Bennett David: Questions for Oral Answer — Questions to Ministers 
Text is incorporated into the Bound Volume 
Bennett David: Questions for Oral Answer — Questions to Ministers 
[Sitting date: 22 June 2010. Volume:664;Page:12000. Text is incorporated into the Bound Volume.] 
3. 
DAVID BENNETT (National—Hamilton East) 
 to the  
Minister of Finance 
: What reports has he received on New Zealand’s economic position? 
Hon BILL ENGLISH (Minister of Finance) 
: 
 Today Statistics New Zealand published current account data for the March 2010 quarter. It shows a current account deficit for the year ended 31 March of $4.5 billion which is around 2.4 percent of GDP. It is the lowest deficit in more than 20 years. However the latest figure reflects a mix of permanent and temporary factors. It includes the benefits of recent high commodity prices the revenues from major tax cases and reductions in imports during the recession. Most forecasts show the deficit widening again though not to the previous extreme levels of 9 or 10 percent of GDP. The data reinforced the need for New Zealand to tilt the economy towards savings exports and productive investment and away from excessive borrowing debt and Government spending increases. 
David Bennett 
: What are the main reasons for New Zealand’s current account deficit? 
Hon BILL ENGLISH 
: The current account deficit has become particularly bad through the last cycle partly because of the mismanagement of the temporary boom of recent years. New Zealand’s external liabilities have risen almost 40 percent to $167 billion over the past 5 years. The cost of servicing this is more than 5 percent of GDP. At almost 90 percent of GDP our external liabilities are similar to those of Spain Ireland Portugal Hungary and Greece names the House might recall from recent media coverage. This is why the Government has placed such emphasis on financial stability. We have been successful up until now but there is still plenty of work to do. 
Hon David Cunliffe 
: Why is he attempting to take credit for the recent result when J P Morgan has labelled the improvement as short-lived and both Treasury and the Reserve Bank are forecasting the current account deficit to almost triple over the next few years? 
Hon BILL ENGLISH 
: I am not trying to take credit for it and actually I pointed out in my answer to the primary question exactly that—that the forecasts are expected to get worse. What I have pointed out to the House though is that it is vital we turn round our external position because under the mismanagement of the previous Government our external liabilities have now reached—[ 
Interruption 
] The member should listen. Our external liabilities are now 90 percent of GDP. Other countries with external liabilities at a similar level are Spain Ireland Portugal Hungary and Greece each of which has featured significantly in the international media because of its substantial financial challenges. 
David Bennett 
: What steps is the Government taking to address New Zealand’s current account problems? 
Hon BILL ENGLISH 
: To improve the current account which as the Opposition has pointed out is forecast to get significantly worse again the Government needs to raise exports and save more. The Budget was certainly focused on achieving this with a new operating spending allowance of just $1.1 billion which is about half the level of previous years. We have also set out to rebalance the tax system by increasing consumption taxes and taxes on property speculation and reducing tax on income savings and productive investment. We should also acknowledge the success of some of the Reserve Bank measures in affecting the length of the term of the debt that New Zealand owes to the rest of the world. 
Hon David Cunliffe 
: Given that both the Government and the Opposition are now agreed that the problem is expected to get worse and that the need for rebalancing includes closing the savings gap why did the Government cut in half the incentives for KiwiSaver and continue to defer indefinitely the pre-funding of New Zealand superannuation? 
Hon BILL ENGLISH 
: We have answered those questions before and no doubt Labour will spend the next 10 years trying to justify its policies of the last 10 years. We did that because we had better ideas and actually it was not difficult. 
David Bennett 
: What alternative economic policies would aggravate New Zealand’s current account position and mortgage our families’ futures? 
Hon BILL ENGLISH 
: There are a different set of choices the Government could make. We could for instance increase personal income taxes. We could increase Government spending significantly faster. That would increase the need for borrowing. We could meddle with the Reserve Bank’s toolkit for containing inflation. These are all polices advocated by the Opposition. We disagree with them.