By Bernard Hickey
Finance Minister Bill English has revealed Treasury will be forecasting annual GDP growth of between 2% to 4% over the next four years and that average wages are likely to rise a total of 20% from 2012 to 2018.
English delivered his set-piece pre-Budget speech to the Wellington Chamber of Commerce in a luncheon address. Budget 2014 is due on May 15.
He said Treasury had forecast GDP was likely to lift average wages by 20% to NZ$62,200 between 2012 and 2018 if the economy achieved its growth forecasts.
He said wages were likely to rise NZ$7,500 on average in the next four years to 2018, having risen NZ$3,000 on average in total over the last two years.
"Quarterly GDP or current account statistics are not, in themselves, what matter to families," English said.
"Jobs, higher incomes and opportunities to get ahead are what really matter. Everyone's situation is different and many families are still finding times are challenging. But the benefits of a sustainably growing economy are tangible and meaningful," English said.
"So if you take that six-year period as a whole, the average wage will have gone up NZ$10,500, or around 20%, compared to inflation of around 12 per cent over the same period," he said.
"The forecasts will also show around 170,000 more people will be working by 2018. Together with a falling unemployment rate, this will build on the 66,000 jobs created in the past year alone," he said.
English also confirmed John Key's announcement earlier in the month that the allowance for extra spending would be limited and unchanged at NZ$1 billion in Budget 2014.
"The Budget next month will be about thoughtful targeted spending, not a spend-up. It will invest in better healthcare, more effective education, safer communities and less welfare dependency," he said.
"This is the responsible thing to do. Imagine the effect on interest rates - and the rest of the economy - of a return to the NZ$3 billion-plus annual spending allowances we saw under the previous Labour government from 2005 to 2008," he said.
"By helping to restrict interest rate increases, the Government can make a significant and positive contribution to family budgets," he said.
"Every one percentage point movement in mortgage interest rates is worth around $40 a week - or $2,000 a year - for a family with a $200,000 mortgage. So when you hear politicians promising to ramp up spending to pay for expensive election promises, you should remember that this would come at a significant cost to households and businesses."
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