Source: New Zealand Parliament – Hansard
Question No. 3—Finance
3. Hon SIMON BRIDGES (National—Tauranga) to the Minister of Finance: Does he agree with the latest ANZ Quarterly Economic Outlook’s assessment that “Government spending remains highly expansionary … The fiscal situation is quite nuanced. Many businesses and households are in desperate need of targeted support, but from a macroeconomic perspective, high government spending in an economy facing severe capacity constraints risks just adding to inflation pressures. That wouldn’t be a good return for taxpayers, and also implies the RBNZ will need to hike interest rates more than otherwise”?
Hon GRANT ROBERTSON (Minister of Finance): I thank the member for floating up to the macroeconomic level, as his leader suggested! I agree with the ANZ that many businesses and households are in need of targeted support and that the fiscal situation is nuanced. That’s why this Government has invested in our businesses and households during this one-in-100-year shock. As the ANZ says, there is a balance to be struck. We will be careful and focused in future spending decisions in order to provide targeted support and address the long-term challenges facing the economy.
Hon Simon Bridges: Does he accept that one of the reasons inflation is at its highest level in over 30 years and Kiwis’ wages are going backwards in real terms is because his Government has increased Government spending by 40 percent since 2017 and is now overcooking the economy?
Hon GRANT ROBERTSON: I do not accept the member’s analysis. What I do accept is that in recent months the Government has had to provide a significant amount of targeted support to businesses, through things like the wage subsidy scheme and the resurgence support payment, and, indeed, I have stood in this House and been called upon by the Opposition to put more money into those areas. The member cannot have it both ways.
Hon Simon Bridges: Has Treasury provided him with a view on whether his Government’s decision to run structural Budget deficits for the next five years, at a time of very high inflation and tightening monetary policy, is in line with the principles of the Public Finance Act, which requires Governments to have regard to the interaction between fiscal and monetary policy?
Hon GRANT ROBERTSON: As we traversed in the select committee this morning, the Public Finance Act foresees a situation where, in the event of a crisis such as what we have experienced with COVID-19, the Government is able to run the books in the way that we are and still meet the Public Finance Act. It is fiscally prudent to make sure that we support people to stay in jobs, and that’s what we’ve done.
Hon Simon Bridges: Why is the Government running structural Budget deficits for the next five years, at a time when monetary policy is having to tighten to offset it, hurting many millions of Kiwis in the process?
Hon GRANT ROBERTSON: The member cannot wish away COVID-19, a one-in-100-year economic shock. The Government took the responsible action of supporting businesses, of supporting Kiwis to stay in work, and I stand by those decisions.
Hon Simon Bridges: Does he accept that he is turning up the heat on the economy with his increased Government spending so that the Reserve Bank of New Zealand has to try and turn down the cooker in terms of interest rates, to dampen inflation more than would otherwise be the case?
Hon GRANT ROBERTSON: The member is well aware that the inflationary pressures are being seen all around the world. What this Government has done is make sure that we invest in supporting people to stay in work and balance that with a responsible fiscal position. I do note that the member’s party’s fiscal position wouldn’t see a surplus until 2028.
Hon Simon Bridges: Does he accept that overcooking the economy quite literally means less for Kiwis to cook this Christmas, with the price of fruit and veggies, for example, having gone up 9 percent this year, well above the 2.4 percent average wage increases?
Hon GRANT ROBERTSON: That’s interesting, isn’t it, because here we now have the true colours of this particular National Party. I presume that means the member is going to propose a price freeze. Welcome back, Muldoon.
