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8. Hon DAVID PARKER (Labour) to the Minister of Finance: What is the projected current account deficit as a percentage of GDP and in dollar terms for the forecast years in Budget 2011?
Hon BILL ENGLISH (Minister of Finance) : For the 3 years from 2012 the forecasts are 4.1 percent, 5.2 percent, and 6.8 percent. This is after the current account deficit averaged more than 8 percent of GDP each year between 2004 and 2008. In 2010 it fell to 3 percent of GDP.
Hon David Parker: I raise a point of order, Mr Speaker. That was a question on notice, and it asked for the current account deficits in dollar terms as well. That part of the question has not been answered.
Mr SPEAKER: That is a fair point.
Hon BILL ENGLISH: They are $8.4, $11.5, and $15.6.
Hon David Parker: I raise a point of order, Mr Speaker. Is that billions or hundreds?
Mr SPEAKER: The Minister should clarify.
Hon Bill English: He knows it’s billions. Of course he knows that.
Mr SPEAKER: I have asked the Minister to make it clear.
Hon BILL ENGLISH: It is billions.
Hon David Parker: Is the Minister of Finance aware that under current policy settings that current account deficit he projects means that New Zealand’s indebtedness to the rest of the world is projected to grow by $52 billion by 2015?
Hon BILL ENGLISH: Yes, I am aware of the projections. Again, because of the very large current account deficits run by the previous Government in what were ideal economic conditions, this Government has had to try to hold back the massively negative momentum, and we have partially succeeded so far, with a lot more to do.
Hon David Parker: Does not that Budget forecast show to him that his policies are not working, because after 6 years, if National is re-elected, New Zealand every year gets poorer by billions and billions of dollars?
Hon BILL ENGLISH: No, because if the Government had not taken the considered and consistent decisions it has, we would be in a much worse situation. We are not likely to take much notice of that member, because his Government promised to halve the current account—
Mr SPEAKER: The member asked a question. He did not ask whether anyone should take any notice of him. He is entitled to ask a question. The Minister should not make any disparaging comments about the questioner.
Hon BILL ENGLISH: I raise a point of order, Mr Speaker. The standard that you usually apply is that if a question is asked in a political way, it invites a political response. The member referred to “Government policy failure”, so a political response is to refer to the failure of the previous Government, which made this job so hard.
Mr SPEAKER: I hear the point the member makes. [Interruption] I am considering a point of order. I accept the point being made, which is that members should be a little more careful in asking questions, too.
Hon David Parker: Given his disagreement with me, why does he also disagree with the legion of economists, the International Monetary Fund, the OECD, and Treasury, which state that to overcome the structural problems the New Zealand economy has, we need a structural solution like a capital gains tax?
Hon BILL ENGLISH: As I pointed out, the tax the member refers to is part of a tax package that means bigger Government spending, finance for higher taxes, and more debt. That will be bad for the New Zealand economy. I accept some of the criticism that the previous Government led a consumption boom, which was fuelled by excessive debt. We have grappled with that over the last couple of years. We have not yet succeeded in turning it round, but we are determined to do so.
Hon David Parker: Given that a very high proportion of New Zealand’s international debt has been borrowed to fund mortgages for property speculation, would it not be sensible to close the capital gains loophole that distorts investment towards property, to the detriment of the export sector, so that we can start getting that current account deficit under control?
Hon BILL ENGLISH: Two points: if the member really believed that, he would have done it when he was in Government. He had 9 years and he did not do it. Secondly, the measures the Government has taken to increase the effective tax on property are collecting somewhere between $800 million and a billion dollars this year. That is about 6 or 7 years ahead of when any kind of capital gains tax would collect that sort of revenue from the property sector. So the measures the Government has taken are much more effective than what the member proposes.