Budget 2014: Surplus real, says English

Finance Minister Bill English has dismissed Opposition claims that New Zealand's new surplus is a "fake" and the Budget doesn't do enough to help families.

The Government has raided future surpluses to build a $1.6 billion war chest to fight the next election as it holds out the prospect of "modest" tax cuts ahead.

At the same time it has tried to head off Opposition spending promises, with a Treasury warning that spending any more cash could push mortgage interest rates higher.

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English yesterday delivered his promised surplus for the 2014-15 year - $372 million, well ahead of the paper-thin $86m tipped in December.

The centrepiece of the Budget was a family and children's package worth $500m over four years that included an increase to paid parental leave from 14 weeks to 18, free doctors' visits and prescriptions for children under 13, and extra money to ease the cost of early-childhood education.

Eligibility for paid parental leave will also be extended and the existing parental tax credit will rise.

Legislation was rushed into Parliament last night so the changes could come into effect from next year.

Prime Minister John Key said that after years of tight Budgets, it was logical for the first spending to go towards families and particularly to vulnerable children.

But Labour leader David Cunliffe accused the Government of offering a pale imitation of Labour's policies, such as its pledge to increase paid parental leave to 26 weeks, while "fudging the numbers" to make the books look better.

English today rubbished that claim.

"It's a real surplus and it follows a string of improvements in deficits starting at $18 billion four years ago, this year about $2.5b and next year a surplus of $370 [million], and then bigger surpluses after that," he said on Firstline.

English said paid parental leave could not be extended further without leaving other families behind.

"Roughly half of all families don't qualify for paid parental leave, so what we've done is focus ... we've given some extension ... but we've focused on extending eligibility to recognise the many different circumstances women are in," he said.

"There's also significant help for a big group of families who aren't on benefit and don't have the kind of steady work that qualifies you for paid parental leave, with extending the family tax credits.

"So it's a fair package that covers more families."

But English also opened his purse ahead of the election campaign, boosting the cash earmarked for new spending or tax cuts from $1b a year to $1.5b from 2015 and rising over time.

That would free up an extra $1.6b for the election campaign, on top of the $3b already earmarked for new spending, while contributing to a slashing of the 2018 surplus from $5.6b to $3.5b.

Key suggested earlier this week that tax cuts would be considered in the coming weeks and could be part of the election campaign, although both he and English subsequently said any cuts would probably be modest and have to wait until 2018.

"One of the dividends of a growing economy is there's a bit more room, it's just the question now is where that can best be spent?" Key said.

Already, 12 per cent of families paid about 77 per cent of net tax.

"The higher-income earners do pay their fair share in New Zealand."

Key said that after years of tight Budgets, it was logical for the first spending to go towards families and particularly to vulnerable children.

The Government signalled ACC levies on private vehicles would drop next year by $130 a year, but Cunliffe said the delay was to preserve the surplus.

Key is set to speak at a post-budget lunch in Auckland's Sky City hotel this afternoon.

Protesters from Auckland Action Against Poverty at the door, who say the budget ignores beneficiaries, have promised to greet him.

Spokesman Alastair Russell said: "Extending paid parental leave, free GP visits for under-13 year olds and increased parental tax credit is the sum total of an election year family bribe. But true to form, the increased parental tax credit excludes beneficiaries."

"In spite of a few band aids for families hurting after six years of National, the Budget contains no job creation. It also contains no living wage, and there is no way the unemployed share in this illusory strong economy."

English said the average wage was forecast to rise by $7600 to $62,300 by 2018, but he conceded home-buyers might be disappointed by the Budget, which offered them little beyond the end of tariffs on building materials, estimated to lower the cost of building a new home by $3500.

Growth is tipped to reach 4 per cent this year before falling to 2 per cent by 2017, and English warned that some factors driving the so-called "rock-star" economy would peak in the next few years.

Export prices were expected to return to normal, housing supply would catch up with demand, and the Christchurch rebuild would slow. 

The Dominion Post