Budget 2014: Back in black but no tax cuts yet

11:27, May 15 2014
Budget 2014 is delivered
Finance Minister Bill English delivers the Budget speech.
Budget 2014 is delivered
John Key congratulates Finance Minister Bill English following his Budget speech.
Budget 2014 is delivered
National MPs applaud Finance Minister Bill English following his Budget speech.

Prime Minister John Key says after years of tight Budgets, it was logical for the first spending to go towards families.

"It's natural that the first place and focus of attention could be on families and particularly vulnerable children,'' he told reporters after Bill English delivered his sixth Budget this afternoon.

There would be lots of New Zealanders tonight welcoming free doctors visits and prescriptions for under-13s, and the extension of paid parental leave as ''spending in areas that are going to support families and ensure that they can carry out the lifestyle that they want'', Key said.

There was no clear signal about tax cuts in the Budget, but Key said this would be considered in the coming weeks.

"We'll need to make the decision some time in the next few months, whether we want to campaign essentially on spending more money or potentially using that free-board to have a modest tax package."

Tax cuts were "quite possible" but would have to be "modest" Key said.


"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."

Already 12 per cent of families paid some 77 per cent of net tax, Key said.

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


Earlier English delivered the family-friendly Budget to Parliament, to applause from the Government and jeers from the opposition.

With the general election just months away, English announced a $372m surplus - and slightly loosened his iron grip on the Government's purse strings, returning the books to black in a pitch to middle New Zealand.

Interactive: The tax-o-meter | Expenses and revenue | The essential guide

Following English's speech in the House, Key said it was a "very, very good Budget".

But Opposition leader David Cunliffe said there was "no vision".


English said he hoped to keep interest rates lower for longer but Budget documents suggest tax cuts are unlikely until 2018-19.

Key hinted yesterday National might go into the election campaign with some tax relief promises.

Moves likely to be popular with the voting public are a gradual extension of parental leave to 18 weeks, and an easing of criteria. The $172m package, over four years, will extend eligibility to caregivers, and those who recently changed jobs or are in less-regular work.

There is also a lift in parental tax credit to $220 a week, plus an increase in entitlement to 10 weeks, from April 2015. However, it will be means tested and a couple having their second child will not receive any payments if they together earn more than $99,847.

Free GP visits and prescriptions will be extended from under-6s to under-13s, from July next year.

Almost $156m will go to early childhood education centres, to keep them "accessible and affordable".

ACC levies on private vehicles are likely to drop by $130 a year.

And households can look forward to a little extra at the end of the month, with Treasury predicting the average wage will rise by $7600 to $62,300 by 2018.

"This package is clearly focused on young families and those vulnerable children who most need our care and protection,'' English said. A $33m plan also aims to bring down high levels of child abuse and neglect.

The Government has also moved to tackle a housing affordability crisis by freezing taxes on imported building products, the reducing the average cost of building a house by $3500.

There is also more money for health ($1.8b) and education ($858m). Auckland transport projects will get a $375m leg-up, with an interest-free loan. However, the police budget remains frozen, at $1.5b.

Cantabrians are likely to be disappointed, with new announcements on the rebuild just rats and mice spending. The Government's total contribution to the rebuild is $15.4b, of which $7.3b will be incurred by the Earthquake Commission.

After two years of "zero budgets'', the Government will stick to its $1b operating allowance - increasing to $1.5b next year, and then by two per cent.

English says this "moderate" lift will keep interest rates "lower for longer".

No tax cuts are likely until 2018-19, with a focus on reducing debt to 20 per cent of GDP by 2020. It currently sits at 26 per cent.

Money banked from the sale of state-owned energy companies - known as the Future Investment Fund - is dwindling, with just $1.7b left from the $4.7b pot.

And English urged caution, warning that some factors driving the so-called "rock-star" economy will peak in the next few years.

Export prices are expected to return to normal, housing supply will catch up and the Christchurch rebuilt will eventually slow, he warned. The economy is also tied to the performance of trading partners China and Australia.

English said the Government wanted to focus on long term ''fundamentals'' rather than a "shorter period of unsustainable growth".

He denied National was targeting the centre vote with this Budget, and stressed the Government's family packages differed from Labour because they were "modest" and "sustainable".


As the allocations were read out, carefully timed press releases from ministerial offices were sent to coincide with, and trumpet, the exact paragraph being read out by English.

But on the other side of the house, the response took on  a decidedly minor key tone.

In his response, Cunliffe said the Budget was a "fudge it Budget".

"This house has no confidence in a government that has failed to put people first, he said.

Cunliffe said the government had "no vision" but was "mired in politics".

"This budget should be about those we are here to serve - the people of New Zealand," he said.

"I've got a few numbers for you - 56 billion, that's how much debt has piled up under National.

"Numbers like $1.2 billion, that's the level of  debt... $10 million a day, that's the interest we're paying on National's debt - think of how many kids could be lifted out of poverty for that."

Prime Minister John Key said the budget was a "very, very, good budget".

"The economy, law and order, education - that's what we want on this side of the house. We get the job done."

He contrasted the budget to Labour's alternative, calling the opposition version a wishlist.

"In 2008 this country was in recession, now it's going to grow this year by 4 per cent.

"House prices up 96 per cent over the last nine years under labour, up 28 per cent under this government.

"Under the labour government 3000 New Zealanders a month got up and packed their bags for Australia... under this government it's 350."

Green Party co leader Russel Norman said Key had been borrowing $17,000 per minute, for every minute he'd been Prime Minister.

"I'll tell you, the legacy of this government will be 30 per cent of children living in poverty, a 50 per cent increase in greenhouse gas emissions, and debt. Mountains and mountains and mountains of debt."

He said it was the decisions National made in response to the Global Financial Crisis and the Christchurch Earthquake that had made the economy worse.

While the Government's paid parental leave announcement was "welcome", it would make no difference to the "three out five" children that were living in poverty. 

He said both education and health votes had taken significant cuts over next three years, just to achieve a surplus.

"If the news is bad for the government books, then the outlook for the average household budget is even worse." 

"Families, are really, really struggling."