Budget 2011 marks the next step in this Government’s programme to tilt the economy towards exports, savings and investment and away from borrowing and consumption. It helps to lift national savings by returning the Government's books to surplus sooner, increasing the level of private savings in KiwiSaver and providing quality investment opportunities for New Zealanders.
It does this while funding the Government's $5.5 billion share of the costs of rebuilding Christchurch, investing more in frontline services in health and education and continuing to protect the most vulnerable. This is a responsible and balanced budget for the times. It ensures New Zealand will build faster growth based on savings and exports, so New Zealanders have the jobs and higher incomes they deserve.
BUDGET 2011 – AT A GLANCE
- Returns the budget to surplus in 2014/15 – a year sooner than forecast in December – reducing the need for Government borrowing and lifting national savings.
- Forecast economic growth of 4 per cent in 2012, with 170,000 new jobs being created by 2015.
- Creates the $5.5 billion Canterbury Earthquake Recovery Fund for infrastructure and schools; temporary housing; trades training; welfare and business support; and CBD demolition costs.
- Invests $4 billion in frontline public services in areas such as health, education and supporting young people into jobs.
- Makes changes to KiwiSaver, Working for Families and Student Loans to make the schemes sustainable into the future and reduce the need for Government borrowing.
- Creates investment opportunities for New Zealanders by extending the mixed ownership model to four state-owned energy companies and reducing the Government’s majority stake in Air New Zealand.
REDUCING BORROWING, LIFTING NATIONAL SAVINGS
The Government has supported the economy through the recession, but with growth forecast to reach 4 per cent next year – its highest level since 2004 - and the economy expected to create 170,000 new jobs over the next four years, it is appropriate to speed up the Government’s return to surplus.
Achieving a surplus in 2014/15 – a year earlier than previously forecast - reduces the need for Government borrowing and supports jobs and growth by reducing pressure on interest rates. It will also put the public finances in a stronger position to cope with future shocks.
Budget 2011 changes mean the Government will borrow over $10 billion less over the next four years.
BETTER VALUE FROM PUBLIC SPENDING
Almost $4 billion of Budget 2011 savings are redirected to new initiatives –most of it on frontline services in health and education. This leaves a net saving of $1.2 billion over four years. We were previously planning to spend $4.4 billion over that period – so that's $5.6 billion we won't have to borrow over those four years from operating spending alone.
Together that's over $10 billion we won't need to borrow over the next four years. These savings combined with forecast economic growth, mean net debt will remain below 30 per cent of GDP – a significant achievement in the current circumstances.
MAKING LARGE PROGRAMMES MORE SUSTAINABLE
Changes aimed at making KiwiSaver, Working for Families and student loans more sustainable will take place after the election – giving voters a clear opportunity to choose whether they support the Government's approach.
This is expected to result in a modest improvement in the rate of national savings and reduce New Zealand’s net international liabilities – the amount the country owes to foreign lenders – by an estimated two per cent of GDP over the next decade.
IMPROVING FRONTLINE SERVICES
BOOSTING SAVINGS AND INVESTMENT
Extending the mixed ownership model is expected to free up $5 billion to $7 billion, which will fund much of the Government's capital investment in social assets like schools and hospitals over the next few years, as well as reduce Government borrowing.
As we have said, we will ensure Kiwi investors are at the front of the queue to buy a stake in these companies. Extending the mixed ownership model will also broaden the pool of investments available to New Zealanders, contribute to deeper capital markets and bring sharper commercial disciplines, more transparency and greater external oversight for the companies involved.
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