Budget bits

Bill English said his Budget is a balanced response to the recession:

“It funds public services, maintains entitlements, and meets the increased cost of benefits, while at the same time taking the first steps towards improving productivity and competitiveness in the longer term.

“Our focus over the next year will be rebuilding business confidence, which will further help to preserve and create jobs, and ensuring that young people remain connected with the workforce and improve their skills.

“The Government is confident about New Zealand’s prospects over the next few years. We believe New Zealand has a genuine opportunity to emerge from the recession in a stronger position than most other countries.

“Budget 2009 is the first step to ensuring that happens.”

bill budget 2

Two contrasts with recent Budgets – all commitments are funded and it is clear about what is new funding and what’s already been announced.

Some highlights:

Line by line reviews free up $2 billion.

More for infrastructure:  including $245 million capital spending in health; $250 million capital and $56 million operating fund for broadband – $48m of that for rural broadband; $325.6 million capital funding for education and an extra $197.7 million operating funding for new schools and upgrades to existing ones; ($172m of this was announced in February);

More for science:  An extra $40 million over four years to the Crown Research Capability Fund; $36 million over four years to the Marsden Fund;  $32 million over four years for health reserach; new funding of $4 million over four years for the Prime Minister’s Science Prizes; $16 million in 2010/11 for the Kiwi Advanced Research and Education Network.

A boost for primary sector innovation: $190 million over four years for the new Primary Growth Partnership.

Agriculture Minister David Carter said:

When fully operating in 2012/13, the partnership will see the Government investing $70 million annually in primary sector innovation,

The Government’s commitment will be matched dollar for dollar by industry, leading to a total investment of up to $140 million a year.

$60 million for hospices.

The decision to suspend payments to the government superannuation fund had been clearly signalled and is a sensible response to the recession. There is no point borrowing to invest.

The decision to suspend tax cuts had also been signalled. It’s disappointing but as David Farrar  explains at Kiwiblog:

National did “pay” for the 2010 and 2011 tax cuts by reducing KiwiSaver subsidies by over $1 billion to compensate. The problem is that the fiscal position has changed so much since PREFU that anything not yet nailed down had to be sacrificed.

He also has the answer to the question of why break a tax cut promise but not a spending one such as interest free student loans:

English responded that people feel insecure in a recession, and they made a decision not to cut any current entitlements to help confidence and security.

Summing up the Budget, Bill English said it was a turning point for the country after 10 years of economic growth and appetite for debt and government spending.

He’s tightened the national belt to rebalance the economy from debt and expansion to investment and exports.

In the last five years government expenditure increased by 50%, the tax take went up 25% and the economy only grew 3%.

No-one likes going on a diet, but we can’t afford to keep feasting on borrowed money – whether that’s borrowing from overseas or borrowing from future taxpayers.

If we want to be a first world country with first world services we need a first world economy and the foundation for that is economic growth from exports.

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