Finance Minister Bill English has used a wafer-thin
surplus to undercut Opposition policies while using some
creative spending ideas to try to improve National's chances of
re-election in September.
National will have the option of going into the election
campaign promising tax cuts and increased spending, all the
while retaining a reputation for fiscal restraint.
The Opposition parties were yesterday reduced to nit-picking
about how the surplus was achieved as Mr English rolled out a
series of spending initiatives that were family friendly,
along with some social spending aimed at low to middle-income
A surplus of $372 million is forecast for next year, followed
by surpluses of $1.3 billion for 2016, $2.4 billion in 2017
and $3.5 billion in 2018.
The surpluses are forecast at a time when there is no
discernible increase in tax revenue. In fact, tax revenue has
been down for five consecutive months ending May.
Rating agency Standard & Poor's left New Zealand's
ratings unchanged and said the latest projections were in
line with its expectations.
However, S&P analyst Richard Noonan said although a
general election was due in September, the agency believed
the current fiscal strategy would be broadly unaffected by
any change in government, because of New Zealand's strong
political and community consensus for prudential fiscal
The main part of the Government's $1 billion spending in
Budget 2014 was a $500 million children's and family package.
Mr English said families would benefit from a growing
economy, offering more jobs and higher wages.
It was also appropriate they were among the first to benefit
from extra government spending as the economy improved, he
Not content with aiming for traditional Labour voters with
the family package, Mr English then moved into other areas of
spending designed to undermine the Opposition.
Labour has said it would set a target of reducing
unemployment to a rate of 4% in its first three years of
government, while forecasts by the Treasury see unemployment
at 4.8% in 2017 and 4.8% the following year.
Extra paid parental leave was announced, not as much as
Labour wanted, but probably enough to appease many families.
The parental tax credit was raised, the first time since
1999. And free visits to doctors were extended to all
children aged under 13.
An extra $33 million was allocated in the next financial year
to help vulnerable children.
That will allow eight new children's teams around the country
to identify and work with at-risk children and their
families, screening of people who work with children and
support for children in care.
In wider policies, Mr English suggested ACC levies would
reduce significantly next year, mainly through a reduction in
the levy for private motor vehicles, which could fall by
about $130 a year from next year.
An extra $26.5 million was allocated over four years to
protect the kauri forest from dieback, a policy made much of
recently by Labour leader David Cunliffe.
Mr English also tried to address some of the issues around
He announced a package that temporarily removed tariffs and
duties on building materials covering 90% of a new home's
construction, provided new funding to increase the community
housing sector and increased administration support for
social housing tenants.
''Rising house prices hit those on lower incomes the hardest,
worsening inequality. Improvements in housing supply
complement the ongoing social housing reform programmes,'' he
Speaking to reporters after his Budget speech, Prime Minister
John Key said the Budget was ''a reflection of the fact that
the Government has worked hard with the people of New Zealand
to get back into surplus, and it does give us some room''.
''So it's natural that the first place and the focus of
attention would be on families, and particularly vulnerable
children,'' Mr Key said.
Mr Cunliffe adopted a description of the Budget first coined
by former Act NZ leader Rodney Hide to describe a previous
Labour Budget - ''a fudge-it Budget'' - and said the
Government had massaged the books.
He accused Mr English of turning transport spending into
loans, keeping ACC levies higher than needed and cutting
funding for the Canterbury local infrastructure rebuild to
scrape into surplus.
The big losers were first-home buyers, he said.
House prices in Auckland had gone up $200,000 under National
and all the Government offered was a saving of $3500 on a new
''You could get a better deal off your mortgage broker,'' he
National had borrowed from Labour's playbook with policies
including the paid parental leave extension, he said.
National had plundered Labour's ideas.
''Fortunately, we have many more'', Mr Cunliffe said.
Green Party co-leader Metiria Turei said young people trying
to get a foot in the door of a new home should be offended by
National's Budget, which offered a small discount on building
materials as its only new solution to one of the most
pressing issues of the day.
While an extension to the Welcome Home Loans was sensible,
young New Zealanders needed new ideas that tackled home
''Young Kiwis got nailed by this Budget, even if those nails
were a few cents cheaper.''
Additional reporting: APNZ
The surplus speed read
- A $372 million surplus in the coming year, forecast to
reach $3.5 billion in 2018.
- Treasury forecasting economic growth to average 2.8% over
the next four years.
- Free doctors' visits and prescriptions extended from
children under 6 to those under 13.
- Paid parental leave extended from 14 to 18 weeks.
Eligibility to be expanded.
- Parental tax credit raised from $150 to $220 a week.
Payment period extended from first eight weeks of baby's life
to 10 weeks.- $53 million over four years to establish three
new Centres of Research Excellence. The University of Otago
will host a Core in physics and co-host one in brain
- Import duties on plasterboard, reinforcing steel and nails
suspended, to cut the cost of building a new home by an
- $857.8 million over next four years for early childhood,
primary and secondary education sectors.
- $25 million a year to help get beneficiaries back into
work.$50 million over the next two years for the Canterbury
Earthquake Recovery Authority.
- Eight new children's teams - at a cost of $33.2 million in
2014-15 - to help at-risk children and families.