[Sitting date: 30 May 2012. Volume:680;Page:2662. Text is incorporated into the Bound Volume.]
SHANE ARDERN (National—Taranaki - King Country) to the
Minister of Finance: How will Budget 2012 reduce New Zealand’s long-standing reliance on debt and help keep interest rates lower for longer?
Hon STEVEN JOYCE (Associate Minister of Finance) on behalf of the
Minister of Finance: Budget 2012 will do this in a number of ways. Firstly, it keeps the Government on track for fiscal surplus in 2014-15, when we can start repaying debt. That is important in a world that is deeply concerned about debt. Secondly, it continues the Government’s programme to address our longstanding imbalances by building sustainable growth from savings and productive investment, rather than excessive debt, property speculation, and Government spending. Thirdly, the Budget reprioritises existing spending to invest significantly more in infrastructure, innovation, and skills. These are essential ingredients in giving businesses the confidence to invest, sell more to the world, and employ more staff. All of these things will ensure future growth does not rely on excessive debt and fast-growing Government expenditure. It will keep interest rates for homeowners and businesses lower for longer.
Shane Ardern: How have New Zealanders benefited from lower interest rates in the past 3 years?
Hon STEVEN JOYCE: Both households and businesses are now paying very significantly lower interest rates than they were in late 2008. For example, average floating home rate mortgages have fallen from almost 11 percent in 2008 to an average of 5.9 percent currently. For a family with a $200,000 mortgage, that is a saving of about $200 a week. Similarly, business lending rates have fallen from more than 9 percent to around 6 percent in the same period, so both households and businesses are benefiting from lower interest rates under this Government and its responsible economic policy.
Shane Ardern: What progress is being made in improving savings and reducing New Zealand’s reliance on debt?
Hon STEVEN JOYCE: I am pleased to report good progress is being made. Households and businesses have started to save and pay down debt. New Zealand’s household savings rate is positive, and it is forecast to increase to almost 4 percent by 2016. That is a significant turn-round, as household savings have been negative in almost every year, going back at least two decades. Although these higher savings do temper economic growth a little in the short term, over time they will leave New Zealand considerably better off and less vulnerable to economic shocks.
Shane Ardern: What reports has he received supporting the Government’s responsible fiscal approach in Budget 2012?
Hon STEVEN JOYCE: The Minister of Finance has seen a number of reports supporting the Budget’s focus on getting on top of debt. For example, ratings agency
Moody’s has said the deficit and debt forecasts in the Budget support the Government’s current triple A credit rating. It says that in the absence of further shocks, the Government’s overall fiscal position will improve considerably over the next several years. Standard and Poor’s has said the Budget is the latest step forward to consolidating the Government’s fiscal settings. Its stable ratings outlook reflect its expectation the Government will continue to consolidate public finances against the risks associated with the country’s high private sector external debt.