Budget hot off press, cold on surprises

By VERNON SMALL

It will come as no surprise that Thursday's Budget contains no surprises.

That is the way they are these days, even with an election looming.

The size of the fiscal surplus is well-signalled, the growth path well-mapped and a rash of pre-Budget announcements has already "spent" a large portion of the available cash.

Finance Minister Michael Cullen yesterday made the traditional pilgrimage to the printing works in Petone to watch the red, black and white documents rolling off the presses.

"It's a no-surprises Budget because I believe that's what budgets should be," Dr Cullen said.

"Because of the way finance markets operate, there is a need for maximum transparency and predictability."

The colour of the cover - an opportunity for tongue-in-cheek symbolism every year - was "slightly redder" than last year, Dr Cullen said. Then, on reflection, he described it as "a strong red".

He said new spending would stay within the three-year limit of $6.125 billion, leaving a net $815 million to spend in this budget.

However, after accounting for money underspent in the year to June, some shifting of current spending to other areas and "efficiency improvements" by Inland Revenue, the sum available would be higher.

"Enough to make life somewhat easier than $815 million gross would have been," Dr Cullen said.

A significant amount has already been allocated, including $400 million for health announced in November.

Dr Cullen said he would also target education, skills and "economic transformation".

Significant new spending would go to tertiary education and conservation.

Dr Cullen has ruled out big changes to the tax system, including cuts to corporate tax, but said he would "foreshadow" changes to superannuation savings tax.

People earning less than $38,000 are penalised by having the earnings on their pension savings taxed at the top 33 per cent tax rate.

Dr Cullen is expected to tax those savings at the marginal tax rate of the individual, although this is not expected to take effect until 2004.

Dr Cullen said he was looking particularly at options in relation to employment-based schemes.

On the economic outlook, he said the Treasury saw stronger growth than that given in the Reserve Bank's May projections.

The bank forecast growth of 3 per cent in the year to March 2002, falling to 2.75 per cent and 2.5 per cent in subsequent years.

"I don't think Treasury is seeing the necessity for such a strong monetary response as the Reserve Bank does," Dr Cullen said.

His Budget would address the need to lift long-term growth, but not with radical reforms.

"This country isn't in a crisis. We have not been performing calamitously. We have not been performing as well as some other countries. Our standard of living has not been falling."

He said the fiscal position had improved since the Treasury's December forecasts because the impact of the September 11 attacks had not been as bad as expected.

He said it would be difficult for the Opposition to continue to say he was borrowing cash for the superannuation pre-funding scheme.

"That is not to say that nominal debt will stay constant or decline, but then we have other large capital expenditures. You would really be pushing it uphill to try to argue we are borrowing for the super fund on these numbers."

He predicted that the Budget would be attacked by some business organisations for not delivering on major tax cuts and by lobby groups that want more spending.

"Put all those criticisms in a box and shake them up and open the box. There will be nothing there because matter and anti-matter will have cancelled each other out."

The Budget speech, expected to be longer than usual, will be read in Parliament on Thursday, starting just after 2pm.

"It will take 56 1/2 minutes at standard pace," Dr Cullen quipped yesterday.

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