Budget 2010: NZ still 'financially vulnerable'

File photo / NZ Herald

New Zealand remains financially vulnerable, but there are positive signs emerging and the economy is on track to grow about 3 per cent per annum over the next four years following two years of contractions.

Finance Minister Bill English today credited 2009 budget decisions with helping to improve New Zealand's financial position and said announcements in the budget would have a positive long-term effect on the economy.

The worst of the recession was over and New Zealand had weathered it better than many developed economies, Mr English said.

He said the budget would fund improved public services, a better tax package for the economy and families, while producing a lower track for public debt.

The projected operating deficit in next financial year was $8.6 billion, or 4.2 per cent of GDP, but steady improvements meant a surplus was expected in the 2015/2016 year - three years ahead of last year's projection.

Net core crown debt ($26.6b or 14.1 per cent of GDP for 2010) was forecast to peak at 27 per cent of GDP in the 2014 year, before declining steadily.

Mr English continued to implicate the previous Labour administration in allowing for government expenditure to balloon and the economy to decline well before the recession hit.

"Too many New Zealanders have discovered that growth driven by debt, government spending and property speculation does not create worthwhile, permanent jobs."

The country's largest single vulnerability was its large and growing net external liabilities.

"New Zealand owes the world $168 billion, or around 90 per cent of GDP."

Private sector debt to foreign lenders had also grown over the past decade.

Reducing those vulnerabilities by "tilting our economy away from debt and consumption toward savings, investment and exports" was the focus of Government policies.

Mr English said Treasury forecasts showed predicted growth would raise real incomes of the average household by about $7000 over the next four years and create 170,000 jobs.

He was confident a strong emergence from the recession would position New Zealand strongly as a an attractive place to live and do business.

- NZPA