Minister's Executive Summary
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 continues the responsible approach we took in the last two Budgets to build a platform for faster growth, more jobs and higher incomes.
Budget 2011 helps to lift national savings by returning to surplus sooner, increasing private savings in KiwiSaver and providing quality investment opportunities for New Zealanders. These measures reduce the need for government borrowing and support jobs and growth by reducing pressure on interest rates. They will also put the public finances in a stronger position to cope with future shocks.
With growth forecast to reach 4% next year and the economy forecast to create 170,000 new jobs over the next four years, it is appropriate to accelerate the Government's return to surplus.
The Budget achieves this while continuing to protect the most vulnerable New Zealanders, increasing investment in health and education and establishing a $5.5 billion recovery fund to help pay for rebuilding Christchurch.
The Government's responsible management of its own finances in Budget 2011, combined with the projected growth of the economy, means that despite the additional costs of the Canterbury earthquakes, net debt will remain below 30% of Gross Domestic Product (GDP) and we will return to surplus in 2014/15. This is one year earlier than previously expected. Contributions to the NZ Superannuation Fund will resume in 2016/17, two years earlier than expected.
To achieve this we have focused on getting better value from public spending. Budget 2011 identifies operating savings of $5.2 billion over five years. These savings are drawn from across the board. They include efficiency savings expected of most government agencies. They also include changes to KiwiSaver, Working for Families and student loans to make them financially sustainable and better targeted. Almost $4 billion of these savings is redirected to new initiatives - with most of it tightly focused on frontline services in health and education. The remaining savings will reduce the deficit.
Budget 2011 continues to make better use of Crown capital. It contains significant infrastructure investment, including in ultra-fast broadband and KiwiRail. The Government will look to extend the Mixed Ownership Model to four State-owned energy companies and reduce its majority shareholding in Air New Zealand. The proceeds are likely to be $5 billion to $7 billion, which will fund about a third of the Crown's investment in social infrastructure over four years. The alternative would have been to borrow the funds.
Despite recent shocks to our economy, Budget 2011 presses ahead with the Government's economic programme, putting the public finances on a sound footing and lifting national savings. This will support jobs and economic growth, while allowing continued investment in the critical public services that matter to New Zealanders.
Bill English
Minister of Finance
