Govt surpluses set to soar within four years says Key

Government will be able to satisfy many spending itches, Prime Minister John Key hinted today. Picture / Mark Mitchell

Next week's surplus forecasts will be so big that the Government will be able to satisfy many spending itches, Prime Minister John Key hinted today.

When the Government books are opened next week, Key says they will show surpluses "hockey-sticking up".

That would allow for increased social spending, and a family and tax package, and repaying debt.

Key also confirmed that despite the looming costs of the Kaikoura earthquake of perhaps $2 billion to $3 billion in the short-term, the Government would not be altering its priority to get net debt down to 20 per cent of GDP by 2020 - it currently sits at 24.5 per cent.

The half yearly economic and fiscal update (HYEFU) is on December 8.

The surplus in the last financial year came in at $1.8 billion and the current year may not be much higher, but Key suggested last week they will be heading towards $8 billion and $9b in four years, hence today's reference to a sudden upturn.

"When you see the HYEFU numbers, what you'll see is the budget surpluses start hockey-sticking up and they start getting quite big," Key said at his post Cabinet press conference.

He said it would spark debate on how the surpluses should be spent.

Asked if the Government would be able to do it all, increase social spending, tax cuts and paying down debt, Key said: "I think when you see the numbers next week, that's what you'll think as well."

"If the conversation is solely is it health and education vs a tax and family package, that's a very different discussion to one that says the Government is going to spend more money in health and education, it's going to spend more money on less-well-off New Zealanders, and it's also going to do these other things and it's going to repay debt in nominal terms and it's going to debt down."

Key said the result in a 1News Colmar Brunton poll tonight about what last year's surplus should be spent on was not surprising given the choices offered and it being so soon after the earthquake: only 17 per cent supported tax cuts, 48 per cent wanted it spent on public services; and 31 per cent wanted it to pay down debt.