Budget 2006: Roads, roads, roads

Michael Cullen and Prime Minister Helen Clark congratulate each other after the Budget speech. Marty Melville / Getty Images

Michael Cullen's seventh Budget commits funding to the biggest roading programme in New Zealand's history, benefiting Auckland and the Waikato in particular.

Roading projects that might otherwise have languished on the old 10-year plan, or were making slow progress, have been given a funding injection, certainty and a five-year deadline.

The first details will be announced today when Waikato projects valued at about $200 million will be announced.

But although northern business and transport interests are delighted with the funding, National has dubbed it the "Bondi Budget", seizing on its failure to signal tax cuts as an incentive for New Zealanders to head to Australia.

Finance spokesman John Key called it the Pavlova Budget - "cream on top and nothing underneath".

National leader Don Brash will launch a campaign today in a bid to contrast New Zealand with Australia's $45 billion tax-cuts package last week.

"If he thinks it's so hot over there, go and live there," Prime Minister Helen Clark taunted yesterday.

Roading became the centre-piece of Dr Cullen's Budget by default after a leak forced the early release of the telecommunications package - legislation forcing Telecom to open its network to competitors.

Together they were to have formed a high-impact package under the Government's "economic transformation" strategy.

As well as the $200 million for Waikato roads, the Government yesterday committed an extra $1.3 billion over five years to the state highway building programme and to speed up work on other projects.

That will take the total being spent over the five years to $13.4 billion.

But planting the pedal on roading has not been universally embraced.

Greens leader Jeanette Fitzsimons said it was "a mad, petrol-headed, road-building, vote-seeking Budget".

The Budget commits $2.2 billion to new operating spending and $1.3 billion to new capital spending.

Some of the details had already been announced, such as the $360 million this year for the expansion of its Working for Families package and $1.845 billion over the next four years.

The new spending of $750 million in health takes its total expenditure to $10.6 billion, and forecasts the same amount of new spending for the next three Budgets.

That is down on the $956 million increase in health spending last year, but not a surprise because Dr Cullen has repeatedly warned that the rate of increases would not be sustained.

Several times yesterday he returned to the theme of tax cuts and his justification for not including them.

"The fool who spends on the upturn will find himself broke on the downturn. There is no point in having tax cuts if the result is reducing the quality of roads, a poorer health system and a poorer education system."

The extra $3 billion in health funding in the next four years was the result of a "balanced approach to fiscal policy that large tax cuts would clearly threaten".

Dr Cullen presented his seventh successive operating surplus yesterday - $8.46 billion for the year ended June 30 and much higher than the $5.55 billion forecast in December.

The average operating surplus for the next four years is $4.77 billion.

But he prefers to use the lower cash position - the amount available to spend after contributions to the Superannuation Fund and capital expenditure such as on hospitals have been taken off.

This financial year finishes with a $1.75 billion cash surplus, but Treasury forecasts an average cash deficit over the next four years of $1.8 billion, some of which will be funded through borrowing.

The GDP growth forecasts reflect the economic downturn with 2.1 per cent in the year to March 2006 (compared with 3.7 in the previous year).

Treasury is expecting it to bottom out by next March, forecasting only 1 per cent but then to average 3.3 per cent in the following three years.

But Dr Cullen warned that certain Treasury revenue forecasts were significantly lower than those of Inland Revenue in the coming four years.

"The Government is placing its emotional bets on Revenue," he told reporters, "but it has to place its forecasting bets on Treasury because that is what the law requires."