Budget 2012 will have implications for some Kiwis, but not slash and burn; Key says, as govt looks for NZ$640 mln spending plug

Budget 2012 will have implications for some New Zealanders, but it will not be a slash and burn exercise, Prime Minister John Key says.

Cabinet Ministers and their departments are busy looking for ways to turn a forecast NZ$640 million government deficit at the end of the 2014/15 year into a surplus of any kind, after revised forecasts from Treasury last week showed the government would not be reaching its self-set goal of hitting surplus that year.

Lower-than-expected tax revenues, rising earthquake costs and a deteriorating global economic situation have seen the forecast surplus in 2014/15 be whittled down from NZ$1.45 billion at October's pre election update to just NZ$370 million at February's Budget Policy Statement, and then a billion dollars worse to a NZ$640 million deficit last week.

Speaking at his post-Cabinet press conference on Monday afternoon, Key said Ministers were currently looking at what they could do to help plug that gap over the next three years. At the start of April, before the latest set of Treasury forecasts were released, Key announced Budget 2012 would be a zero budget, cancelling a planned NZ$800 million operating spending increase.

Last week, following the new forecasts, Finance Minister Bill English said it would be an achievement if the government got near surplus in 2014/15, but he and Key both said they were still aiming for that target.

"The simple bottom line is that we are going to get back to surplus by 2014/15 if it's within our power to do so - that's a government objective," Key said on Monday afternoon.

"The Minister of Finance pointed out last week the challenge that's been set for us because it's got a bit harder, but we remain committed to doing that," he said.

"The important point to understand is, that while that makes the challenge more difficult, I don't think people should think that this Budget's going to be a slash and burn exercise.

"There will be some changes in there, and that'll have some implications for some New Zealanders, but overall I think the balance is about right, which is, it will provide economic certainty for the country, that we are on track to get back into surplus, and it will be fair in terms of the allocation of resources," Key said.

See this morning's article, NZ not set to follow UK back into recession because of government austerity, PM Key says; 'We've done it the Keynesian way'.