2. CRAIG FOSS (National—Tukituki) to the Minister of Finance: Why is it so important that the Government rebalance the economy towards savings and exports?

Hon BILL ENGLISH (Minister of Finance) : New Zealand families and households expect an economy that generates new jobs, secure jobs, and higher incomes. We must rebalance the economy because we will not be able to provide new jobs and higher incomes if we continue with economic growth based on too much consumption, too much Government spending, and too much borrowing.

Craig Foss: What benefits would a properly growing economy bring for the Government’s finances?

Hon BILL ENGLISH: Stronger economic growth makes an enormous difference over medium periods of time. Had the economy grown at, say, 3 percent since 2005—just above the OECD average over the last 5 years—GDP would now be around 10 percent or $20 billion higher than it is, and Government finances would be around $6 billion per year better off. A few extra percentage points of growth are well worth it for everybody.

Hon David Cunliffe: If the Minister is so keen on rebalancing the economy in favour of savings and investment, why did his Government cut in half the KiwiSaver incentives and completely remove the research and development investment incentives?

Hon BILL ENGLISH: I am pleased that the member now understands that the economy needs significant rebalancing. To respond to the particular questions, I say that the Government replaced the previous Government’s Fast Forward Fund, I think it was—which did not actually exist or pay for anything—with real money, which is financing real innovation and science.

Hon David Cunliffe: I raise a point of order, Mr Speaker. The question was a very simple one to try to draw from the Minister the link between rebalancing in favour of savings and investment and the removal of two policies that did exactly that. The Minister did not address that question. He talked about a third policy, the Fast Forward Fund, which was not raised in the supplementary question, at all.

Mr SPEAKER: I will allow the member to repeat his question, because of uncertainty about it, and I will listen very carefully to it.

Hon David Cunliffe: If he is so keen on rebalancing the economy in favour of savings and investment, why did his Government cut in half the KiwiSaver incentives and completely remove the research and development incentive policy?

Hon BILL ENGLISH: Because we did not think either policy was appropriate in the circumstances of what, under his party’s management, was a very poorly performing New Zealand economy, which was then hit by the global financial crisis.

Craig Foss: What benefits would a properly growing economy bring for New Zealand families?

Hon BILL ENGLISH: Most of the benefits of a growing economy that flow through to the Government accounts also apply to families and households. Average household income today in New Zealand is $75,000 before tax. Had the economy grown at 3 percent since 2005, rather than the half percent that it actually grew, the average household would be about $5,000 a year better off. But instead of 3 percent growth—a bit above the average for the OECD—under Labour we had half a percent growth, so we missed out on that benefit.

Craig Foss: What steps is the Government taking to rebalance the economy?

Hon BILL ENGLISH: The Prime Minister outlined a comprehensive suite of policy in this House several weeks ago. In particular, he outlined plans for changing the balance of taxation. We would be interested to know whether on the Opposition’s bus tour it will campaign on reducing GST and increasing income tax.

Hon Sir Roger Douglas: Does the Minister agree that the Government needs to help rebalance the economy through private sector job creation; if so, is he concerned at the high rate of youth unemployment, at 26.5 percent, and especially Māori youth unemployment, at 39 percent; if so, what does he intend to do about it?

Hon BILL ENGLISH: I agree with the member that private sector job creation is the key to a sustainable recovery. The Government is overstretched. It is already borrowing too much money and cannot afford to employ more people, even if it wants to improve its services. I share the member’s concern about youth unemployment. The Government has invested in a number of schemes to provide youth with the opportunity to stay connected to the workplace, but we will need private businesses to have the confidence to invest and employ 18 and 19-year-olds, who may not have a strong track record in the job market.