National will campaign on more big cuts in the public service to be outlined in Thursday's Budget.

Prime Minister John Key signalled fresh cuts taking effect from next year as the price of getting the Government's books back into the black more quickly.

The hint comes as Mr Key suggests the good times are just around the corner, with the Government preparing to unveil fresh predictions of strong wage growth and a big jump in the number of new jobs.

Mr Key said the Budget would show that the Treasury was predicting "New Zealanders will be earning more at a faster rate than the inflation rate and getting to keep more of it", suggesting wage growth of as much as 4 or 5 per cent after several years of restraint. He acknowledged that the Treasury had got it wrong before, including last year, and there was an element of "putting one's finger in the air".

But when asked if public servants would get to share in the improved economy, Mr Key made it clear that their pain would be continuing. They should not expect big pay rises in line with the rest of the workforce because they had already done better than most in recent times.

"They have typically been having higher levels of wage increases prior to National coming into office; public sector wages outstripped private sector wages for a long period of time."

The Treasury was also predicting strong employment growth but the public service, again, should not expect to share in the windfall.

"Few, if any, of these jobs will come from the back office of the public sector. We have set an overall fiscal savings target that [we] will realise over three years starting July 1, 2012, and this figure will be reflected in the Budget.

"You will be surprised how much we are looking to save overall from a couple of public sector initiatives."

Mr Key did not spell out where the cuts would be made, but a recent Treasury report pinpointed savings of as much as $425 million a year, or $1.3 billion over three years, from efficiency gains in administration and support services alone.

Areas where savings were identified included information and communications technology, property management, human resources, finance and corporate and executive services.

The Government has also signalled mergers among departments.

Asked if the cuts would result in a "drastic" reduction in the number of public servants, Mr Key responded: "Not per se."

He suggested public service bosses would be given savings targets and it would be up to them how they got there.

The Government has already carved almost $4b of "low priority" spending from public service budgets and shed nearly 2000 jobs since taking office on a promise to cut bureaucratic "waste".

It says all the money has been reprioritised into areas where it would be better spent within the public service.

Finance Minister Bill English will deliver its toughest Budget yet on Thursday after Mr Key promised to slash new spending to zero in the face of a debt blowout because of the global financial crisis, the two Christchurch earthquakes and finance company bailouts.

The Government is facing a further four years in the red and Government debt is set to hit 34 per cent of gross domestic product.

- © Fairfax NZ News

Comments