Raising economic growth to be Govt's major focus this year, says Key

Prime Minister John Key. Photo / Mark Mitchell

Prime Minister John Key said the Government's major theme in 2010 would be improving New Zealand's economy and growth in what was still a "fragile" world economy.

The Budget would focus on steps to improve economic growth and he would lay out his initial thinking in his first major speech of the year on February 9 when Parliament resumed.

Lower personal taxes was still an important objective, he said, as was shoring up the tax base, remaining "vigilant" about company tax and getting better value for money from the state sector.

Mr Key arrived back in New Zealand yesterday morning from his holiday home in Hawaii two days ahead of the visit, starting tomorrow, of US Secretary of State Hillary Clinton.

"The world's economy is still fragile, so the Government has a lot of work at hand," he said.

This year "had to be the year where we start delivering on the faster growth agenda that we want".

According to the half-yearly opening of the books in December, Treasury expects the economy to shrink 0.4 per cent in the year to March 2010, which is better than the 1.7 per cent it forecast in last year's Budget.

For 2011 it is forecasting 2.4 per cent growth - less than the Reserve Bank's 3.6 per cent and the consensus of 2.8 per cent. It forecasts an average of 3 per cent over the following three years.

Mr Key said: "We have had some time now to reflect after what will have been 18 months in office, and I think you can look to the 2010 Budget to have a strong focus on that step change that we campaigned on in 2008."

The Government was committed to strengthening the economy, lifting wages and delivering value for money from the state sector.

Asked if getting better value from the state sector meant job cuts or getting the state sector to work harder, he said: "It may be a question of both.

"It may be that over time we can operate with a smaller number of core state sector employees, but we will work our way through that methodically."

That had been a key area of attention for the Ministry of Health, which had identified personnel savings over time.

New Zealanders wanted an efficient bureaucracy "but they don't want a bloated bureaucracy".

Mr Key said the issue of resuming military exercises with the United States might be discussed with Mrs Clinton, but he was not expecting the United States to make an announcement during the trip.

He planned to discuss the issue of Japanese whaling with her and hoped that she might be able to use the United States' close relationship with Japan in finding a diplomatic solution.

He said he had not been briefed on who was at fault over the sinking of the protest vessel Ady Gil in the Southern Ocean last week.