The Government is positive it is on track to return to surplus this year, with spending restraint and responsible management a theme of Budget 2014.
The Government is forecast to achieve its surplus target of $372 million this year, and a net Crown debt of no more than 20 per cent of GDP in 2019/2020.
The economy grew 3.1 per cent in 2013, in part a result of low interest rates and the Christchurch rebuild, while inflation has been just 1.5 per cent.
At the announcement at Parliament this afternoon, Finance Minister Bill English said restraint shown in previous budgets had paid off, and the Government now had options for investment.
“It was appropriate to run deficits and take on debt to support the economy and New Zealand families over the past few years, but as households know, carrying substantial debt is neither comfortable nor financially prudent,” said Mr English.
PM John Key and Finance Minister Bill English head into the debating chamber Photo: RNZ / Diego Opatowski
“Making these projections a reality requires sticking to the Government's plan of careful spending and responsible public management.”
“Responsible” management of a growing economy, and keeping interest rates low, was a recurring theme of the announcement. $5.7 billion of new spending for initiatives to 2017/2018 was financed in part by $1.6 billion of “reprioritisation and revenue-raising initiatives”.
A $500 million package of extra support for children and families, including a four-week increase to paid parental leave and free GP visits and prescriptions for children under the age of 13, is likely to appeal to voters. But many changes are to be introduced in annual increments.
$199 million of investment in tertiary education is centred around science, agriculture, pharmacy, physiotherapy and ICT training. The suspension of inflation adjustments to the student loan repayment threshold, which is currently at $19,084 a year, will be extended two years to April 1 2017, meaning the total repayments made by borrowers will marginally increase.
The budget for public health services will reach a record $15.6 billion next year, though just $1.8 billion of this, allocated over four years, is for new initiatives and meeting cost pressures and population growth.
The Christchurch rebuild, forecast to cost $40 billion in total, is a focus of the Budget, with an extra $50 million over two years to be put towards the work of the Canterbury Earthquake Recovery Authority.
The New Zealand Transport Agency is to be loaned $375 million to accelerate $815 million of Auckland Transport projects to reduce congestion in New Zealand's largest city.
$33 million is to be put towards protecting vulnerable children, and $77.5 million of new operating funding and $18.2 million of new capital funding will be invested in social housing to 2017/2018. That includes a $30 million boost to the Social Housing Fund to increase the size of the community housing sector.
But the Budget did little to address the shortage or inflated prices of housing, or make it easier for people to buy their first home. Building materials duties are to be suspended from June, which is expected to reduce the average cost of building a new house by $3500.
The Finance Minister acknowledged that this Budget would not satisfy first-home buyers, but said the Government's priority of keeping interest rates low would benefit them in the long run.