PM, deputy disagree on timing of recovery

Bill English

The views of Finance Minister Bill English and Prime Minister John Key on when New Zealand will emerge from the recession are in stark contrast.

Mr English said yesterday that he thought New Zealand was "unlikely to aggressively grow out of it".

But Mr Key says that by this time next year New Zealand would be starting to come out of it "reasonably aggressively".

Mr Key made his comment on March 22 on TVNZ's Q & A; Mr English made his comments on the same programme yesterday.

Asked about the difference, Mr English said Mr Key "has always had a very positive view about New Zealand. I certainly wouldn't want to say he is wrong but he is setting a high hurdle here and it's our job as a Government to meet those expectations - that's a feature of John Key's leadership."

Mr English said he would not want to guess when the recovery would occur but said it would be relatively slow.

It would be based on exports and on savings rather than readily available credit.

Mr Key said he believed that by the end of this year or early next year "we'll be starting to come out of that and I think starting to come out of that reasonably aggressively".

Mr English also indicated that although a start would be made this year on Mr Key's idea of a national network of cycleways, spending on it would be nothing like the $50 million originally estimated as the cost.

"It will start smaller and as confidence builds and the economy improves, it can grow bigger," he said.

"We won't be spending $50 million on it this year or next year or the year after."

The cycleway was one of the ideas to emerge from the Prime Minister's Job Summit in February.

Mr English yesterday gave his strongest hints yet that he intends to suspend or reduce payments to the New Zealand Superannuation Fund until the economy improves.

NZPA reported recently that poor returns by the fund mean the Government should by law increase its contribution by at least $400 million in the coming year.

But Mr English yesterday indicated that the Budget on May 27 would include provision for the Government to put put the brakes on contributions to the fund.

"The fund was set up at a time ... when there was a view there would always be surpluses," he said.

"Now we don't have surpluses, it's something we'll be having a pretty close look at."

Last year the Treasury calculated that in 2009-10 the Government would need to put $1.97 billion into the fund.

The $1.97 billion figure was worked out before the global recession took $4 billion off the fund's investment values and the wider economic outlook deteriorated.

A recalculation by NZPA - which takes into account lower forecast returns and the lower value of the fund - shows that Mr English would need to increase the contribution to at least $2.3 billion to keep pace with the legally prescribed formula.

Mr English's office refused to comment on the figure.

"There's no free lunch here," Mr English said.

"The formula that's in the law won't change ... the way it works is if you don't pay in this year then you have to make higher payment later."

The Government would be more explicit about the level of risk the fund should have.