News and Updates from Bill English

Finance Minister Bill English today confirmed Budget 2010 will be delivered on May 20 and will set out important policies to lift economic growth and give hard-working New Zealanders incentives to get ahead.

"The Budget will be about taking action to grow the economy over the next five years and beyond," he said after updating the National caucus on the economy and the Government's priorities for 2010.

"It will build on the Government's substantial economic programme last year and give businesses the confidence to invest and create jobs.

"We've come through the recession in better shape than many commentators had predicted. That gives us an opportunity to differentiate ourselves from other countries in areas like tax reform, productive infrastructure investment and better public services.

"All of this is essential if everyday New Zealanders are to enjoy the incomes and living standards that give them opportunities to get ahead."

As it makes decisions for the Budget, the Government will consider several reviews - including the report last month of the Tax Working Group.

"As the Prime Minister has said, we want to create a tax system that strengthens the economy, rewards effort, reduces tax avoidance and keeps talented New Zealanders at home. We also want to tilt the economy towards exports and investment, and away from consumption and borrowing."

The Budget will be delivered against a backdrop of ongoing restraint, given the Government faces another six years of Budget deficits and net Crown debt will more than treble to a forecast $65 billion by 2014.

"It was entirely appropriate that the Government helped New Zealanders through the recession. Now we need to focus on fixing a damaged economy and restoring the Government's books."

GEARING UP FOR 2010


CLICK HERE TO WATCH MY LATEST VIDEO BRIEFING

I hope you all had a good Christmas break. Summer holidays are a chance to spend time with family and reflect on our busy lives. We also get a chance to think about the year ahead and what we want to achieve. I had a great break down south with my family and looking ahead, I'm excited to be back.

As Prime Minister John Key has said - this is the year the Government will start delivering on the faster growth agenda we want. Last year our focus was on jobs, as we weathered the worst global recession since the 1930s. While unemployment is still expected to rise in the first part of this year, our focus has paid off with the jobless rate tracking well below forecasts.

While we were focused on jobs we also set out a comprehensive programme to lift New Zealanders' living standards in the longer term. We set a variety of taskforces the job of investigating specific policy options. Most of these have now come back with findings and over the coming weeks and months the Government will choose the best and most practical options to lift growth.

Outlining a concrete programme to lift growth is the best way to boost consumer confidence and give businesses the confidence to invest and hire more workers. You can read some more about this in an opinion piece I provided to the New Zealand Herald early this month.

TAX WORKING GROUP

Last week I received the report of the Tax Working Group. The report, which identifies problems with our tax system, has generated a lot of discussion and you can expect that to continue over the coming months as the Government considers which options it adopts in the May Budget.

In summary, the report says our tax system is too heavily weighted towards taxes on wage earners and companies. It says these taxes are the most damaging to growth. On the other hand it says tax on consumption is low by international standards and there is a large gap when it comes to investment property. The report suggests changes to the tax mix to create a better tax system.

The working group has made a strong case for change and suggested some practical options. Our focus as we pick through the report will be on options that will boost economic growth. You can read more about the Government's approach to the report in my press release.

BETTER, SMARTER PUBLIC SERVICES

Last week I took a tour of around some Wellington Work and Income sites with Welfare Minister Paula Bennett. These included a call centre and Community Link centre in Lower Hutt and a service centre in Porirua. Jobs has been a major focus for this Government and it was great to see the improvements Work and Income has been making to their frontline services so they can better match up job seekers with jobs.

These include:

• Better use of technology in their call centres so they can handle the far higher volume of job seekers in the last year.


• Bringing together the various government and non-government agencies in a community under one roof in the case of Community Link.


• General process improvements that have cut waiting times for job seekers and meant a high proportion of job seekers are going straight into new jobs within weeks of losing their old one.

It was heartening to see this kind of innovation and improved efficiency getting good results for both taxpayers and job seekers.

THINGS TO LOOK OUT FOR

• On February 4 Statistics NZ will release the Household Labour Force Survey for the December quarter. This is expected to show a rise in the unemployment rate from the current 6.5 percent.


• On February 9 Prime Minister John Key will outline the Government's programme for 2010 in his speech to the opening of Parliament.


• Later in the month I'll also deliver a speech focusing on the economy in 2010.


• Also keep an eye out for the first National Infrastructure Plan, which will be released in coming weeks. You can find out some more about it here.

Regards,

Hon Bill English
Finance Minister

I welcome your comments - please feel free to share your thoughts and reactions using the comments option.

Bill talks about the shape of the economy going into the new year and what can be expected from Government in 2010.

Crown accounts for the five months to November 30 were slightly better than forecast, but reinforce the need for responsible fiscal and economic management through 2010, Finance Minister Bill English says.

"We face another six years of Budget deficits and we're borrowing an average $240 million a week, every week, for the next four years.

"The best way - in fact, the only way - of getting on top of this significant fiscal challenge is to get the New Zealand economy growing and giving businesses the confidence to invest and create higher-paying jobs.

"The Government has embarked on a significant programme that includes reducing red tape, investing billions of dollars in productive infrastructure, getting better services from the government sector and addressing imbalances and inequities in the tax system.

"Budget 2010 will clearly set out the next steps of that plan, so that the economy grows faster and creates opportunities for families to get ahead."

The Crown's operating deficit before gains and losses for the five months to November 30 was $3.7 billion - or $700 million better than forecast late last year in the Half-Year Economic and Fiscal Update.

The operating deficit including gains and losses at $1.4 billion was $1.1 billion better than forecast, after better-than-expected investment performances by the New Zealand Super Fund, ACC and EQC.

"Monthly variations in the Crown's finances can reflect timing differences that are later reversed - and they need to be seen in the context of net core Crown debt rising from $17 billion in 2009 to a forecast $65 billion in 2014.

"The recession will continue to be felt on the Government's finances for some time. Anything we can do to shorten that process and get the economy growing faster will make a significant difference."

New Zealanders can go into the Christmas break feeling more positive after two quarters of economic growth, but more work is needed to ensure a strong sustainable recovery, Finance Minister Bill English says.

GDP data shows the economy grew 0.2 per cent in the September quarter and June quarter growth was revised upwards from 0.1 to 0.2 per cent. In the September quarter household consumption and mining were stronger than expected and manufacturing and construction down.

For the year to September 2009, the economy contracted 2.2 per cent compared with the year to September 2008.

"While growth is still weak, today's figures are positive news. New Zealanders can go into the Christmas break feeling a bit more confident about the economy and the year ahead," Mr English says.
 
"Two quarters of growth – following five quarters of contraction - reflects a stabilisation in the global economy and the Government's sound economic management.

"The positive data follows Treasury's updated forecasts which show unemployment is likely to peak sooner and at a lower level than previously thought, with 64,000 fewer jobs expected to drop out of the economy.

"However the recovery remains fragile and any further problems abroad could weaken our growth prospects. That is why it is critical we improve the competitiveness of our exporters and address structural imbalances in our economy.

"To climb back up the world income ladder and to replace jobs lost during the recession we need businesses to have the confidence to invest and create jobs. The Government's role is to make that as easy for them as possible.

"We have set out a comprehensive programme to lift our economic performance and we will be developing that further in 2010," Mr English says.