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Bill English delivers the 2011 Budget. - Source: ONE News -
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The Finance Minister says keeping interest rates lower for longer will be the biggest help to middle income earners affected by changes to KiwiSaver and Working for Families announced in the Budget.
Bill English told TV ONE's Q + A this morning that given the background of recession and the large deficit, the two programmes had to be made sustainable to help get the deficit under control.
English said interest rates are the biggest single component of the cost of living in the income groups impacted by the changes.
"In the long run those families are best served by an economy that delivers them higher incomes," English said.
"The prospect of growth in the economy and wage increases gives them some hope they can get on top of their debt."
The government has been operating to a plan to reduce reliance on borrowing, English said, adding that the move to exports, savings and investment are the drivers for wealth.
"We think we are laying the platform for stronger growth in the future."
And English said the key to reducing inequality with Australia is to increase savings and investment and provide "more opportunity and faster rising incomes".
The government believes New Zealanders understand the requirements and are "getting into a more confident way of thinking".
English is backing Treasury's forecast job growth, saying the country is benefiting from its highest export prices in a generation and the Canterbury rebuild will generate jobs and a generalised lift in spending, especially around the construction sector and housing.
The Finance Minister denies the government is relying on two one off events - the earthquake and the Rugby World Cup - to generate growth and said there has been "massive investment" in road, rail, energy and ultra fast broadband.
By international standards New Zealand has a very high total debt to foreigners and English said although private debt is reducing, the overseas financial markets increasingly bundle government and private sector debt together.
"Government borrowing is going to drop significantly over the next three years, bringing its own behaviour into line with households," English said.
"The government's been making us more vulnerable to those foreign lenders."
He said the country's credit rating and interest rates are determined by adding the two together and in this Budget the government is "simply following the same path households and businesses started on three years ago".
Defending National's intention to partially sell off the four big energy companies and Air New Zealand, English said the government has large capital requirements to maintain core infrastructure such as schools and hospitals and that money has to be sourced from somewhere.
"Rather than borrowing a lot of it I would rather pay dividends to shareholders in New Zealand than pay interest to foreigners lending us debt.
"People who are saving want some good options for long term investment."
English said it's going to be pretty straightforward for Nw Zealanders given a choice between the kind of investment they were making a few years ago in finance companies and shares in a reasonably solid energy company.
Responding to English, Labour leader Phil Goff told Q+A there is nothing in the Budget to grow the economy.
Goff said the Budget is about cuts, borrowing and selling and relies on optimistic projections.
The Labour leader said the best way to create jobs and lift incomes is to get growth in the economy. He said he will be announcing some of Labour's policy to the party conference this afternoon.
Read the full Q and A transcript with Bill English .
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