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Source: New Zealand Parliament – Hansard

Question No. 4—Finance

4. NICOLA WILLIS (Deputy Leader—National) to the Minister of Finance: Does he consider that fiscal and monetary policy decisions in the past two years have in any way exacerbated the cost of living crisis; if so, how?

Hon DAVID PARKER (Acting Minister of Finance): The fiscal and monetary measures enacted in early 2020 were in response to a pandemic-related one-in-100-year economic shock. This was a time of considerable uncertainty, with unemployment forecast to reach significant levels. I consider our economic response has been instrumental in the record low levels of unemployment we now have. If we did not provide that support, the economic consequences for New Zealanders were dire. In all likelihood, the households still managing the inflationary impacts of global energy prices now, many of them would also be out of work. New Zealand’s response was in line with the rest of the advanced world, and was generally supported by Opposition parties at the time. We are now seeing tighter constraints on the supply side of the economy, and both monetary policy and fiscal policy are responding accordingly. Fiscal policy is also supporting New Zealand households through the current inflationary spike through targeted, temporary support.

Nicola Willis: Does he agree with Arthur Grimes, former Reserve Bank chair, that the current Reserve Bank’s least regrets policy on unemployment meant they were paying no attention to inflation over the past two years?

Hon DAVID PARKER: No, I prefer the comments in the editorial in the Dominion Post, which says the Reserve Bank of New Zealand did a creditable job during the pandemic.

Nicola Willis: Who does he think knows more about monetary policy, a former chair of the Reserve Bank or the editor of the Dominion Post?

Hon DAVID PARKER: I’m sure that the former chair of the Reserve Bank knows more about monetary policy than either I do or the member does, but he would know no more about it than the current chief executive or chair of the Reserve Bank, who the Dominion judged did a creditable job.

Nicola Willis: Does he agree with former Reserve Bank chair Arthur Grimes that the Government’s decision to change the Reserve Bank’s focus to a dual mandate was a mistake and has helped lead to record high inflation?

Hon DAVID PARKER: No, and I would observe that the dual mandate is common overseas.

Nicola Willis: Has he seen reports that one in four New Zealanders are now struggling to make ends meet on a monthly basis, and does he acknowledge that if the Reserve Bank hadn’t unleashed such a tidal wave of cash, then things could be different?

Hon DAVID PARKER: The Minister of Finance and the Prime Minister have, on many occasions, acknowledged cost of living pressures. I would observe that Treasury forecasts are for wage growth to exceed inflation in every one of the next four years, as they have in the prior years under this administration. In respect of the current pressures, of course, there is a payment on 1 August going to 2.1 eligible New Zealanders, which will assist with those pressures.

Nicola Willis: Does he agree with economist Dennis Wesselbaum, who says, “While there was way too much money put into the system by the Reserve Bank, most of the blame for the current inflation situation should be placed at the feet of the Government’s response.”?

Hon DAVID PARKER: I would agree with Todd Muller, who on 26 May said, “This is a time in our history where money needs to be spent.”, and with Paul Goldsmith on 11 May 2020, who said, “No Government could have stopped COVID-19 creating huge economic problems … credit where credit is due. The Government’s speed at getting the wage subsidy scheme up and running reduced early economic calamity.” I would also agree with similar comments from Simon Bridges, who, of course, said that it was too little by saying that the wage subsidy had helped employees for 12 weeks, but it hasn’t helped businesses with zero revenue pay overheads like rent, power, and stock. I would not agree with captains of hindsight.

Nicola Willis: Will he support members of Parliament from all parties except Labour to encourage Labour MPs to agree to an inquiry at the Finance and Expenditure Committee into the economic response to COVID-19, or is it his position that the Government did everything perfectly?

Hon DAVID PARKER: We won’t be agreeing with that suggestion of a separate inquiry in addition to all of the other processes that enable inquiry into those same issues. One of the reasons why I don’t think I like the National Party’s approach to independence of the Reserve Bank is that, of course, it was a former leader of the National Party, the Hon Don Brash, who, whilst head of the Reserve Bank, colluded with the National Party to obtain an electable place on the Labour Party list whilst he was Governor of the Reserve Bank—appalling practice.

David Seymour: Point of order, Mr Speaker. I think that sort of accusation of corruption against a member of the public, a former member of his House, someone who does not have the ability now to defend himself in this House, is exactly the sort of thing that brings this House of Representatives into disrepute, and if you’d like to uphold the reputation of the House, I think you should ask that member to withdraw and apologise for those comments.

Hon Chris Hipkins: Speaking to the point of order, if any member of the public who is not present in the House has an objection to something that is being said about them in the House, there is a process that they can follow.

Hon DAVID PARKER: Further speaking to the point of order, the very strong word that was used by the leader of the ACT Party was not used by me. It was his description.

David Seymour: Speaking to the point of order, the accusation was that someone in high public office used their power to gain personal political favours. If that’s not an accusation of corruption, nothing is. He’s now dancing on the head of a pin.

DEPUTY SPEAKER: What I will say is that I listened carefully to the answer. The Minister doesn’t actually have responsibility for part of that answer. That’s one thing. The former member is able to apply to respond to what has been said—Standing Order 160. I think every member, in my opinion, should be careful about what they say even if we do have privilege in this House. We’ll go on to the next question.