Back to surplus by 2014/15 despite record deficit

NZPA

Thursday 19th May 2011 1 Comment

Finance Minister Bill English has delivered a budget that will bring the Government's books back into surplus by 2014/15, a year earlier than forecast, helped by public service savings, asset sales and KiwiSaver cuts.

Despite a record $16.7 billion deficit at the end of this financial year, forecasts show than in four years the Government will stop borrowing and start repaying debt.

The budget confirms the partial sale of four state-owned energy companies, raising $5b to $7b, cuts to KiwiSaver and Working for Families, and tighter student loan criteria.

The public service has to save $980 million over the next three years, and departments are going to have to fund KiwiSaver for their employees out of their own budgets.

That will cost them $650m, and they have to find ways to save another $330m.

KiwiSaver cuts are in line with predictions -- the tax credit worth about $20 a week is being halved while employee and employer contributions increase from 2 percent to 3 percent.

Changes to Working for Families are modest, with most lower income families getting an increase from April 1 next year and those on higher incomes slightly less than they do now. The changes will be phased in slowly.

Student loans for people over 55 are going to be restricted and the three-year repayment holiday for students who go overseas is being cut to one year.

Borrowers who are in default will be targeted and part-time students won't be entitled to loans for course-related costs.

Although there is no new money in the budget, reprioritised spending has given health an extra $585b next financial year and a total of $2.2b over the next four years.

Education is getting an additional $1.4b over four years, with $550m of that going into early childhood education.

There is $5.5b over six years for a new Canterbury Earthquake Recovery Fund, and the Government's total liability including ACC costs is estimated at $8.8b.

Of the extra funding that is available for departments, health and education recieve most of it with the rest going to justice, the Whanau Ora welfare delivery system and several smaller agencies.

The budget forecasts economic growth at 4 percent next year, the highest for five years, with 170,000 new jobs created by 2015.

Mr English said his third budget would build a strong platform for jobs and growth, set a credible path back to surplus and help increase national savings.

"The budget does this while continuing to protect the most vulnerable New Zealanders, increasing investment in health and education, and establishes a recovery fund to help pay for rebuilding Christchurch," he said.

"The measures announced in this budget will put both the Government's finances and the economy on a much sounder footing, despite a series of adverse events and a slower economic recovery."

Big budget issues like asset sales and KiwiSaver changes won't happen until after the November election, and Prime Minister John Key said the Government was meeting its promise to clearly set out its policies.

Comments from our readers

On 20 May 2011 at 7:56 am Nick said:

correction, that he "says" will return the budget to surplus.