Healthy Budget hedged with caution

Finance Minister Michael Cullen has delivered a strong budget with a healthy surplus, prepared against a background of international uncertainty and potentially disruptive domestic conditions.

Warning that a "clutch of malign influences" was stacking up against the New Zealand economy, Dr Cullen was still able to unveil Government accounts with a $4 billion surplus.

But he said that international uncertainty and potentially disruptive internal conditions like the drought and power problems were likely to reduce the country's economic growth rate, which last year hit 4.4 per cent.

He expects it to fall to 2.2 per cent in the next 12 months before bouncing back to 3.2 per cent in 2004/5.

"A clutch of malign influences including weak world demand, the potential impact of severe acute respiratory syndrome, drought in some regions, possible disruptions to electricity supply, weaker commodity prices and a strong dollar are already weighing on business confidence and activity."

While much of today's Budget spending has already been announced in carefully choreographed releases over the last fortnight, totally about $300 million, Dr Cullen did unveil some surprises.

Among them were:

* Fifty extra police and a mobile DNA squad for Auckland, $6.6m over four years to fund two police methamphetamine lab clean-up teams.

* The Budget brings ahead by a year the full contribution rate to the New Zealand Superannuation Fund with a $1.879b payment for 2003/04;

* $140 million of new operational funding in research, science and technology over the next four years, including $33.5m for 2003/4.

* $15m in 2003/04 - and a total of $110m over four years - to implement strategies to raise New Zealand's industrial profile in biotechnology, design, screen production, and information and communication technologies;

* $73m over four years to promote overseas trade.

* Maximum fees for tertiary students have been set and linked to the consumer price index.

* For the first time total spending on Health has broken the $9 billion mark.

One of the biggest announcements came in state houses. The Government, which has already announced it wants to build an extra 2393 state houses, has added another 318 houses to its plans.

Setting aside an extra $100m, the Government also wants to extend 80 houses to cope with larger families. In Auckland, among the Pacific Island and Maori community especially, there has been concern that the three-bedroom state houses did not cater to larger extended families.

Unlike the Australian Budget, announced this week, there were no tax cuts but Dr Cullen said that if surplus projections held up, the next one would contain "significant improvements" in family assistance.


- HERALD STAFF