By Bernard Hickey
Prime Minister John Key has signalled he will outline the Government's thinking in a speech on Wednesday about how it plans to use budget surpluses, including whether to resume contributions to the New Zealand Superannuation fund, or build up the EQC fun, or repay debt, or cut taxes.
Key told his weekly post-cabinet news conference in Wellington that there was no room for an election 'lolly scramble', given the government wanted to keep pressure off interest rates and it needed to repay debt for future 'rainy days.'
He said there were a range of options for using any surpluses built up from 2014/15, including restarting contributions to the New Zealand Superannuation Fund, building up the Earthquake Commission's (EQC) depleted funds, increasing spending or returning funds to taxpayers through tax cuts.
Finance Minister Bill English is due to deliver Budget 2014 on May 15. It will be the last before the September 20 General election.
Key said cabinet had discussed the upcoming budget earlier on Monday..
"At a speech I'll be making in Auckland this Wednesday, I'll talk about the broad approach we're taking to this year's Budget," Key said in detailing his plans for the week.
Asked about how any National-led Government would spend its surpluses after 2014/15, Key said: "Part of that we're going to give you at least some sort indication of what they look like and how we might deal with those issues, both on Wednesday, and also in the discourse the Minister of Finance will give on the day in his Budget speech."
"My overall view is we shouldn't have a massive increase in Government expenditure. If you're looking for us to have a massive lolly scramble, either on budget day or going into the election you're looking at the wrong political party because, A, I don't think that would be in the best interests of New Zealanders," Key said.
"If there are surpluses, those surpluses in part can be used for the benefit of New Zealanders in terms of direct payments we might make, but actually part of it's got to be used to repay debt and part of it's got to be used potentially to build things like the New Zealand Super Fund," he said.
"If you're going to have the argument that in the bad times, like a Christchurch earthquake or a recession, the Government should borrow money to stimulate the economy or support the people, then by definition in the good times you've got to prepare for another rainy day," he said.
Asked if the options for using surpluses could include tax cuts, Key said: "There's a range of options and they include, you could spend more money, you could tax people less, you could build up the Super Fund, you could build up the EQC. There's any range of potential options there."
"Broadly speaking, the new Budget spending allowance we've got is about right. It doesn't mean there can't be some increases over time, but the sort of promises we've seen Labour and the Greens making are truly unrealistic, would put enormous pressure on the Reserve Bank Governor and interest rates, they're unaffordable and they'd send New Zealand back into deficit," he said.
The Government set new operating spending allowances in Budget 2013 of NZ$1 billion a year for the current 2013/14 year and through until 2016/17. Last year's budget also delayed the planned resumption of contributions to the New Zealand Superannuation Fund for two years until 2020 and after net debt had been cut from over 25% of GDP to under 20%.
Asked if his Wednesday speech would detail the Government's ranking of its options, he said the speech would give "a bit of sense of where we're going."
'Higher interest rates under Labour'
Key said National had run 'zero' net new spending for four of the last five budgets, despite increasing health, education and science spending in each of those years. It had done that with cost reductions in other areas.
"I accept that can't go on forever, which is why we had about NZ$1 billion of new spending in the last budget," Key said.
"Bill English's view is that NZ$1 billion is pretty much the new normal. It doesn't mean you can't have a little bit more, but not massive amounts," he said.
He then referred to Labour's baby bonus plan, which he said would probably cost up to NZ$800 million a year once fully rolled out because the take-up rate for free childhood education would be higher than Labour's estimates.
"This is an opposition that came from being a Government that spent on average NZ$3 billion or NZ$4 billion extra every year for the last five years of being in office. That's not affordable for New Zealand. That will put pressure on interest rates and that will cause New Zealand to have to borrow more money and borrowing has to come from foreigners," Key said.
"And I just don't think that's what New Zealanders want. That's why Labour is not going up in the polls and they're going down in the polls and that between them and the Greens, who are just abjectly opposed to growth, that's just not a recipe to take New Zealand forward."
(Updated with more detail, quotes)
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