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"Instead of throwing money around we are actually addressing the real causes of problems and we are having a great deal of success.''
Mr Key also announced an expansion of New Zealand Trade and Enterprise capacity in China, South America and the Middle East in his major pre-budget speech today.
He re-affirmed that the Budget would post a small surplus - it was forecast in December to be just $86 million - the first since 2008 and that the new spending allowance would be $1 billion.
New Zealand Trade and Enterprise at present assists 500 New Zealand companies trading overseas each year.
Mr Key said the increase in funding and personnel would increase that to 700 companies.
NZTE would add seven new positions in greater China, three new positions each in Brazil, Chile and Colombia and two new positions in Saudi Arabia and United Arab Emirates..
"To become a wealthier country that afford higher incomes and better public service, we have to boost our trade,'' he said in a speech to the North Harbour Club at the North Harbour Stadium.
The new funding would be $69 million over the next four years and $14 million from reprioritising in other areas, which he did not specify.
The boost in China follows a similar boost of seven staff in Ministry of Foreign Affairs and Trade staffing and five Primary Industries positions in China announced by Mr Key in China last month.
Mr Key said anything more than a modest increase in spending would mean higher interest rates than would otherwise have been the case.
His Government was prepared to invest in programmes that had a pay-off wither socially or economically.
"We need to get on and reduce our debt instead of using taxpayers' money in a series of election bribes, which is the Opposition's approach.''
The Government's approach was to focus on what was really driving social outcomes like crime, welfare dependency and under-achievement at school and address the underlying causes.
"That approach is delivering real results without breaking the bank. In fact over the longer term it saves money.
"We've found that the possibility of more spending can be a distraction from a growing focus in the public sector on solving complex problems rather than throwing money at them.''
The new approach had already reduced reoffending by 12.6 per cent, which was half way to the target of a 25 per cent drop.
That has meant 2300 fewer offenders and 9300 fewer victims of crime.
In welfare, the Government had focused on getting people off benefits and into work because that was the best way to lift people out of poverty.
Government spending as a proportion of GDP had been declining at the same time since the Government changed in 2008.
In 2008-2009, Government spending was 34.5 per cent of GDP. In the coming year it was forecast to be 30.6 per cent before dipping under 30 per cent and staying there.
That was important when the economy was an upswing because on-going spending restraint by the Government helped to dampen the interest rate cycles.
Lower interest rates kept the exchange rate lower which was important for the overall competitiveness of the economy.
- By Audrey Young of the New Zealand Herald