Wellington (AFP) May 17, 2011
Prime Minister John Key has vowed to shore up government finances hit by the devastating Christchurch earthquakes in the New Zealand budget rather than making big-spending pre-election promises.
With the country facing a NZ$15 billion ($11.7 billion) bill from the quakes in September and February -- the second of which claimed 181 lives -- Key said fiscal responsibility was needed in Thursday's annual budget.
He said the conservative National Party-led government, which goes to the polls on November 26, could not afford the vote-winning sweeteners usually included in an election-year budget.
"When you see the budget on Thursday, it screams responsibility," he said.
"If we had been irresponsible, we'd be going into the election promising lots of things with money we don't have.
"Actually, we've come through the worst recession since the Great Depression, two enormous earthquakes in Christchurch and a collapse in the finance sector in New Zealand and we're going to deliver a pretty good set of books."
New Zealand was already struggling to shake off the impact of a lengthy recession before the quakes razed much of its second largest city, prompting concerns from international credit rating agencies about rising debt levels.
In response, Key has promised a "zero spend" budget where the cost of new initiatives must be offset by cuts to existing programmes to rein in a government operating deficit set to reach a record NZ$16-17 billion this year. He has signalled the budget will contain cuts to retirement subsidies, middle-class welfare payments and public service jobs in a bid to get the budget back into surplus.
Other debt-busting measures under consideration include a further reduction in the government's 74.6 percent stake in Air New Zealand and the partial privatisation of state-owned energy assets.
"This budget is a careful balancing act," Key said.
"On one hand, we must and will show a clear path back to surplus and lower government debt position over time. On the other hand, if we were to slash expenditure irresponsibly it would snuff out our hard-fought recovery."
For all the talk of fiscal responsibility and maintaining New Zealand's AA+ credit rating, analysts say the National Party will be careful the budget does not jeopardise its popularity ahead of the general election.
National leads the main opposition Labour Party 57.5 percent to 27.1 percent, according to a TV3 Reid Research poll taken in mid-April, giving it a huge buffer as it seeks a second term in office.
TD Securities senior strategist Roland Randall noted that Key had already said major policy changes would not be implemented until after the election, minimising the chances of alienating voters.
"This budget will not be about policy changes... this will be used as a launch pad for a campaign which will take the government to the general election on November 26," he told Dow Jones Newswires.
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