Budget may hold 'light, shallow secrets'

Michael Cullen

Finance Minister Michael Cullen's sixth budget last year turned into a bit of a public relations disaster for the Government.

Dr Cullen refused to do pre-budget interviews and speculation filled the vacuum left behind with rumour that it contained a "deep, dark secret".

This turned the whole day into a disappointment for some, when the secret was revealed to be a small lift in tax thresholds in 2008.

This year Dr Cullen does do interviews and he puts on his happy face.

Asked if the Budget contains any deep, dark secrets this year, Dr Cullen laughs "there may be some light shallow ones".

Of course the intended thunderbolt - forcing Telecom to open up its local network - had to be prematurely announced due to the now infamous leak.

It was intended that the budget this year would focus heavily on infrastructure policy with the Telecom decision as a centre piece.

Despite the hole, Dr Cullen and Prime Minister Helen Clark will still be strongly signaling changes in infrastructure policy and probably more spending.

Dr Cullen has been signaling for some time that he does not believe the electricity market can deliver all the results the Government wants.

One of the key problems for the Government that energy policy was not fitting into climate change priorities

"Both the Prime Minister and myself see this as an area where we have more work to do and we have more work to do reasonably quickly," Dr Cullen said.

Dr Cullen said he was concerned about how the electricity market operated when it came to long term policy issues such as different types of generation and climate change policy.

Plugging any funding gaps in the Government's roading strategy is also likely to be announced.

There has been talk that Helen Clark has tired of Dr Cullen referring to his budgets as boring. She sees them as a centerpiece of her Government and Dr Cullen no longer uses the b word in quite the same way.

"It is a difference of perception in part. For me budgets are usually highly predictable, the more predictable the better - and in that sense they are boring. But there's lots in it," Dr Cullen said

New spending initiatives have largely been announced in the form of election promises and deals done to form the Government, such as scrapping interest on student loans and 1000 more police.

Health spending increases would be pared back to $750 million and, while this was still high, it was not as great an increase it had been in recent years.

"We have to get to a sustainable rate of growth over the longer term which can not be too much above nominal GDP," Dr Cullen said.

Education and skills training will get a boost, while economic development spending will be "reprioritised" in limited amounts, Dr Cullen said

The fall in the New Zealand dollar had lowered Treasury growth forecasts for the near term, but Dr Cullen believed Treasury was being pessimistic about the negative effects of the dollar.

Treasury also predicts the Government will pull in less tax year than Inland Revenue believes it will.

But Dr Cullen says the "big" economic and fiscal numbers will not change much.

Other forecasts would be very much in line with the half year economic updates released in December.

"The broad fiscal parameters (will be) very predictable."

Differences in tax thresholds and rates would not be addressed in the upcoming budget as they were part of a wider review which would be implemented in 2008.

Dr Cullen is unconcerned about the short-term political difficulties caused by his long term initiatives.

"You might have noticed my budgets tend not to have three year terms, thinks like the (New Zealand) super fund and Kiwisaver -- is not three year term stuff."

For a while Dr Cullen seems to give a nod to talk that he doesn't have many more budgets still in him.

He muses about being around long enough to enjoy the benefits of his long term policy, but then snaps back when he realises how those comments might be interpreted.

Instead he ponders a future scenario where in 2030 his counterpart across the Tasman Peter Costello is still not prime minister and is putting taxes up and Dr Cullen is instead boasting about keeping tax levels the same.

"Told you so back in 2006," Dr Cullen predicts his future self saying.

- NZPA