Budget 2013: English stays on track

Finance Minister Bill English, with Prime Minister John Key, on his way to the house for the reading of his fifth Budget. Photo / Mark Mitchell

Finance Minister Bill English has stayed on the track set in previous years in today's Budget, reconfirming the return to surplus in two years while taking steps to reduce the risk of a housing bubble.

Social housing is a big element of the Budget.

There will be tenancy reviews for all state house tenants, with up to 3000 tenants to be moved on within four years. However, many of those tenants are expected to find homes in the non-government community housing sector.

The Budget includes $900 million in new spending, up from the $800 million previously indicated.

However, as Mr English said in a pre-Budget speech, his firm hold on the Government's purse strings continues for the next few years and he has trimmed the forecast increases for future spending That helps his 2014-2015 Budget surplus which is now forecast to be $75 million rather than $66 million previously indicated.

That's achieved in spite of cutting ACC levies that year by $300 million. However, achieving surplus is helped by cutting the forecast allowance for new spending by $200 million.

Mr English said the cuts to ACC levies - enabled by the Government's work to rebuild the scheme's long term sustainability - would continue, with a further cut in 2015/16 taking savings for workers and employers to $1 billion a year.

Click here for nzherald.co.nz's full coverage of Budget 2013.

Housing measures feature strongly, with Mr English saying the Government would introduce legislation today to enable the housing accord announced last week with Auckland Council. The legislation will allow for similar agreements with other councils to fast-track the consenting process for new subdivisions.

But while last week's agreement with Auckland appeared to be a fairly amicable affair, Mr English revealed the Government would reserve the right to take more dramatic action. The new legislation will allow the Government to establish "special housing areas" and issue consents itself.

Meanwhile, to tackle the risk to the wider economy posed by fast rising house prices and a possible crash, Mr English confirmed that he'd signed an agreement with Reserve Bank Governor Graeme Wheeler to give him new tools to curb increases in housing debt if required.

Measures agreed included restrictions on high loan to value ratio loans and increases in the amount of money banks must hold in reserve as a buffer during credit booms.

The Budget also includes a series of social housing initiatives including the introduction of reviewable tenancies for all state house tenants, with 3000 tenants expected to be moved out by 2017. However, the Budget extends income related rents to be community housing providers.

Meanwhile, Mr English confirmed hydro-giant Meridian Energy, the country's largest power company would be the next to be partially privatised under the mixed ownership model. Valued at about $6.5 billion, 49 per cent of Meridian's shares will be sold by October.

The Budget allocates $1.5 billion of money raised from the sale of Meridian and Mighty River to capital expenditure projects on top of the $569 million committed last year.

The largest share this year - $426 million - goes toward the redevelopment of Christchurch hospitals, which Mr English said would be the single biggest building project ever for New Zealand's health system.

A further $94 million goes to the KiwiRail turnaround plan, $50 million goes to speed up the deployment of technology in schools, and $80 million to irrigation projects.

Mr English also announced that contributions to the New Zealand Superannuation or "Cullen" Fund would be delayed. Contributions were to be resumed when the Government's books returned to a healthy surplus - in the 2018-2019 year - but that will now happen two years later in 2020/21.

The Budget also tightens the screws on those with outstanding student loans, introducing a new ability to arrest the worst offenders at the border.

Mr English said the Budget builds on the Government's Business Growth Agenda with a $100 million a year "internationally focused growth package".

The largest part of that is a $200 million increase over four years for science, innovation, and research.

That money goes to expand current research and development grants and a new repayable grant to fledgling businesses to help them become "investment ready".