John Key: Yesterday welfare for millionaires, today welfare for nobody

1. Hon PHIL GOFF (Leader of the Opposition) to the Prime Minister: Does he stand by his statement that "we have actually delivered a Budget that saw a credit rating upgrade in New Zealand"?

Hon JOHN KEY (Prime Minister) : Yes.

Hon Phil Goff: If a change in outlook by Standard and Poor's is a credit upgrade, as the Prime Minister has claimed, is he now admitting that a downwards change in outlook from Fitch Ratings is a downgrade in New Zealand's credit rating?

Hon JOHN KEY: Yes.

Chris Tremain: What did the Fitch Ratings release say about the New Zealand economy?

Hon JOHN KEY: Fitch Ratings was concerned, as is this Government, about New Zealand's persistently large current account deficit and rising foreign debt. The release goes on to say that because of these imbalances, the Government needs to rein in spending. The Government outlined a balanced and credible plan to do that in the Budget, and Standard and Poor's backed that up. If the Opposition is worried about a much smaller player, Fitch Ratings, putting New Zealand on a negative outlook, then it should tell us how it intends to make further cuts to Government spending, because that is what Fitch Ratings wants to see done.

Hon Phil Goff: Can the Prime Minister explain why Fitch Ratings downgraded New Zealand's credit rating after analysing the last National Budget and the Prime Minister's own speech on National's plans for the future?

Hon JOHN KEY: I can explain one of two things. The thing I can explain is that Fitch Ratings looked at a very large current account deficit, which the Labour Opposition of 1996-99, led by Michael Cullen, campaigned on doing something about. Labour did; the deficit doubled under its watch, when Michael Cullen came into office. What I cannot explain is what was going through Phil Goff's mind yesterday, because at one point it was welfare for millionaires, and today it is welfare for nobody. It sounds as though the pixies at the bottom of the garden got swine flu overnight!

Hon Phil Goff: Apropos of the Prime Minister's last comment, does he believe that a person who has been made redundant should get no transitional financial assistance for job search or retraining simply because his or her spouse earns $26,000 per year?

Hon JOHN KEY: I do, and he or she would already get that assistance from the Ministry of Social Development. [Interruption]

Mr SPEAKER: I do want to hear the supplementary question from Chris Tremain.

Chris Tremain: Has the Prime Minister seen any recent reports about a previous Government's management of our economic imbalances?

Hon JOHN KEY: Funnily enough, yes, I have. I have seen a report that says: "I do not pretend either that our record was perfect nor deny that there were significant questions unresolved. Our current account deficit, something that Fitch put us on negative outlook for, was stubbornly high, and the savings deficit was unsustainable. Productivity growth was too low." That frank and honest assessment came from a recent speech to "Mood of the Boardroom". It was, of course, by David Cunliffe.

Hon Phil Goff: Is it the Prime Minister's intention next year, before the Budget is released, to show the Budget in advance to Fitch Ratings as well as to Standard and Poor's, if we are going to allow the rating agencies to determine what is in a Budget that is meant to be for New Zealanders?

Hon JOHN KEY: We need to get one thing perfectly right: Fitch Ratings did not put New Zealand on negative outlook because of the Budget. Actually, if it had followed a Budget that Labour had written, then Moody's and Standard and Poor's would have downgraded New Zealand.

Chris Tremain: Has he seen any reports of alternative fiscal strategies, and how does he think rating agencies would respond to them?

Hon JOHN KEY: Yes, I have seen reports from the Opposition arguing that we should have further tax cuts, expand the welfare State, bring back large KiwiSaver subsidies, reinstate tax credits, and spend more on tertiary education, early childhood education, overseas aid, and health. This massive and totally irresponsible increase in Government spending would have set New Zealand on a downgrade by every single rating agency, and Phil Goff knows that is the case.

Hon Phil Goff: Is it part of his plan to impress the rating agencies by using proxies such as Mark Weldon and John Whitehead to promote National's secret privatisation agenda?

Hon JOHN KEY: If John Whitehead is a proxy, how come he was Secretary to the Treasury under the last 9 years of the Labour Government?

Dr Russel Norman: Does he agree that one of the central drivers for the imbalance in foreign debt and the current account deficit in the New Zealand economy has been the housing market's speculative bubble, and will his Government support measures that tackle the bubble directly, such as a capital gains tax excluding the family home, and ring-fencing the losses from investment properties?

Hon JOHN KEY: Yes, in answer to the first question. In terms of the latter question, the member will be aware that Bob Buckle is leading a tax review. I do not want to prejudge that review, because there may be all sorts of things it looks at. But I personally have stated many times, and am happy to state again today, that I do not support a capital gains tax.

Hon Phil Goff: Is it also the Prime Minister's attempt to impress credit rating agencies that is the reason he is appointing Don Brash as head of the Productivity Commission, notwithstanding that that brings back an agenda that the electorate rejected decisively in 2005?

Hon JOHN KEY: From my memory we lost the 2005 election by only a smidgen, so I am not quite sure that is the right assessment. I do not know whether I have missed something, but I cannot understand the Leader of the Opposition's fixation with rating agencies at the moment. When Standard and Poor's upgraded us, apparently it was the guy who got it wrong with regard to Enron and should not be believed.