Public sector to be given job cut targets, says Key

Prime Minister John Key. Photo / Daily Post

Specific savings targets over three years will be set in Thursday's Budget, Prime Minister John Key said yesterday, pointing to the brunt of the spending cuts being borne by public sector job cuts.

"Targets for individual agencies will be finalised after the Budget based on their size and current funding. It will then be over to the chief executives how exactly to meet these targets," Mr Key said at his post-Cabinet press conference. "The Budget will continue our drive for efficiency in Government administration."

Mr Key characterised his Government's third Budget as a careful balancing act - despite an expected record operating deficit of $16 billion to $17 billion in the current year.

"On the one hand we must and will show a clear path back to surplus and a lower Government debt position over time.

"On the other hand, if we slashed expenditure irresponsibly we would snuff out our hard-fought recovery."

He hinted that on Thursday the return to a meaningful surplus would be revised and put back to the 2015 to 2016 financial year.

That was the date forecast in the half-yearly economic and fiscal update, but it was subsequently brought forward a year in February, but before the second Christchurch earthquake on February 22.

Mr Key said the Budget would contain Treasury forecasts of strong wage and employment growth over the next couple of years that would "well and truly outstrip inflation", suggesting they could be around 4 or 5 per cent.

Asked whether Treasury's forecasts should be relied on, Mr Key said: "We all acknowledge that there is a degree of putting one's finger in the air when it comes to these things."

The world hadn't predicted that there would "such a meltdown" with Portugal, Spain and Greece in the latter part of last year. "That reflected in reduced growth right across the world, not just New Zealand."

Most sectors will receive zero increases or cuts, but education, health and justice will get funding increases from cuts elsewhere.

Labour leader Phil Goff yesterday predicted that the Budget would not be as bad as Mr Key had been hinting but could be if he went into coalition with Act leader Don Brash after the election.

"I think what we are seeing is a softening up of the public that this is going to be a black Budget. But he knows it is election year."