3. DAVID BENNETT (National—Hamilton East) to the Minister of Finance: What reports has he received on the Government’s financial position?

Hon BILL ENGLISH (Minister of Finance) : Earlier this month Treasury published the Government’s Financial Statements for the 11 months ending 31 May. The Government’s operating balance was about $1.1 billion better than forecast at minus $5.9 billion. This is slightly encouraging, but the global environment remains uncertain and there will continue to be fluctuations in the tax take from month to month. The world situation, though, reinforces the need for the Government to keep a firm control on its costs.

David Bennett: How does balancing the Government’s books help the economy?

Hon BILL ENGLISH: I know that it is broadly accepted in the National Party that it is good for the economy, but I would like to explain the reasons why to Opposition members, because they remain unconvinced. Balancing the books is one of the most important things a Government can do to build the resilience of our economy and reduce its vulnerability to growing overseas indebtedness, and take the pressure off interest rates and the exchange rate. For instance, the average business lending rate has now fallen to 6.04 percent at May 2012, compared with 9.4 percent in late 2008. In so far as the Government is on track to surplus, this helps make our businesses more competitive.

David Bennett: How is the Government’s responsible management of its finances—[Interruption]—helping New Zealand’s households?

Mr SPEAKER: Did the Minister hear the question?

Hon BILL ENGLISH: Yes, I did.

Mr SPEAKER: Because the Speaker did not.

Hon BILL ENGLISH: Again, for the benefit of those who want to borrow more and spend more, balancing the books helps take pressure off mortgage interest rates. The average residential floating rate is currently 5.9 percent, compared with a floating rate of almost 11 percent in late 2008. For a family with a $200,000 mortgage, that is a saving of around $200 per week, or more than $10,000 per year, since they elected a National Government.

Hon David Parker: Does today’s report from Statistics New Zealand show that the Government’s finances need to provide for more than 1 million people over 65 years of age by the end of the 2020s, and what changes to superannuation is he intending to make to ensure that New Zealanders have fair and sustainable superannuation?

Hon BILL ENGLISH: I think the member probably put it correctly when he said the economy needs to be able to support a growing number of older people. We are focusing very strongly on reinforcing the competitiveness and productivity of this economy so that it can support an older population. As the member knows, the Government’s position on national superannuation is quite clear.

David Bennett: What other approaches to managing the Government’s finances is he aware of?

Hon BILL ENGLISH: I have heard a number of reports of propositions that would require a considerable amount of extra debt and unsustainable spending: for instance, borrowing to pay for reducing the retirement age to 60 for some workers, borrowing to pay for the Auckland rail loop, borrowing to pay for doubling paid parental leave, and, of course, borrowing $5 billion to $7 billion on global financial markets to buy back the four State-owned enterprises that the Government plans to partially sell.

Hon David Parker: Does his Budget project that by the end of the 2016 year his Government, if still in office, would be spending more on superannuation than on all of education—that is, more than on preschool, primary, intermediate, secondary, and tertiary education combined—if so, how can he deny that changes are necessary and should be signalled now, rather than sprung on people later?

Hon BILL ENGLISH: That may be the case with the Budget projections; I would need to check it. As far as I know, no one is proposing—or maybe they are proposing that. Maybe the Opposition is proposing to somehow reduce national superannuation, so that by 2016 we are spending less on it than on education. If so, people need to be told about that, so that it is not sprung on them as a surprise.

Rt Hon Winston Peters: Why is the Minister bragging about a floating rate of 5 percent when that equivalent rate in the EU, the UK, and Japan is four times less than that?

Hon BILL ENGLISH: The Government is not bragging about anything. It is simply pointing out that the floating rate of interest is around about half what it was in 2008, which is giving New Zealanders the opportunity to pay off debt and save more money, and those are good things for the economy.