18 May 2013
Bill English on The Nation

Finance Minister Brushing Off Criticism Over Current Account Deficit

Finance Minister Bill English is brushing off criticism that his Budget doesn’t deal with the country’s growing current account deficit.

This week the International Monetary Fund called for the Government to take action to increase household savings to help reduce the deficit.

But speaking on TV3’s “The Nation” Mr English argued the Government had have taken a number of angles on the savings issue.

He said there had been pretty significant reform of our tax system which had cut the tax on savings.

“More recently the government share offers which give savers better opportunities for investment<” he said.

“I think there's quite a lot of work to do now to understand just why New Zealanders behave the way they do.

“We've been inclined in the last 20 years just to say most people have got it wrong, they're not saving enough, and I've been discussing with Treasury and the Reserve Bank we need to dig down further into that, because New Zealanders won’t all be wrong.

“Now they’ve got good reasons for making the decisions they make and we need to understand that better before we take another significant step in encouraging savings.”

But Mr English said he agreed with criticism from the ratings agency, Standard and Poors, that the Auckland housing market was overheated.

“That is why parliament is debating legislation we introduced with the Budget to provide for housing accords, and to provide the tools for councils and government to increase the supply of housing into the market,” he said.

“ Because when you look around the world you see countries like Spain, Ireland, the US where when the bubble bursts you get some real economic destruction.”

And he said that alongside that the Government signed up to a set of moves by the Reserve Bank “which are ways of the Reserve Bank ensuring that banks remain safe, and that banks don’t over extend themselves on lending.”

“ And together it is a pretty significant shift in the environment for our housing market, and I think significant enough to have some impact over the next two or three years.”

ends

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