[Sitting date: 10 May 2012. Volume:679;Page:2162. Text is incorporated into the Bound Volume.]
Dr RUSSEL NORMAN (Co-Leader—Green) to the
Minister of Finance: Does the Budget Policy Statement 2012 show that the Government’s proposed asset sales programme would decrease the Government’s operating balance before gains and losses by nearly $100 million per year?
Hon BILL ENGLISH (Minister of Finance)
: The Budget Policy Statement sets out a number of measures of the impact of these sales, and it does show a decrease in the Government’s operating balance before gains and losses. It also shows a significant decrease of between $5 billion and $7 billion in gross Government debt. It also shows a positive effect on the Government’s cash, because it pays more for debt than it gets in dividends from the 49 percent that it is selling. The conclusion, I think, of that is that when you look at the measures of the impact of the 49 percent sale of shares, it is about neutral over the longer term, but, of course, we will end up with less debt and better-performing companies.
Dr Russel Norman: So the Minister agrees that Treasury is forecasting that the Government’s asset sales programme would increase the Government deficit by $100 million a year, which has to be funded from somewhere, presumably by more debt?
Hon BILL ENGLISH: What we have said is that Treasury has done an estimate in the Budget Policy Statement. It is going to do another estimate, and I just make the same point again: there are a number of ways of measuring it. In the current
environment, less debt is better, when you see how toxic debt is around the world. If we can avoid borrowing in another $5 billion to $7 billion at the margin when we are already a highly indebted country, we believe that is a good thing to achieve.
Dr Russel Norman: Does he agree that the reason why the Government deficit will be $100 million a year worse as a result of privatisation is that the cost of borrowing is lower than the return on these assets, and hence the long-term effect of the privatisation will be to increase Government debt, because it has to fund the increased deficit?
Hon BILL ENGLISH: No, I do not agree with that. The member is confusing a number of different measures of the impact. But can I put this to the member: if the return on shares is guaranteed, then why is it not Green Party policy to borrow hundreds of billions and buy all the companies on the stock exchange?
Hon Member: It is.
Hon BILL ENGLISH: Well, maybe that is a policy. But that would be silly, because there is no guarantee of those returns, but you can guarantee you have to pay the interest on debt.
Rt Hon Winston Peters: I raise a point of order, Mr Speaker. With the greatest of respect, the Minister is on his feet, theorising and speculating about some other political party’s policy—
Mr SPEAKER: Order! The Minister was not saying anything about any political party’s policies that I heard. He perhaps should not have said that if you want to do something—that is what he said. He said that if you want to do that, then you might as well borrow billions and buy a whole lot more companies. I do not think he alleged that was any particular party’s—
Rt Hon Winston Peters: He did. Look at the
Mr SPEAKER: The member will not interject like that when I am on my feet. If I am wrong, I will apologise to the member, but he does not need to interject like that. Courtesy in this House does matter.
Dr Russel Norman: Has the Minister seen what Roger Douglas admitted about the last round of privatisations, when he said: “I am not sure we were right to use the argument that we should privatise to quit debt. We knew it was a poor argument, but we probably felt it was the easiest to use politically.”?
Hon BILL ENGLISH: No, I do not agree with that. There was a set of circumstances then that actually had some similarities to now. At the time New Zealand had very high public debt, and our public debt cycles are over 30 years long. So once public debt goes up, it takes a long time to get it back down to where you started. This is one measure, but of course a more competitive economy, higher levels of growth, and the containment of Government expenditure are more important in the long run for containing debt. The sale of 49 percent in these companies will give us better-performing companies. They will provide New Zealanders with some better longer-term options for their increasing savings, and it will, at the margin, mean we borrow less money from volatile and difficult international debt markets.
Dr Russel Norman: Is Roger Douglas not saying here that the argument that says we have to privatise to reduce debt is not a good economic argument, and the only role for that argument is that, as Roger said, it was the easiest to use politically—that is, it is a political or a propaganda argument, not a good economic argument?
Hon BILL ENGLISH: I do not know; you should ask Sir Roger.
Dr Russel Norman: Given that his Government has already clocked up a record $37 billion worth of debt in just 3 years, is it really responsible fiscal policy for the Government to permanently lock in hundreds of millions of dollars of additional debt because of the increased deficit from privatisation?
Hon BILL ENGLISH: I just do not accept the member’s premise. The fact is that future income from these assets is uncertain, and that is always going to be the case, because they are commercial businesses. Future costs of Government debt are certain, and we are putting ourselves in the position that many other households and businesses have done across New Zealand, and that is to get our debt down so we can reduce the certain interest costs. We are doing that by selling to someone else 49 percent of assets that are actually a bit risky, and whose incomes will fluctuate over the years.
Dr Russel Norman: Given that last time round, when the National and Labour Governments previously embarked on a round of privatisation, they used debt to justify that privatisation, is he at all concerned that one of the architects of that process, Roger Douglas, is now on the public record saying that “We were wrong to use the argument that debt is the reason to privatise. The reason we used that argument was for political purposes. It wasn’t a good economic argument.”?
Hon BILL ENGLISH: It may surprise the member, but I take less notice of what Sir Roger Douglas says than he does. The fact is that there are a number of reasons why we believe this is an appropriate policy right now. One is that for one of the most indebted countries in the developed world, we can borrow less at the margin, the second is to provide better investment opportunities for New Zealanders who are increasing their savings, and, thirdly, we can get better-performing companies. As that member will know himself, these are companies that may be seen positively by the market because of their renewable energy content. Let us see.
Dr Russel Norman: I seek leave to table a page from the book
Out of the Woods by Reg Birchfield, which includes the quote from Roger Douglas that I have been using in question time about debt.
Mr SPEAKER: Leave is sought to table that document. Is there any objection? There is objection.