Finance Minister Bill English says he wants restraint in increased spending allowance to continue in future govt budgets

Finance Minister Bill English says he hopes restraint in the government's increased budget spending allowance for the coming budget can continue into future budgets as government becomes more disciplined about its spending and role in the economy.

Speaking to Massey University and the Auckland Chamber of Commerce, English outlined the government's policies since the November 2008 election, but did not touch on any new policies, saying new savings and investment measures would be announced in the May 2011 budget.

However, he did say he hoped restraint in additional government spending could continue.

"The main control tool used in the Budget is the new spending allowance. This is currently set at NZ$1.1 billion a year," English said.

"This figure has already been pruned from an average NZ$2.8 billion a year in each of the previous Government’s last five budgets. That lack of discipline, which allowed total spending to increase by more than 50 per cent in six years, has damaged the economy. It sucked resources out of the efficient, export-orientated side of the economy, and lowered our competitiveness," he said.

Government planned to reduce that new spending allowance in Budget 2011 to between NZ$800 million from and NZ$900 million.

"I would like to think this is just a start and that at least some of this restraint could continue into future budgets," English said.

"We will continue to prioritise new spending in health and education – and initiatives that promote economic growth. And we will continue to reallocate existing spending into our priority areas," he said.

Elsewhere there was still strong upward momentum in the system.

"For example, over the next four years, New Zealand Superannuation costs will rise by almost half a billion dollars each year, driven by both indexation and higher numbers of retirees," English said.

"Other income support benefits are projected to rise by about NZ$300 million a year, and finance costs by almost NZ$550 million a year," he said.

"All these elements make the task of getting back to surplus harder. But despite this, the Treasury’s current projections show that providing revenue remains on track, this tighter budget approach will allow us to return to a meaningful surplus in 2014/15 – a year earlier than currently forecast.

"Until we get back to surplus, we will allocate any positive revenue surprises to further reducing the deficit," English said.

Here is the media release accompanying the speech, which can be read here:

The Government’s multi-billion dollar investment in important construction projects has helped prevent unemployment from peaking well above 7 % - as it has in many other countries, Finance Minister Bill English says.

“I have no doubt that thousands more New Zealanders would be out of work without the Government’s considerable infrastructure programme,” he said today in a speech hosted by the Auckland Chamber of Commerce and Massey University in Auckland.

“And our unemployment rate would have got significantly worse than the 7 per cent peak in late 2009.”

The Government is investing $7.5 billion over five years in public amenities such as schools, state houses, hospitals, prisons and ultra-fast broadband.

It has boosted spending on State Highways to $1 billion a year and is investing more than ever on upgrading the electricity grid.

“All up, the Government is spending directly about $6 billion each year on improving infrastructure and with it supporting thousands of jobs across the country,” Mr English says.

“There are good reasons for this: First, we need to unclog the country’s economic arteries, after many years of under investment. Second, it was important to protect New Zealanders from the worst effects of the recession – providing work for trades people and construction firms at a time of otherwise low demand.”

According to statistics from construction industry research company Pacifecon, two thirds of all construction projects worth overNZ$5 million in December and January were in the public sector.

“So the Government is definitely playing its part,” Mr English says.

Two years ago as part of its wider infrastructure programme, the Government fast-tracked about NZ$500 million of publicly-funded building projects in the housing, transport and education sectors to help support the economy.

“These fast-tracked programmes alone have created around 4000 jobs and are supporting an estimated 1200 more jobs in associated trades.”

They include:

Housing - NZ$124.5 million of new spending to build 87 new state homes and upgrade 11,300 others. In the past two years, an average of 1430 additional people were employed in any one month as a result of this extra work.

Education - NZ$142.5 million of new spending in February 2009, plus another NZ$141 million in Budget 2010. Four new schools opened in 2010, another four opened in 2011, and a further two schools will open in 2012. Together with extra classrooms and other school property work, this investment has seen an estimated 2000 extra people employed since early 2009.

Transport - NZ$222 million of spending on five large state highway projects. In addition, the Government has accelerated NZ$100 million of small and medium sized roading projects. All up, this has created or retained about 550 jobs, and supported up to 1200 extra jobs in associated trades providing shorter-term services. This is in addition to our wider road building programme which is supporting thousands more jobs.

“In addition, we’ve allocated NZ$347 million over four years for our home insulation programme, which has so far insulated almost 89.000 homes around New Zealand and supported an estimated 2000 jobs.

“The Government is also investing NZ$1.5 billion in rolling out ultra-fast broadband and has committed hundreds of millions of dollars to help owners of leaky homes around New Zealand.”

Mr English says that with unemployment still well above 6 %, the Government is doing everything possible to make it easier for businesses to hire and retain staff.

“Unemployment will fall only when businesses – not the Government – have the confidence to invest, grow their operations and take on new staff.

“To achieve that, we will continue removing barriers and costs for business, encouraging growth in the right parts of the economy – such as savings and exports – and giving companies the confidence they need to invest and hire workers.”