7 June 2007

Mr English should front up on spending cuts

Mr English has again shown he is not prepared to let facts stand in the way of a good story, Finance Minister Michael Cullen said today.

"In his haste to criticise the government, Mr English has skipped over the very thing that commentators say has driven the Reserve Bank to raise the official cash rate.

"As Dr Bollard said at the select committee today what is 'most on our minds' is the extra $2 billion which will flow into the dairy sector. He said this was the big surprise since the last review of the official cash rate and noted that any additional stimulus from the Budget was 'much smaller'.

"He also points out that the big factor pushing up the dollar was New Zealander's appetite for debt, which has to be financed from overseas.

"KiwiSaver is designed to change New Zealander's attitude to debt – the very thing that will have a lasting impact on the dollar and interest rates. I note Mr English has yet to make up his mind about KiwiSaver.

"And Mr English conveniently forgets that John Key favours more debt. He wants to borrow to finance tax cuts and spending as he said on NewstalkZB (27 May).

"Mr English also twists Dr Bollard's assumption that KiwiSaver will have no net impact on consumption as meaning it will have no impact on savings. This is simply untrue.

"Dr Bollard is making the important point that KiwiSaver will not lead to increased spending, in complete contrast to John Key's number one priority of large personal tax cuts funded by borrowing, which would add significant fuel to inflation.

"Mr English's sweeping attacks on government spending are misleading voters.
When is he going to explain to voters what National would cut?

"Cheaper doctor visits? New roads and rail? New schools and hospitals?

"Two weeks ago National voted against business tax cuts. Maybe that's what National wants to cut.

"I note the Reserve Bank states that 'fiscal policy, in the form of the business tax package and infrastructure investment, is also expected to continue to support GDP growth over the next few years.'

"We had a choice, we could have run larger surpluses, we decided not to. We made choices to invest in priority areas to raise the sustainable rate of growth of the economy – business tax changes and infrastructure.

"And instead of the personal tax cuts National wants, we enhanced KiwiSaver to help grow the wealth of New Zealand and take the pressure off inflation.

"What does National actually stand for? More spending? Less spending? Borrowing for tax cuts? Slashing spending to afford tax cuts? It's high time it fronted up," Dr Cullen said.

ENDS

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