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Bill English delivering Budget 2009 - Source: ONE News -
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Two more rounds of tax cuts have been put off and contributions
to the Super Fund are suspended in a tight Budget designed to curb
soaring government debt and get New Zealand through the
recession.
Finance Minister Bill English says the Budget ensures forecasts of
skyrocketing debt, due to the big spending policies of the previous
government and the recession's pressure on revenue and growth, will
not eventuate.
The government's forecast operating deficit for the current year to
the end of June is $2.9 billion.
English says Treasury estimates showed that without policy changes,
gross government debt would rise alarmingly, reaching 48% of GDP by
2013 and 70% of GDP - about $227 billion - by 2023.
English says even with measures taken in the Budget the operating
deficit is forecast to be $7.7 billion in the year to June 2010,
increasing to $9.3 billion in 2011.
He says in these circumstances the government would have to borrow
even more than it plans to in order to pay for tax cuts and that
would be reckless.
So, the second and third tranches of planned tax cuts in 2010 and
2011 are deferred but he says they will be assessed in future
Budgets.
The first round of tax cuts went through last month. English says
by deferring the two rounds of tax cuts, the government will save
around $900 million a year from 2011/12.
Annual government spending has been cut from $1.75 billion
indicated last December, to $1.45 billion. It will be capped at
$1.1 billion in 2010/11 and adjusted up by 2% in the following
years.
English says a growing mountain of debt would act as a handbrake on
the economy and could lead to an adverse reaction from foreign
investors and credit agencies. That would mean higher interest
rates for businesses and households, he says.
English says at the heart of the Budget are steps to future-proof
the government's financial position as it takes a hit from the
biggest and most co-ordinated global recession since the
1930s.
The economy will lose around $50 billion of output compared with
what was forecast in last year's Budget, he says.
"I think we have all been surprised by the ferocious nature of the
recession", he told reporters.
Unemployment is now forecast to peak at 8% in
September 2010.
English says recovery from recession is likely to be slow at first,
with modest growth forecast late in 2009, picking up somewhat
during 2010.
The government's
automatic payments to the New Zealand Super Fund
will be suspended until the government's books return to surplus. A
payment of $250 million will be made in 2009/10 and any future
partial contributions will be considered on an annual basis.
But National Superannuation pensions are locked in at 66% of the
average wage and will still be paid at age 65. That's despite
Australia's decision recently to gradually raise the pension age to
67.
Economy to keep going amid global turmoil
English outlined steps the government is taking to ensure New
Zealander's are cushioned from the sharpest edges of the global
recession.
The Budget confirms the $323 million home insulation and clean
heating programme the government foreshadowed and it will start in
July.
Government grants of up to $1,800 will be available for houses
built before 2000 that require
ceiling and under floor insulation or a clean heating
device such as heat pump or approved wood burner, regardless of
income.
The government says about 180,000 households will be eligible for
the grants. Community Service Card holders will be eligible for
grants of up to $3000.
The Budget also allocates $50 million for a national cycleway
network, and pumps billions into infrastructure.
This includes $290 million for the first part of the government's
$1.5 billion plan for ultra-fast broadband in the home
More than $1.6 billion goes into improving education facilities and
lifting educational achievement, including $ 523 million to build
new schools and upgrade existing ones.
There's an extra $1 billion over three years for the state highway
network.
Health gets a $3 billion boost over four years, focused on
frontline services.
Six hundred more police will be employed , along
with 246 more probation workers to improve public safety.
And it's not a comfortable Budget for the nation's prisoners. One
thousand extra prison beds will be established through increased
double bunking, or sharing cells, at five prisons.
Budget 2009 at a a glance
What do you make of Budget 2009? What does it mean for you and your family? Share your views on the message board below.
Add a Comment:
Post new commentNoddy samurai said on 2009-05-29 @ 18:57 NZDT: Report abusive post
I think the same as "UP2DATE I think it's about the best National could have done. Nobody including Labour predicted just how bad things would get so overall I'm pretty happy with it
UP2DATE said on 2009-05-28 @ 17:38 NZDT: Report abusive post
I think it's about the best National could have done. Nobody including Labour predicted just how bad things would get so overall I'm pretty happy with it. I had been a Labour supporter up until the last election but the "nanny state" thing had me change. I'm so glad. How disappointing is Phil Goff as leader of the Labour party? Mr Negative without any real alternative...