Key maintains he can hit "artificial" surplus ahead of pre-Budget speech

Ahead of his first major Budget speech John Key is refusing to rule out the Government hitting a surplus this year, while at the same time dismissing the target as "artificial".

For several years National has pledged to return the Crown accounts to surplus in 2014/15, although Treasury is currently forecasting a small deficit and last week Finance Minister Bill English said a surplus was "unlikely".

But Key, who will deliver a pre-Budget speech at Te Papa on Tuesday, maintained it could still be reached.

"It's within cooee, one way or another, it's a very small number," Key told his weekly post-Cabinet press conference in the Beehive on Monday.

"We may well make the surplus even if the number's negative on Budget day, because the numbers will move around quite a bit over the next few months. It's very fine margins at these levels."

Although economists have dismissed the importance of hitting surplus, the target has become increasingly political over time. During the election campaign Key repeatedly said the country was "in surplus" when the Treasury was forecasting it.

On Monday Key said that despite how close the books were to surplus, the Government would not take extra steps to hit it by cutting important spending.

"If you asked New Zealanders, have we got the economy going in the right direction, they'd say yes, could we hit an artificial target [a fiscal surplus], well, we're so close to it, potentially the answer is yes, but I don't think people would want us to take, sort of, irresponsible actions to hit an artificial target."

Nevertheless, he refused to drop the goal, saying it was an important sign that the Government would live within its means. On May 21 Treasury will give an updated forecast on whether the Crown accounts are in surplus, but the final figure will not be known until the final accounts are published, expected in October.

Key said New Zealand was a $220 billion dollar economy, the Government spent about $70 billion, meaning a deficit of a few hundred million dollars was irrelevant.

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"It's really like trying to land a 747 on a pin head. It's just not that possible for the Treasury to get that right."

Although he gave little away about Tuesday's speech, Key said it would give a tone of his Government's overall programme for the coming term, including indications of new "sensible" reforms.

Key said the performance of the New Zealand economy had attracted attention internationally, and compared favourably with Australia.

Labour has mocked the Government over doubts it can return the Crown accounts to black, with English now poised to report a seventh straight deficit.

"If the Government can't get the books back in the black after seven years there is something seriously wrong with their economic management," Labour's finance spokesman Grant Robertson said.

"The reason the Government has failed to reach surplus is they haven't been able to get the productive economy humming to generate revenue. National doesn't just have a deficit of money, it has a deficit of ideas."


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