Debt reduction still king

Nothing much to see here, move along please.

Finance Minister Bill English's fifth Budget eases up slightly on the tight-fisted approach of recent years, including an extra $100m of new spending above the previously-signalled $800m cap.

But despite some minor surprises, such as a yet-to-be-detailed cut to ACC levies worth $300m next year, the extra spending is mainly rats and mice ... and some fairly skinny rodents at that.

There are significant shifts in housing policy, but while they are potentially far-reaching they have little impact immediately on the Government's accounts.

The extra cash this year is more than offset by a tightening of the fiscal screws next year and over subsequent years that sees the new spending allowance about $200m lower from 2014/15 inwards than was previously expected.

Without that cut the target of a return to surplus by 2014/15 would have slipped away, showing again how it dominates ministers' thinking.

When spending is dallied up on one side of the break-even line they find something to dial back on the other.

Even with the net cut of $90m next year - up $100m this year, down $190m next - the forecast surplus continues to be a wafer thin one - just $75m.

The deficit this year is set to be $6.3b falling to $2b in 2013/14.

The poverty package is there in minor key - including a pilot scheme to impose a warrant of fitness on state houses - but is still to be fleshed out, with a response to the Children's Commission's working group on child poverty still some weeks away.

The next asset sale has been confirmed as Meridian Energy.

But there must be doubt about whether the market can swallow the full 49 per cent of such big float - especially with investors today looking at a disappointing 5c to 6c gain on the $2.50 float price of Mighty River Power.

Not surprisingly the spending on the Canterbury earthquake recovery overshadows all other new capital initiatives.

Of the $1.5b allocated from the MRP sale some $900m goes to Christchurch.

English characterised it as a Budget that was "building momentum".

As a shift from the previous two years' "zero Budgets" that is probably fair enough.

But from 2014 the speed is in fact throttled back with a "mildly contractionary" impact on the economy from fiscal policy from now on.

Austerity it isn't, but debt reduction is still top of mind for English and his ministers.