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Budget 2012 will set out balanced decisions to ensure the Government remains on track to surplus in 2014/15, Finance Minister Bill English confirmed today.
In particular, it will address a $1 billion deterioration in the forecast operating balance before gains and losses in 2014/15 between the Budget Policy Statement in February and preliminary Budget estimates.
“It’s important that we return to surplus because New Zealand is one of the most indebted countries in the world as measured by our net international investment position,” Mr English told the Wellington Employers’ Chamber of Commerce today.
“We need to start rebuilding a buffer for when the next global crisis comes along. Surpluses give us choices we simply don’t have while we’re running deficits.”
Returning to surplus by 2014/15 is a significant challenge, requiring tight control over spending for the foreseeable future, Mr English said.
“The scale of the challenge was again highlighted in preliminary Budget estimates ministers received in recent weeks.
“They revealed a $1 billion deterioration in preliminary forecasts of the operating balance before gains and losses in 2014/15, compared to the Budget Policy Statement in February. In other words, the preliminary Budget estimates showed a $640 million deficit in 2014/15, compared to the $370 million surplus predicted in the BPS.”
This reflected a number of factors, such as the impact of lower global growth on short-term, New Zealand growth forecasts. This in turn flowed into lower government revenue expectations.
In addition, New Zealand Superannuation Fund revenue and State Owned Enterprises profits had been revised downwards, and finance costs and earthquake costs were revised upwards.
“But ministers remain focused on staying on track to surplus in 2014/15 for all the reasons I’ve outlined,” Mr English said. “They are making decisions to achieve that. As a country, we can’t afford to spend money we don’t have.”
These decisions include:
The Budget will also propose changes in the Public Finance Act so there are more checks and balances on ministers’ spending decisions and their long-term effects.
This includes a proposed spending limit to restrict spending increases to population growth and inflation, as set out in the National-ACT confidence and supply agreement.
“So you can see that this Government is serious about getting back to surplus by 2014/15,” Mr English said.
“But I want to stress that while we’re making some challenging decisions to get back to surplus, we will continue with the same balanced approach we’ve adopted for the previous three Budgets.
“We’re keeping up entitlements to welfare and superannuation, and continuing with large programmes like Working for Families and interest-free student loans. We will invest more in health and education. We promised New Zealanders we would do that.
“We’re investing money up front to support New Zealanders out of welfare. We’re also remaining strong on law and order and demanding better, more innovative, public services. This Government has a strong track record in these areas.”