In this edition of Focus on Finance, I outline the main points in Budget 2012.
This year's Budget is about supporting New Zealanders in uncertain times and investing in our future. It keeps the Government's books on track to surplus in 2014/15, invests in better public services, and builds a strong platform for future growth. The Budget delivers on the Government's four main priorities.
- Responsibly managing the Government's finances.
- Building a more productive and competitive economy.
- Delivering better public services within tight financial constraints, and
- Rebuilding Christchurch.
Once again, the Budget strikes a balance - it sets a path back to surplus, continues to protect vulnerable New Zealanders, and supports a growing economy that generates more jobs and better incomes. For more information read my main media statement, or have a look at the Beehive Budget 2012 feature which includes all the ministerial media statements.
RESPONSIBLY MANAGING THE GOVERNMENT'S FINANCES
The Budget shows the Government remains on track to surplus, with $4.4 billion of new operating spending over the next four years matched by a combination of savings and revenue initiatives.
That helps the Government reach a forecast $197 million surplus in 2014/15 and means net core Crown debt will now peak lower at 28.7 per cent of GDP in 2013/14. This kind of sensible fiscal management is important because it helps us pursue our other economic priorities. For more information on the Government's path back to surplus, read my media statement.
Budget forecasts show economic growth picking up from 2 per cent this calendar year to more than 3 per cent in 2014 and 2015. The Treasury expects a further 154,000 New Zealanders to gain work over the next four years, on top of the 60,000 increase in employment over the past two years.
BUILDING A MORE PRODUCTIVE AND COMPETITIVE ECONOMY
New jobs are created and incomes grow only when businesses have the confidence to invest, to take risks to employ more people, and to pay higher wages. The Budget invests heavily in infrastructure, innovation, and skills - ingredients that help create a more productive and competitive economy that will support more jobs and higher incomes.
Annual spending on science and innovation will increase by $385 million over the next four years, taking total science and innovation spending across government to more than $1.3 billion by 2015/16. The Government is establishing the new Future Investment Fund to invest the expected $5 billion to $7 billion proceeds from selling minority shareholdings in four SOEs and Air New Zealand, into modern schools and hospitals, innovation, and transport. For more information on the Future Investment Fund, read my media statement.
DELIVERING BETTER PUBLIC SERVICES
The Government is creating a more innovative and efficient public sector. The Government wants to see better results and improved services. Earlier this year, the Prime Minister announced 10 challenging results for the public sector to achieve over the next three to five years. This is a fundamental shift that requires different thinking. If a programme gets results, we are likely to spend more money on it. If it doesn't, we are much more likely to reduce spending on it.
We're investing more in health, education and into supporting long-term beneficiaries to help them back into work. For more information on better public services, read my media statement.
The Government is providing considerable resources for the Canterbury rebuild and we are making some progress. Of the $5.5 billion in the Canterbury Earthquake Recovery Fund, about $2.5 billion will have been committed by 30 June this year and we expect to commit another $2.2 billion next year.
Thousands of repair jobs are already under way across greater Christchurch and overall spending on the rebuild is forecast to steadily pick up over the next four years. So we're confident the people of Christchurch will see more real progress in the next year and after that. We are already seeing huge demand for skilled workers and the Canterbury Earthquake Recovery Authority estimates an extra 17,000 construction workers will be needed in Christchurch over the next few years.
OUTLOOK POSITIVE DESPITE HEADWINDS
Despite the headwinds from increased consumer saving and sluggish European and US economies, New Zealand's outlook remains positive.
Our strong trade links with Australia and China are expected to continue to support our exports and economic growth over the next few years. Despite falls from recent highs, New Zealand's terms of trade are expected to remain above historic norms.
New Zealand's growth is expected to exceed the Euro area, the United Kingdom, Japan, the United States, and Canada over the next four years. Even if there is a global slowdown New Zealand's growth is likely to outperform most other developed countries. So while we face some risks, there are also considerable opportunities. Providing we stick to the Government's balanced programme over the coming years, I am confident we will grasp these opportunities.
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