Overview
Budget 2012 confirms the Government's commitment to return the operating balance to surplus in 2014/15, get net debt down to more prudent levels and effectively manage the Crown's balance sheet.
These objectives will be met while advancing the Government's programme to build a more productive and competitive economy, deliver better public services and support the rebuilding of Christchurch.
In spite of significant headwinds, the New Zealand economy has grown in nine of the past 10 quarters. The outlook for the next four years is for a steady pace of expansion in activity. Growth will be underpinned by the rebuilding of Christchurch, historically-high terms of trade, and the strength of our key trading partners, including Australia and China.
The build-up in net government debt over recent years has been appropriate in order to absorb much of the shock of the recession, the global financial crisis and the Canterbury earthquakes. However, that build-up could only ever be temporary.
The Government has maintained spending but slowed its growth significantly. In Budget 2012, new spending over the forecast period is matched by a combination of savings and revenue initiatives.
As a result, the fiscal forecasts show a budget surplus in 2014/15, after which net debt will reduce as a proportion of gross domestic product (GDP). This means interest rates will stay lower for longer and the Government can rebuild its fiscal buffer against future shocks.
The Budget also reinforces the Government's deliberate and active management of the Crown's large balance sheet.
