English predicts a fast future

Finance Minister Bill English says the Budget was about putting pressure on right across the system. Photo / Mark Mitchell

In a decade, New Zealand will have an economy with fast productivity growth and a deep understanding of the Asian and Pacific markets, Finance Minister Bill English says.

Mr English's vision for the economy was laid out this morning when he was talking to The Nation, hot off the tail of this year's Budget.

"We will see an economy where there is fast productivity growth, where we have a good and a deep understanding of the Asia/Pacific markets - most of which we don't understand that well right now - and where we're able to accumulate the capital in New Zealand to invest in those markets in a way that means we've kind of got the high paying attractive opportunities here in New Zealand for the people who want to stay here."

He admitted this year's Budget was pretty moderate and reasonably tight, but said it was about putting pressure on right across the system, rather than a dramatic push anywhere in particular.

"It's about the balances, we think we've got that balance about right."

The Government's goal to get into surplus by 2014/15 was important, but it was not a goal that the Government felt it had to hit exactly on 2014/15, Mr English said.

"We've demonstrated we're willing to take a number of steps to show a credible path back to surplus by 2014/15, sure if there's some major meltdown then we would look to revise that, but we aren't going to gear our whole policy to major meltdown."

The Government's confidence in getting to surplus by 2014/15 came from the shift in attitudes and behaviours in New Zealand households and businesses, he said.

Zero extra money has been spent in the past two budgets, but Mr English thought there would be more room in the Budgets over the next few years.

"The key here is to do everything we can to build the growth side of the economy because we're reasonably happy that Government spending is now under control, and the system's getting better at making good choices with the spending, but the uncertainty is around the revenue line, some of that we can influence with growth orientated policy and some we can't."

But Labour finance minister David Parker said if Labour was looking to the future a 2015 Labour Budget would have more focus on growth.

"It's got to come from the export sector, in order to do that business and indeed people who work in business for their incomes need governments to do what governments can only do which is to get the tax saving and other settlements right."

He agreed that the country had to save more, but Labour's answer to the country's rising international indebtedness was moving to a more universal system, similar to Australia, Mr Parker said.

"The big deficit in this budget is they don't take the fundamental decisions that are needed to be taken to get long-term growth in our exports, for 40 years now we haven't covered the cost of our imports and interest and that's got to stop, we cannot continue to go down that track."

The country needed pro-growth tax reforms, in the forms of capital gains tax and development tax credits, he said.

"We need substantial improvements to savings, we need to get serious about fiscal pressures by addressing the age of superannuation, they are probably the three biggest things that need to be done."