'Zero' 2012 Budget aims for surplus

Prime Minister John Key responding to Labour's attack after the reading of the 2012 Budget in the House. Photo / Mark Mitchell
Prime Minister John Key responding to Labour's attack after the reading of the 2012 Budget in the House. Photo / Mark Mitchell

The Government has served up few surprises with a restrained Budget aimed at returning to surplus, but opposition parties say it shows "zero aspiration'' and will hit middle New Zealanders the hardest.

The Budget has forecast a modest $197 million surplus in 2014-2015, but that has come at the cost of little new spending outside core areas and extra costs for smokers, tertiary students and parents of preschool children.

Prime Minister John Key said the Government's commitment to getting back to surplus was not single-minded.

"It's part of our wider programme to build a more productive and competitive economy and brighter future for all New Zealanders.''

But Labour leader David Shearer said the Budget showed "zero aspiration'' while Greens co-leader Russel Norman said it was "a failure for the economy and a failure for our people''.

There were some surprises, including a funding freeze on universal subsidies for early childhood education, which would push cost increases due to inflation onto parents and childhood centres.

The savings would be redirected towards putting $110.9m into early childhood education in high priority communities over four years.

The Budget also deferred last year's costly KiwiSaver auto-enrolment plan until after the return to surplus, freeing up $514m for other areas.

Changes to tax credits on childcare, housekeeping and income under $9880 would save a further $117m - but that means children would now have to pay tax on income from after-school jobs.

Smokers were hit in the pocket, with a 10 per cent a year increase in the tobacco tax over four years set to push up to cost of a pack of 20 cigarettes by $5 by 2016.

Tertiary students will also have to pay up, with an end to the voluntary student loan repayment scheme and an increase in the loan repayments that come out of their pay packets.

The savings will be pumped into cash-hungry core areas like health and education, as well as extra funding for science and innovation.

Delivering his fourth Budget, Finance Minister Bill English said good fiscal management would help the Government deliver on its priority areas - building a productive economy, delivering better public services despite tight fiscal constraints, and rebuilding Christchurch.

"Collectively, these priorities are about building a brighter future for New Zealanders from all backgrounds and walks of life,'' he said.

But Mr Shearer said it truly was "a zero Budget''.

"It has zero growth and zero aspiration for New Zealanders. It offers zero hope that it will grow our economy now or in the years ahead. It fails to make the tough choices.''

There was no real growth agenda and the Budget would send New Zealanders flocking to Australia, he said.

Mr Shearer said the changes to KiwiSaver were manipulations in order to bring the books back into surplus.

"That will ultimately undermine our ability to save more."

He was also critical of income tax on children's after-school jobs.

"This is the nickel and diming of this Budget where you don't really take on the big issues but you end up taxing paperboys and papergirls,'' he said.

"Picking the pockets of paperboys and papergirls is petty. It's not really addressing the big issues.''

Dr Norman said the Budget failed to deliver any fundamental changes to the structural problems facing the New Zealand economy while ramping up the burden on lower and middle-income New Zealanders.

"The budget is a failure for the economy and a failure for our people. The average Kiwi will pay more to cover the Government's economic mismanagement,'' he said.

Dr Norman said low- and middle-income New Zealanders were "slowly being ground down''.

"If you look at all the cumulative changes over time, what you're seeing is that low and middle New Zealanders, slowly it's getting harder and harder.

"Whether it's the changes in the student loan repayment or early childhood education, or a bunch of other smaller changes, slowly they're in a tougher situation.''

Dr Norman said the Government did not realise how tough it was for "real mum and dad New Zealanders''.

"It's been really difficult to pay the grocery bills and the housing bills and the kids school bills and all the rest of it. They just don't have all the spare cash to buy shares in SOEs.''

New Zealand First leader Winston Peters said the Government was "caught in a timewarp'' of asset sales and public service cuts.

The Budget neglected the fundamental requirements for manufacturers and exporters to prosper and develop the economy, he said.

"It will see New Zealand slide backwards at an alarming rate as jobs disappear along with our manufacturing and exporting base.

"Instead of providing a brighter future as promised, this Budget has doomed the next generation of Kiwi workers to join the 1000-plus a week packing their bags for Australia.''

Mr Peters said the "debts and deficits-focused Budget'' did nothing to address the growing gap between the rich and poor.

- APNZ

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