Naylor Jono: Oral Questions — Questions to MinistersText is incorporated into the Bound VolumeNaylor Jono: Oral Questions — Questions to Ministers[Sitting date: 09 December 2014. Volume:702;Page:1195. Text is incorporated into the Bound Volume.]1.JONO NAYLOR (National)to the Minister of Finance: What reports has he received about the stability of New Zealand’s financial system?Hon BILL ENGLISH (Minister of Finance):The Reserve Bank recently issued its 6-monthly Financial Stability Report which I am sure all members have read. It concluded that New Zealand’s financial system remains sound according to a range of measures. The banking system is well capitalised funding and liquidity buffers are above required minimum levels and non-performing loans continue to fall which is good news because it means fewer businesses and people are defaulting on their loans. The Reserve Bank stress tests of all the major banks’ portfolios over the past 6 months demonstrated that each bank has the capacity to manage a range of significant events.Jono Naylor: According to the Reserve Bank what are some of the ongoing risks and challenges facing New Zealand’s financial system?Hon BILL ENGLISH: The Reserve Bank talked about four ongoing risks: imbalances in the housing market which is really about the constraints on supply that are putting pressure on prices; high levels of indebtedness in the dairy sector which has seen significant falls in global prices; the potential effects of a slow-down in the Chinese economy; and the banking sector’s continued although lesser reliance on offshore funding. The bank says that these are the same risks it noted 6 months earlier but that it regards the financial system as sufficiently sound to be resilient to the realisation of these risks.Jono Naylor: What did the Reserve Bank say in its Financial Stability Report about the international economic environment and its possible impact on New Zealand?Hon BILL ENGLISH: Part of the Reserve Bank’s job is to assess the risks in the global economic environment. It noted that growth is firming in the US prompting a gradual removal of monetary policy stimulus and possibly rising interest rates there. However monetary policy is seen as remaining accommodating in Europe and Japan both of which face weak outlooks for growth if not recession and it notes that in China a slowing housing market and tighter credit conditions have moderated growth. Overall the global outlook is somewhat mixed but our banking system and financial system are in good shape to handle any negative impacts from these risks.Jono Naylor: What other reports has he received regarding the better management of the financial system and what impact will they have on New Zealand?Hon BILL ENGLISH: Over the weekend the Australian Financial System Inquiry reported. It made a number of recommendations to reduce financial system risk. For instance it recommended that the four big Australian banks—all of which have subsidiaries in New Zealand—improve their capital ratios as a way of improving the resilience of these banks. It is worth noting that the capital requirements for New Zealand banks are already at or above the levels recommended by the Australian Financial System Inquiry. Our requirements are relatively conservative when compared with banks from other countries. That means that steps that may be taken by the Australian Government to strengthen its banking system further will help to reinforce the strength of the New Zealand banking system.Rt Hon Winston Peters: Is it not a fact that Mr English the Minister of Finance has been holding out that the surplus is imminent for years but in reality all he has ever done as the Minister of Finance is deliver deficit after deficit?Hon BILL ENGLISH: As is often the case with Opposition parties they want you to get to surplus very quickly without cutting expenditure or putting up revenue. The Government has taken a very reasonable approach. Yes we have had 6 years of deficits including financing a recession and the Christchurch earthquake recovery. But if the member can just be patient we will get to surplus.Rt Hon Winston Peters: Will he as the Minister of Finance tell the New Zealand public the complete and unadulterated truth about the state of our public finances [Interruption]—I know it is a laughing matter to them—as a country instead of using the “off again on again off again on again” deficit as a way of detracting from the truth?Hon BILL ENGLISH: Yes on 16 December at I think about 1 p.m. The member should look out for it.Rt Hon Winston Peters: Is it his intention to draw the attention of the public to the “on again off again on again off again” deficit and away from the scary numbers like for example the $150 billion of liability that we owe the rest of the world or the really serious figure: Government debt is up to $65 billion which is over six times higher than the amount he inherited as Minister of Finance?Hon BILL ENGLISH: Unlike that member I do not underestimate the New Zealand public. I think the New Zealand public has a very good understanding of the challenges that the Government has faced in managing its books. In fact it has been remarkably resilient tolerant and forward-looking in supporting the policies of this Government that are enabling us to get back to surplus.