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Budget 2011 ‘screams responsibility’, Key says

Article – BusinessDesk

May 16 (BusinessDesk) – This Thursday’s Budget “screams responsibility” after one of the toughest periods in New Zealand’s economic history, says Prime Minister John Key.

Budget 2011 ‘screams responsibility’, Key says

By Pattrick Smellie

May 16 (BusinessDesk) – This Thursday’s Budget “screams responsibility” after one of the toughest periods in New Zealand’s economic history, says Prime Minister John Key.

People would be “surprised by the savings in a couple of areas”, and the Budget would deliver on the government’s revised decision not to increase total government spending at all this year. Prior to the Christchurch earthquakes, new spending of $1.1 billion a year had been built into the government’s economic strategy.

His comments included signals about public sector “initiatives” to make government departments “spend less money more wisely”, along with “modest” cuts to KiwiSaver subsidies, Working for Families entitlements, and some trimming of the interest-free student loan scheme.

Changes to those programmes would be phased in gradually, and lower income New Zealanders would still receive more cash in the hand than they did today, although that appears to be because WFF will continue to be inflation-adjusted annually.

There would be no government department amalgamations or abolitions in this Budget, even though if a National-led government were re-elected, there would be a reduction in the number of government agencies.

He defended what would be “not a usual election year Budget” as balancing social and economic needs against the requirement to bring the Budget back into surplus as quickly as possible and to keep public debt as a proportion of gross domestic product below 30% to appease international credit rating agencies.

“We have come through the worst recession since the Great Depression, two earthquakes, and the collapse of the finance company sector with a good set of books and unemployment falling,” said Key.

Treasury economic growth forecasts would show it was “more optimistic about the future, probably with good reason” after a disappointingly weak 2010.

To charges from Opposition leader Phil Goff that this would be a “grey” Budget ahead of a “black” Budget if re-elected, Key said only that it was “a very credible, responsible Budget.”

“We have carried the economy for a couple of years (through recession) and we are paying for Christchurch, but we have to have good fiscal discipline” to ensure interest rates remained low, public sector borrowing and spending did not crowd out productive private sector activity, especially exports, and the country’s international credit rating was preserved.

Key said he had “skim-read” Act party leader Don Brash’s open letter to him, but dismissed Brash’s policy prescription as “an extreme proposal if one were to follow through.”

(BusinessDesk)

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