Budget will forecast wage and job growth: PM

Thursday's budget will forecast strong growth in wages and jobs over the next two years while keeping up the pressure on the public service to save money, Prime Minister John Key says.

Giving glimpses of the budget at his post-cabinet press conference today, Mr Key said the growth in average weekly wages was expected to "well and truly'' outstrip inflation and the Treasury was also forecasting strong employment growth.

"It is good wage growth, it is positive, it means New Zealanders will be earning more and getting to keep more of that,'' he said.

Mr Key wouldn't give away budget figures, but told reporters wage growth of between 4 percent and 5 percent could be taken as "an educated guess''.

He said the budget would set an overall saving target for the Government which would start to be realised over the three years beginning on July 1, 2012.

"I think you will be surprised by how much we are looking to save overall from a couple of public sector initiatives,'' he said.

"Targets for individual agencies will be finalised after the budget based on size and current funding, then it will be over to chief executives to identify how exactly to meet these targets.''

Mr Key wouldn't give details of the initiatives, but said mergers wouldn't be involved and the Government wasn't planning to restructure the public service.

He indicated the Government was managing to balance its books sooner than could have been expected after the second Christchurch earthquake and having to look after collapsed finance companies.

"If everything was left unchecked and we just ran the numbers based on the knowledge of the Christchurch earthquake, Treasury would tell us that we would not return to meaningful surplus until 2016/17 and that debt would top out at 34 percent of GDP,'' he said.

"That's the starting point. You will have to wait to see whether we have done better than that, and by how much.''

Mr Key indicated that he expected the international credit rating agencies to look favourably on the budget, saying they were "comfortable'' with countries which kept debt under 30 percent of GDP.

"Debt at 30 percent of GDP is where it should stop,'' he said. "We've got a good, solid pathway back to surplus and and good pathway for controlling debt.''

Labour leader Phil Goff said the Government wasn't going to deliver a black budget because it was election year.

"The black budget will come if a Brash-Key government were to be elected at the end of the year, then you'll see some serious cuts,'' he said, referring to the ACT Party as a potential partner for the Government under the leadership of Don Brash.

"When they've flogged off all their assets, what's their next party trick to deal with the fact that they're borrowing money to pay for income tax cuts for the wealthiest New Zealanders?"

Labour's finance spokesman, David Cunliffe, said his party would present a fully costed package of policies that would build a stronger, more export-oriented economy, help people to save and invest, and reduce debt.