The Government is still on track to get back into surplus in 2014/15 but it would push out the date if the global economy went into meltdown, Prime Minister John Key indicated today.
The upcoming Budget Policy Statement in February will forecast a surplus in the range of $300 to $500 million, he said.
But referring to the possibility that the Europe debt crisis could push the world back into recession, he said: "If the absolute worst happened and there was a major shock to the global economy, the Government would look at whether retaining that surplus target would actually harm the economy by forcing a sharp reduction in demand," he said in his state of the nation speech at Waitakere.
"But outside that scenario, we remain firmly committed to our target for surplus in 2014 - 15."
Mr Key said the most likely outcome was that European countries would manage through the crisis with the Euro intact because it was in their collective interest to do so.
"But that is by no means guaranteed."
Mr Key outlined the Government's four main priorities this term:
- The first was to responsibly manage the Government's finances.
- The second was to build a more competitive and productive economy.
- Third was to deliver better public services to New Zealanders within a tight budget.
- Fourth was to rebuild Christchurch.
Mr Key said the Government would move quickly to enact welfare reforms that National campaigned on in the November election, including requiring a greater portion of beneficiaries to be available for work.
He indicated that he would outline greater reforms in the state sector soon.
"I have been quite clear with my ministers that there needs to be significant change in the way the state sector is run.
"Greater efficiency across Government is an important part of this but it is by no means the only part.''
The Government was focused on getting quality and responsiveness of service, on strong and effective leadership, and on orienting the state sector around achieving results that really matter to New Zealanders.
Labour leader David Shearer said Mr Key's speech was clearly trying to soften up New Zealanders for more economic decline - and blaming it on the global economic crisis rather than National's own economic management.
"He's dropped a billion dollars since his last forecast, so we are now on much shakier ground than we were before. His speech really is a series of excuses of why we are not going to be able to get to where we want to, in the space of time he'd set out."
He said Mr Key was pinning his hopes on New Zealanders believing all the blame was on the global financial crisis.
"I actually think it's about our own management - New Zealand's economic management - and that's what he really should be focussing on."
He said he would set out Labour's alternative economic vision over the coming months - but would not comment on which of its policies from 2011 election - which included a capital gains tax and gradual increase to the pension age - would remain.
He believed it was highly unlikely New Zealand would return to surplus by 2014/15 under National's plans.
"Every single forecast has been downward, downward, downward. I think what he is doing in the speech is setting our expectations to be lower than they are at the moment."
He said Mr Key would use the forecasts as an excuse to make further cuts to the public service.
Meanwhile Maori Party co-leader Pita Sharples said he was disappointed at "the obvious omissions" from Mr Key's speech.
"This was not a speech about the health of this nation - it was almost exclusively about the economy and budgetary matters," said Dr Sharples.
There was nothing said about the well-being of the courntry's peoples.
There was no mention of poverty despite the Government setting up a ministerial committee on poverty under the confdience and supply agreement with the Maori Party.
"The Treaty was not mentioned once - even though we have already begun to review the constitution of Aotearoa.
"And there was no reference to Maori in his speech - so our people must see that only the Maori Party in Parliament is able to bring their most important issues before the House of Representatives and the Government.
"This makes it pretty obvious to Maori that politics is not a game - it's a full-time commitment. The government acknowledge Maori only when it suits them - we are the tangata whenua."
The time has come for Maori to back the Maori Party once again, to advance their issues in debates in Parliament.By Audrey Young Email Audrey