PM Key says can't "indebt" future generations; surplus will be earlier than 2016/17; net debt to peak below 34% of GDP

PM Key says can't "indebt" future generations; surplus will be earlier than 2016/17; net debt to peak below 34% of GDP

By Alex Tarrant

Prime Minister John Key says the current generation needs to be responsible with how it manages government debt and not "indebt" future generations.

On TV3's firstline this morning, Key added to comments he made at his post-cabinet press conference last night, at which he said Budget 2011 would forecast wage growth well and truly above inflation and strong employment growth. Key yesterday also hinted that the government would look to return its books to surplus before 2016/17 and that net debt would peak below 34% of GDP, which he confirmed would be the case this morning.

The government is set to announce a deficit before gains and losses of up to NZ$17 billion for the current year to June 30 as it borrows heavily to cover the initial costs arising from the Christchurch earthquakes, a lower than expected tax take due to a sluggish economic recovery, and as it continues programmes such as Working for Families and KiwiSaver, which it has indicated will change on Thursday.

The government will borrow up to NZ$20 billion in the current financial year to cover that deficit as well as pre-funding some of next year's deficit, which is expected to be about half that of this year's NZ$17 billion.

This morning on TV3's Firstline, Key said there was a big upfront cost for the government from the September and February earthquakes in Christchurch. The earthquakes are expected to directly cost the government NZ$5.5 billion over the next four years, with the remainder of the estimated NZ$20 billion costs for the quakes to be covered by private insurance and reinsurance payments.

“There’s really nothing the government can do about that and it presents a lot of costs," Key said about the quake costs.

"And that’s why it’s a zero budget. Most New Zealanders watching this programme will be able to understand somehow we’ve got to go and pay for that shortfall," he said.

'Economic position improving'

Meanwhile, due to the global financial crisis, New Zealand tax revenue had "slowed down," Key said.

"Businesses paid less tax, individuals paid less tax – less overtime etc, etc, and the government’s outgoings - where we pay for unemployment benefits and the likes – because they rose, we pay more," he said.

"Now the economic position is actually improving, both in New Zealand and globally, and we’re very confident that that deficit will evaporate and we’ll return to surpluses and that’s a good news story for New Zealand," he said.

Meanwhile, Key said the government deficit would reduce “very, very rapidly as you get into the new financial year [beginning July 1]".

Key said Finance Minister Bill English would release those figures on Thursday, when the budget is released to the public at 2pm.

“What I can say is, when we came into office, we were presented by Treasury with an outlook which said, ‘You’ll have ten years of deficits and very rapidly rising debt’," Key said.

"Even if we’d just stuck with the programme that we would change things in the last couple of budgets [by increasing spending by NZ$1.1 billion plus 2% for inflation], we still wouldn’t have got back to surplus until 2016/17 and debt would have topped out at 34% of GDP," he said.

Don't want to join the PIGS

"Now what you’re going to see on Thursday is an improved position from there. That’s because the government’s been very proactive, and despite the fact it’s election year, we’re fundamentally going into the budget telling New Zealanders, ‘Look we’ve got to live within our means, we can’t indebt a future generation, we are going to be responsible."

"Yes there’ll be some changes, you won’t love all of them, but hopefully you’ll understand that it’s better that we take a small amount of pain now, than a lot of pain down the track as Portugal, Ireland, Greece and Spain are," Key said.

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30 Comments

Now it's 34%....days ago it was 32%....weeks ago 30% was the ceiling limit....wanna know the truth.....throw three dice.

Wolly - a few months back (20.December) it was 28.5%

Never mind.........."confident, deficit will evaporate".  See above speech.

A sad charade, nobody dares to tell the truth.

 Prime Minister John Key says the current generation needs to be responsible with how it manages government debt and not "indebt" future generations - Can't argue with that if only he really, really meant it.

The partial privatisation pitch just got a bit easier with the stellar dividend deliverer Meridian's announcement -  http://www.nzx.com/news/5013002/Meridian-pays-521m-special-dividend

Funny timing eh?

Sure John, wouldn't want to copy the Greek example of default thru massive tax avoidance by the rich. 

Your policy of refusing to even consider a land tax or CGT is of course totally consistent with this...

Cheers to all.

Expect rasher statements.

Haha, you mean more porkies.

 JK is  the one who hog-tied us to a pile of unaffordable welfare packages .

They are affordable if you choose to have them....when you look at the tax rates in the OECD, NZ is not a heavy taxation country..

Really easy, up the top rates to 35%...

regards

once again PDK....what do you know about GAVI...?

Once again?  I musta missed the first. You referring to the RNZ interview this morning?

 GAVI  ? ........ A tasty little white wine from the Piedmont region of Italy ........ Have you got some , Count ? ......... ( is PDK an oenophile , too  ? )

indeed I am, and it's gotten me into trouble in the past - shure...az.

Christov - if you're heading where I think, I suggest :

The Current Plague  by Laurie Garrett, pub by Penguin.

 

Ta Steven...

Not really where I was going with it ....but thanks Steven a good watch retrospectively speaking.

What you need to know is Who makes up GAVI in terms of capital and know a lot more about the who's who of their private investors........and where their other connections lead to.

yes me too...PDK...thanks for the tip.

Christov - sorry, that shoud have been 'The Coming Plague', not 'Current'. 'Current' is our crop of 'Pollies'.

I've got a surgeon mate who is convinced it'll be the greal sorter-outer. We both agree that global population will crash to 2 billion or so, by 2050. All biological species in overshoot do, and ours is the biggest biomass on the planet, been in overshoot since 1980-ish.

Just have different ideas as to how it will play out. Our discussions include the fact that we see it from our respective interests, ie medicine vs physics.

A good read (and it's NZ - where are the 'Pollies? the economists? no excuses, they could have known this 30 years ago) is:

Overshoot  by William Catton.

http://en.wikipedia.org/wiki/William_R._Catton,_Jr.

 

Thanks Again PDK...I will be having some reading to do.....what was interesting to me is that when I got "involved" I thought what the hell is going on.... am I alone here..? well the more I read and search and search and read ,apparently ...NOT . those I would have expected to rely on percentages Globaly appear to be involved proactively  in preserving a "future" by avoiding blowout extinction.........so surprised ..? yes I was....and continuing to be.

I guess it's just one of those things "you can't talk about" because as a species we are not ready to talk about it......and in a not so funny way we have God to thank for that.  

I have none GBH....but I will make it my mission to procure some of the said Vino....Cin cin!

No I was not PDK but looks like you caught me up below....

Yeah right...thats why we had the tax cut John....I dont believe for one moment you didnt know how bad the GFC is/was....but you gave the tax cut anyway, funny that the rabid right thinks its perfectly OK to slash and burn but adding a few % back isnt.......so the word is "b*llocks"

regards

You wanna avoid the Pigs...get the hell out of the sty......oink..screech...oink.....the crap your feeding us isn't fit for pigs.

Debt/ tax reduction with investment in “Student- Shares”

 Why do free market approaches not apply to upcoming academics ? Why does the taxpayer fund students in the millions with interest free loans ?

Most successful students are becoming high earners, some earning millions. So why not establish a private organization, which financially looks after students, selling “Students Shares” ? This would be a great opportunity for family-members, friends and/ or companies, etc. to invest in potential brain capital. 

Alex, Amanda - some comments -  even better you could initiate such an organisation.

That's weird man, what you smoking?

Muzza, explain why my idea is weird.

Know wotcha mean , Walter  . Kind of like when David Bowie incorporated himself , the artist , as a company .......... and then launched shares in himself onto the stockmarket in the UK .

........ Establish a  private company to fund students' educations , and then to cash in by clipping a percentage of their income over an agreed period .

Bloody good hooch you're toking , Kunzie ! ... Cool man , way cool .

Hang on John, the "I" in PIGS stands for "Ireland", remember how badly you yearned for the NZ economy to mirror that of Irelands'?

Don't worry John, a smile-and-a-wave in November will see you through with votes to spare...

 

"Don't worry John, a smile-and-a-wave in November will see you through with votes to spare..."

That's actually true, unfortunately. Partly because there are few, if any, viable alternatives, but mostly because the majority of voters haven't become any less stupid since the last election.

So what would his solution be? vote out the guys who are out of control with creating more debt?