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Key's Budget changes 'modest'

Monday 16th May 2011

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This Thursday's budget will chart a path to surplus and make "modest" changes to Working For Families, KiwiSaver and student loans, Prime Minister John Key says.

Key last week announced KiwiSaver and Working for Families would be trimmed in the budget because they were costing too much and weren't sustainable in tough economic times.

He didn't give details of the changes but said the KiwiSaver tax credit, worth about $20 a month, would be reduced and replaced with higher contributions from members and employers.

The $1000 kickstart for new account holders won't change.

Working for Families would be more strongly focused on lower-income families and there would be "a little less" for those higher up the scale.

Change would also be made to the student loan scheme but that did not include altering the interest-free status.

Key told Newstalk ZB this morning that Thursday's budget was charting a return to surplus while funding the quake recovery efforts in Christchurch and would detail changes to Kiwisaver, Working for Families and interest free student loans.

"They will all be over time, and dare I say it, reasonably modest I think, in so much that I don't think people have anything to be frightened of, there will be changes that will save the Government money and allow us to have a zero budget and get back into surplus quickly."

The Government aimed to return the country to surplus faster than 2015-16 forecast by Treasury. Finance Minister Bill English warned last week that by the end of June the surplus could be as high as $17 billion, a record for New Zealand.

Key said the country had weathered finance company collapses, the global financial crisis and earthquakes but had charted a "moderate path" through it.

ACT's answer would be to scrap Working for Families, decrease pensions and dump interest free student loans.

"What sort of New Zealand are you left it, the answer is one that is pretty tough on a hell of a lot of New Zealanders."

Key said the signalled changes were needed.

"I think we are doing the right thing."

On Breakfast on TV One Mr Key said "sheer cost" was behind changes to KiwiSaver which now had 1.7 million members, far more than predicted.

He defended giving tax cuts saying they were needed incentives and said it did not make sense to borrow to put money into saving.

Meanwhile today Tertiary Education Minister Steven Joyce reiterated his plans to save money in the sector.

The New Zealand Herald detailed the foreshadowed changes which would:

* Bar students aged over 55 - a group which borrows $25 million a year - from borrowing for living costs. That could save about $10 million a year.

* Tighten borrowing restrictions for pilot trainees, who borrow $30 million a year, 60% of which is written off.

* Restrict what people who already owe money from previous studies can borrow.

Mr Joyce told the newspaper his Government inherited a write-off rate for student loans of 47c in the dollar from the last Government.

The budget changes would take that down to 43c, and eventually to below 40c.

Last year, the Government paid $1.5 billion in student loans and recovered about half of that.



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