Govt must resist calls to spend - English

Bill English said NZ's economy was hooked into the 'China-Australian train' which was the fastest at the moment. File photo / Paul Estcourt

Finance Minister Bill English has warned National Party delegates that the Government will come under pressure to spend more in election year - and will need to resist.

Speaking at the National Party annual conference today, Mr English said the main problem the country faced was escalating debt, which had been driven by private spending until the recession, and was now being fuelled by Government borrowing.

He said the Government remained focused on growing exports and the trading sector, which had stagnated in the past six years, but warned that there was no silver bullet for growing the economy.

There was no single policy that was going to do that, he said.

"As we go into election year, it is a real opportunity to think about the next steps you want us to take. John Key has led us in a process of considered and consistent change. We're not looking for a big hit, because there is no one big hit."

The Government was focused on "steady and broadly-supported change".

He said New Zealanders owed about $170 billion to foreign lenders at the moment, which will grow to about $250 billion by 2014.

"We have a big appetite for debt. That is going to be a challenge, because we are now in a world that is hostile to debt. It has wrecked economies, collapsed banks.

"We need to rebuild the earning side of the economy and reduce debt."

New Zealand's debt put it on a par with Greece, Ireland, Spain and Portugal.

"The price of getting it wrong is high. The early signs are somewhat promising. We are certainly on the road to recovery. We would like it to recover faster, but that recovery is not broad based. It's pretty patchy.

"The particular nature of the economic problems we have are unique - caused by debt."

But he said New Zealand's debt, which was about 40 per cent of GDP, was far less than America or the United Kingdom. The other major advantage was the tax rate on the average wage, which will be 17.5c to the dollar from October.

Major trading partners were also an advantage.

"We are hooked into the China-Australia train, and that is the fastest train in the world economy at the moment."

Earlier, Auckland Mayor John Banks opened the conference and gave a strong indication that, if elected mayor of the SuperCity, he would make targeting gangs and the proliferation of liquor outlets a main priority.

"I will work with the Prime Minister and this Government to bring an end to these gangs."

He said he was recently in Otara, where he saw five liquor outlets in one street.

"I got an understanding of the depths of the social challenges that we face."

Prime Minister John Key told the 600 delegates that the party was in good spirits, riding high in the polls.

But, in a nod to the recent rolling of Kevin Rudd as Prime Minister in Australia, he said things can change in the blink of an eye and the party needed to continue to earn the approval of New Zealanders.

"We have to get up every single morning and make sure we realise who put us here and what their expectations of us are. We need to earn and retain the trust and support of our fellow New Zealanders. They are the people who will determine the next election.

"We need to stay very focused on that."

He said the public, like the party delegates, will not agree with every decision the government makes, but "it's the overall package and direction that's important".

The mood at the conference was jovial, with ministers joking about Mr Key's recent trip to South Korea, where he visited the border with North Korea, and saying that ministers will refer to him as "Dear Leader" from now on.