[Sitting date: 09 December 2014. Volume:702;Page:1. Text is subject to correction.]
1. JONO NAYLOR (National) to the Minister of Finance : What reports has he received about the stability of New Zealand’s financial system?
Hon BILL ENGLISH (Minister of Finance): The Reserve Bank recently issued its 6-monthly Financial Stability Report, which I am sure all members have read. It
concluded that New Zealand’s financial system remains sound according to a range of measures. The banking system is well
capitalised, funding and liquidity buffers are above required minimum levels, and non-performing loans continue to fall,
which is good news because it means fewer businesses and people are defaulting on their loans. The Reserve Bank stress
tests of all the major banks’ portfolios over the past 6 months demonstrated that each bank has the capacity to manage a
range of significant events.
Jono Naylor : According to the Reserve Bank, what are some of the ongoing risks and challenges facing New Zealand’s financial
system?
Hon BILL ENGLISH : The Reserve Bank talked about four ongoing risks: imbalances in the housing market, which is really about the
constraints on supply that are putting pressure on prices; high levels of indebtedness in the dairy sector, which has
seen significant falls in global prices; the potential effects of a slow-down in the Chinese economy; and the banking
sector’s continued, although lesser, reliance on offshore funding. The bank says that these are the same risks it noted
6 months earlier, but that it regards the financial system as sufficiently sound to be resilient to the realisation of
these risks.
Jono Naylor : What did the Reserve Bank say in its Financial Stability Report about the international economic environment and its
possible impact on New Zealand?
Hon BILL ENGLISH : Part of the Reserve Bank’s job is to assess the risks in the global economic environment. It noted that growth is
firming in the US, prompting a gradual removal of monetary policy stimulus and, possibly, rising interest rates there.
However, monetary policy is seen remaining accommodating in Europe and Japan, both of which face weak outlooks for
growth, if not recession, and it notes that in China a slowing housing market and tighter credit conditions have
moderated growth. Overall, the global outlook is somewhat mixed, but our banking system and financial system are in good
shape to handle any negative impacts from these risks.
Jono Naylor : What other reports has he received regarding the better management of the financial system, and what impact will they
have on New Zealand?
Hon BILL ENGLISH : Over the weekend the Australian Financial System Inquiry reported. It made a number of recommendations to reduce
financial system risk. For instance, it recommended that the four big Australian banks—all of which have subsidiaries in
New Zealand—improve their capital ratios as a way of improving the resilience of these banks. It is worth noting that
the capital requirements for New Zealand banks are already at, or above, the levels recommended by the Australian
Financial System Inquiry. Our requirements are relatively conservative when compared with banks from other countries.
That means that steps that may be taken by the Australian Government to strengthen its banking system further will help
to reinforce the strength of the New Zealand banking system.
Rt Hon Winston Peters : Is it not a fact that Mr English, the Minister of Finance, has been holding out that the surplus is imminent for
years, but in reality all he has ever done as the Minister of Finance is deliver deficit after deficit?
Hon BILL ENGLISH : As is often the case with Opposition parties, they want you to get to surplus very quickly without cutting
expenditure or putting up revenue. The Government has taken a very reasonable approach. Yes, we have had 6 years of
deficits, including financing a recession and the Christchurch earthquake recovery . But if the member can just be
patient, we will get to surplus.
Rt Hon Winston Peters : Will he, as the Minister of Finance, tell the New Zealand public the complete and unadulterated truth about the state
of our public finances [Interruption]—I know it is laughing matter to them—as a country, instead of using the “off
again, on again, off again, on again” deficit as a way of detracting from the truth?
Hon BILL ENGLISH : Yes, on 16 December, at I think about 1.00 p.m. The member should look out for it.
Rt Hon Winston Peters : Is it his intention to draw the attention of the public to the “on again, off again, on again, off again” deficit and
away from the scary numbers like, for example, the $150 billion of liability that we owe the rest of the world, or the
really serious figure: Government debt is up to $65 billion, which is over six times higher than the amount he inherited
as Minister of Finance?
Hon BILL ENGLISH : Unlike that member, I do not underestimate the New Zealand public. I think the New Zealand public has a very good
understanding of the challenges that the Government has faced in managing its books. In fact, it has been remarkably
resilient, tolerant, and forward-looking in supporting the policies of this Government that are enabling us to get back
to surplus.
ENDS