[Sitting date: 10 May 2012. Volume:679;Page:2161. Text is incorporated into the Bound Volume.]
SCOTT SIMPSON (National—Coromandel) to the
Minister of Finance: How will the Budget on 24 May continue the Government’s long-term programme to build a more competitive economy?
Hon BILL ENGLISH (Minister of Finance)
: At the same time as dealing with the consequences of recession and earthquakes, the Government has been focusing in recent years on building a long-term stronger economy for more jobs and higher incomes. Budget 2012 will continue that process with further investment in science and innovation, improving incentives on New Zealanders in the welfare system, increasing public sector productivity, and continuing with our considerable investment in long-term infrastructure.
Scott Simpson: Why is it important to build a more competitive economy?
Hon BILL ENGLISH: That is a good question. In the long run our incomes depend on the competitiveness of our economy, and those economies that have not paid attention to that, such as Greece, are finding their incomes dropping pretty sharply. We need to reverse a marked decline in competitiveness that occurred in the first decade of this century—that is, a decline in our ability to earn enough to maintain the incomes that we expect. This Government is committed to turning round that decline in competitiveness. It is a longer-term project, but it is well under way.
Scott Simpson: What measures has the Government taken over the past three Budgets to improve New Zealand’s competitiveness?
Hon BILL ENGLISH: I will pick just a few measures out of a wide-ranging programme. We have reformed the tax system to shift incentives towards working, saving, and investing and away from borrowing, excessive consumption, and over-investment in housing. We have amended the bigger pieces of regulation that the Government writes—such as the Resource Management Act, the Securities Act, and the
Employment Relations Act—to help businesses make the decisions to invest and employ, because that is how we get more incomes and more jobs.
Scott Simpson: What progress has been made in building a more competitive economy?
Hon BILL ENGLISH: Lifting competitiveness is a longer-term project, and it is a bit difficult in any given year to pick indicators of progress, but we can point to some. The economy has grown in 10 of the last 11 quarters, outperforming most other developed countries. Household savings are now positive, and, in fact, at higher rates than for about 20 years. Our overall debt to the rest of the world has fallen slightly, and we are headed towards surplus over the next 2 or 3 years.
Hon David Parker: Does he agree that the disappearance of $1.5 billion revenue from the Government’s books in the space of 6 months is a consequence of, in the Prime Minister’s words, “sticking to a plan that’s working”?
Hon BILL ENGLISH: No, I do not. As the commentary made clear when the Government accounts were released this week, some of that revenue, of course, will actually correct itself over the next few months. But let us just keep this in perspective. The member is fond of quoting Australia. The Australian Government had predicted a deficit of around $12 billion and ended up with a deficit of $40 billion in this current year, so a billion here or there is actually not too bad in the volatile world that we are dealing with.
Hon David Parker: Given that privatising the State-owned enterprises increases the Government’s deficit by about $100 million per annum and will not grow our economy, why does National have asset sales as the key plank of its economic agenda?
Hon BILL ENGLISH: Well, it is not the key plank; it is a plank in lifting the competiveness of the economy. Of course, the fiscal effect of that has been estimated by Treasury. We just need to bear in mind here that these are commercial businesses where income is at risk. It can go up; it can go down. In fact, recent forecasts have had State-owned enterprise profits dropping by about half a billion dollars over the next 3 or 4 years. There is no guarantee of high returns on those assets. When we come to sell down 49 percent we will see how the market values those future income streams.