4. Hon DAVID PARKER (Labour) to the Minister of Finance: In the most recent World Economic Outlook published by the IMF in April 2012, which of the 34 advanced economies listed is forecast to have a worse current account deficit (as a percentage of GDP) than New Zealand in 2013?

Hon BILL ENGLISH (Minister of Finance) : The two countries are Cyprus and Greece. I note that a number of countries that will have a smaller current account deficit will achieve that because they have deep recessions and are going through dramatic austerity programmes. These are not choices that the New Zealand Government is willing to make.

Hon David Parker: Given that according to the IMF the only country in the world of any size with a worse projected deficit is Greece, how can the Prime Minister be taken seriously in his pre-Budget speech yesterday, titled “Sticking to a Plan That’s Working”?

Hon BILL ENGLISH: For the reasons that we said. New Zealand has the choice of a reasonably moderate adjustment to the global aversion to debt. We are making considered and balanced decisions as we go through that adjustment. Other countries do not have those choices. If the member would prefer the UK’s current account deficit of about 1 percent, then I presume he prefers its policy mix. We do not.

Rt Hon John Key: Has he seen any reports of the Opposition finance spokesman in 1999—

Mr SPEAKER: Order! The Minister of Finance is not responsible for anything the Opposition spokesperson might have said at any time. The right honourable member has to be rather more subtle in framing his question than that, to bring it within order.

Rt Hon John Key: Has he seen any reports of what happened to the current account deficit in the 9 years that Labour was in office, and any reports of what the Opposition finance spokesman said when he was campaigning with Mr Michael Cullen in 1999 about the matter?

Hon BILL ENGLISH: I am sure I would certainly find those reports, but I can recall that at the time the Labour Party campaigned to halve the current account deficit, and it ended up doubling it.

Hon David Parker: Will the rising current account deficit be funded by a combination of more overseas borrowing and selling New Zealand assets to foreigners, or does it intend to print money?

Hon BILL ENGLISH: The current account deficit will be financed in the same way it has been for some time. It is one of those economic variables where change occurs slowly over time. As recently as 4 years ago it was one of the highest in the developed world, at over 8 percent. If it can peak at around 6 percent through this business cycle, taking into account the significant impact of the earthquake, that would represent significant progress. New Zealanders are doing their bit by saving and being careful with their spending, and the Government is lending weight to that by being careful with its spending so that we can get to a position where we are saving, as well.

Hon David Parker: I raise a point of order, Mr Speaker. My question was whether it would be funded by a combination of more borrowing and selling of assets. The Minister said it would be funded as it was previously, but he did not tell the House the answer or address the question as to whether it was a combination of borrowing from overseas and selling assets.

Mr SPEAKER: Order! I cannot ask the Minister to limit it just to those options. What the Minister did say was that it would be funded in the way that it has been traditionally funded. The member asked how it was going to be funded, and that was the answer from the Minister of Finance. I cannot pin him down to those particular options in case there are other options. The member does have further questions, should he wish to pursue that further.

Hon David Parker: Does the Minister realise that another near-zero Budget, rising net international liabilities, and record numbers of New Zealanders leaving to Australia are proof of his Government’s failure to properly manage the economy?

Hon BILL ENGLISH: No, I do not. Many New Zealanders have put their shoulder to the wheel through the recession. They have been resilient, they have been adaptable, they have responded to the economic signals, and the Government is doing everything it can to support them because they want to see more jobs, higher incomes, and a growing economy, and we are on track to achieve that.

Paul Goldsmith: How does New Zealand’s present international position compare with the situation that the Government inherited in 2008?

Hon BILL ENGLISH: Just to add a few facts to the debate, the current account deficit for the year ended 31 March 2012 is 4.1 percent. On 31 March 2008 it was 8 percent. So it is currently half the level that we inherited.

Paul Goldsmith: What steps has the Government taken to rebalance the economy towards savings, exports, and paying its way in the world?

Hon BILL ENGLISH: Every step the Government takes is headed in that direction, but some of the significant ones have been to reform the tax system, increasing taxes on consumption and property speculation, and cutting taxes on work and saving; curbing Government spending increases and getting on track to surplus; keeping a lid on the cost of doing business, for instance, by getting on top of the fast-rising costs like ACC; and providing more investment and savings opportunities for New Zealanders by pushing ahead with the mixed-ownership model.

Hon David Parker: Does the Minister realise that the chorus of reports saying that it is going to get worse include the Bank of New Zealand forecast that New Zealand exports will decline by over $3 billion over the next 12 months, and if so, when is he going to acknowledge that his efforts to rebalance the economy have failed?

Hon BILL ENGLISH: If the member is going to judge any economic policy on what might happen in the next few months, then that indicates his unsuitability to be trying to run an economy.

Mr SPEAKER: Order! I do not think the question quite deserved that kind of answer. I think the question is not unreasonable. There are commentators who have made these kinds of predictions, so I do not think it deserved quite that answer.

Hon BILL ENGLISH: No, I do not acknowledge that. The fact is that it is going to take some time to undo the enormous damage that the Labour Government did to this economy when it had a decade of benign global conditions. We are dealing with that legacy, plus the global recession. Many New Zealanders are actually quite proud of the way they have adapted, and they are looking forward to a brighter future.