Surplus remains Labour's bottom line
The Labour Party may have to scale back some of its promises after Treasury forecasts for the economy were lower than expected.
However, running a surplus remains an economic bottom line for the party.
Treasury yesterday released the pre-election economic and fiscal update (Prefu), giving an update on the state of the Government's books just a month out from the election.
It showed Finance Minister Bill English's long-promised surplus for 2014/15 to be on track, but it is wafer-thin at $297 million.
The outlook for surpluses in the following years was markedly weaker than it was in May's Budget, meaning less scope for new spending by the Government.
Treasury has cut the projected surplus by $500m in each of the next three years.
However, Labour finance spokesman David Parker said the party would not need to trim that amount from its spending promises.
"Because, remember, our spending is effectively funded through the revenue we garner from a capital gains tax excluding the family home, plus increasing the marginal tax rate on incomes over $150,000," Parker told Radio New Zealand's Morning Report.
But Labour would have to "live within our means" to run a surplus, Parker said.
"We have said we are committed to running surpluses as we did nine times in a row when we were last in government."
Some of Labour's policies would be introduced more slowly as their draft alternative budget was updated to accommodate the Prefu, Parker said.
The Best Start package - which focused on the first five years of a child's life - would be unlikely to be at risk, Parker said.
"Because we've got such high rates of child poverty, particularly at the extreme end, that would remain a priority for us."
The Green Party has pledged to reduce child poverty by raising the top tax rate for those earning more than $140,000 to 40 per cent and raising the trust tax rate to match.
The policy would generate a total of about $1 billion a year.
Parker said while Labour would rely on the Green Party to form a government after the election, fiscal parameters were largely driven by the dominant party.
Whether the top tax rate was negotiable was a matter for the party leaders, but neither Labour nor the Greens had said anything was off the table in any government-forming negotiations, he said.
Nevertheless, Labour wouldn't give way on running a surplus.
"We have stuck our colours to the mast, that we will be in surplus, all our policies are paid for, and that we will be as fiscally responsible next time as we were last time, when we ran nine surpluses," Parker said.