Budget 2012: English's nickel and dime Budget

PALOMA MIGONE AND DANYA LEVY
Last updated 17:30 24/05/2012
KARL DRURY

National's "zero" budget promises a forecast surplus by 2015, but critics say it will force New Zealanders to look overseas for opportunities. Laura Westbrook reports.

Budget 2012
Bill English delivers the Budget statement in Parliament.

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The Government has failed to offer a plan to grow the economy in today's Budget, forcing New Zealanders to look for opportunities overseas, critics say.

Speaking in Parliament this afternoon, Labour leader David Shearer said the National-led Government had delivered a "departure lounge" Budget that gave people zero hope and zero reasons to stay in New Zealand.

About 50,000 New Zealand had left for Australia in the past year and now more could be expected to join them, he said.

Finance Minister Bill English today handed down his fourth Budget and second zero Budget, showing the Government as on track to return the books to a $197 million surplus by 2014/2015 - despite a $1.2 billion deterioration in forecasts since February.

Smokers, families with young children and people who exploit tax loopholes on the family holiday home have been hit. Even school children have been targeted as they will no longer get a tax refund on their earnings.

English said the Budget continued the Government's focus on addressing the imbalances built up in the economy during the 2000s.

"It does those things while keeping the Government on track to surplus in 2014/15, when New Zealand will be one of the very few developed countries not running deficits and increasing public debt," he said.

"Good fiscal management is important because it helps us pursue the Government's other economic priorities."

However, Shearer said English and Prime Minister John Key continued to make promises they couldn't keep.

The Government had delivered the worst growth in 50 years and was now resorting to selling New Zealand assets because of it.

"People are working hard, working longer and making harder choices. They expect a better deal," he said.

"National keeps promising growth without doing anything to encourage it - the political equivalent of putting a seed on a windowsill and wishing it into a forest."

Shearer said last year the Government promised 4 per cent growth, but today had cut it to 2.6 per cent.

"National promised a brighter future. They keep saying the good times are just around the corner. But they never arrive."

Shearer said New Zealanders were tired of hearing National blame the earthquakes, global financial crisis for the failure to deliver.

Green Party co-leader Russel Norman said the Government didn't deliver any fundamental changes to address the problems with the New Zealand economy, while ramping up the burden on lower and middle-income New Zealanders.

"The budget is a failure for the economy and a failure for our people. The average Kiwi will pay more to cover the Government's economic mismanagement," he said.

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"If there is a burden to be shared, then it should be shared fairly. This Budget does not do that."

With the increase of user pay charges, student allowance cuts, bigger state school class sizes and increased costs for early childhood education, New Zealanders would be worst off, he said.

Decisions like spending $12 billion on new motorways were politically motivated, he said.

"Auto-enrolment in KiwiSaver has been delayed for political reasons in order to achieve a wafer thin surplus. A Government focused on acting in our economic interests would have done more to promote savings."

THE BUDGET

The Government was increasing excise tax on cigarettes, taking the price for a packet of 20 to more than $20 by 2016.

It was also closing tax loopholes which enable people to get a tax break for renting out their holiday homes, boats and aircraft.

Those changes were expected to save $109m over the next four years.

Removing the childcare, housekeeper and income-under-$9,880 tax credits would save the Government a further $117m and changes to livestock valuations would reverse a forecast $184m fall in revenue.

Children would now have to pay income tax on their after-school jobs but would have a limited exemption for cash-in-hand earnings such as babysitting.

The Government was reprioritising $4.4bn of existing spending over the next four years in areas such as health, education, science and innovation, welfare and law and order.

Reallocated money includes $104.1m more over three years for the Social Housing Unit and a further $11m for the Warm-Up New Zealand home insulation fund.

The Government was again making changes to Kiwi Saver, it has made changes in three out of the past four years, after changing the minimum employee contribution twice and reducing the tax credit.

Today's announcement that workers would no longer be auto-enrolled until the Government was back in surplus was expected to save $514m.

The Government would increase spending on science and innovation by $385m over four years, taking total funding for the sector to $1.3bn by 2015/16.

This was the Government's second zero Budget and outlines just $26.5m of new spending over the next four years, down from a previous plans of $800m in new spending.

It is forecast to be its last zero Budget with new spending expected to return to $800m in 2013/14 and rise to $1.2bn in 2014/15.

Government debt is set to rise to $70b, up from $10b in 2008, before the books are back in the red and debt can start to be reduced.

The deficit is expected to fall to $7.9b next year from $8.4b in the current year, and fall further to $2b in 2013/14.

Growth is forecast to pick up from 2 per cent by this calendar year to more than 3 per cent in 2014 and 2015.

The Treasury predicts there will be 154,000 new jobs in the next four years, on top of the 60,000 created in the past two years.

Announcements made before the Budget and confirmed today include $65m for rehabilitation and reintegration programmes to help meet the Government's aim of reducing reoffending by 25 per cent by 2017.

There will also be $111m spent over four years to target Maori and high needs areas to assist increasing participation in early childhood education from 94.7 to 98 per cent by 2016.

However, the annual inflationary increase to early childhood subsidy rates will be scrapped and is expected to force a rise in fees.

As already signalled an increase in prescription charges from $3 to $5 will help fund $48m more for elective surgery and $33m for more cancer services.

There is also a further $287.5m for the first stage of the Government's welfare reform, along with $37.7m to fund 3000 more places for training under the Youth Guarantee Scheme.

Rating agency Standard and Poor's said today's Budget will have no immediate impact on New Zealand's rating. 

- The Dominion Post

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