The Government is sticking to its spending plans, including possible tax cuts, despite a slowdown in economic growth, Prime Minister John Key said in his formal statement to Parliament this afternoon.
The size of the economy is expected to be $17 billion lower over five years than was expected in the Budget, last May, caused in part by weaker dairy prices.
"This flows through to slightly less tax revenue, slightly lower operating balances and slightly higher debt compared with Budget forecasts, said Mr Key.
"None of these forecast revisions change the Government's overall fiscal strategy, which is to keep a tight rein on spending, focus on results from public services, start to pay down debt and look to return any excess revenue on top of this to taxpayers," he said in a reference to tax cuts.
The new operating allowance remained at $1 billion for Budget 2016; $2.5 billion for Budget 2017 and $1.5 billion each for Budgets 2018 and 2019 -- although he confirmed that the re-phasing of the allowances was possible.
The Government would also spend about $6 billion in the next financial year on capital expenditure.
Despite lower forecasts, Mr Key said the New Zealand economy continued to expand, with the latest Treasury forecasts putting economic growth at an average of 2.7 per cent over the next five years.
"On average, people's incomes are growing faster than inflation, and the forecasts show continued employment growth.
The Prime Minister's statement is required to be tabled at the start of each year and sets out the Government's programme, which has already been well signalled and includes:
- Increasing the supply of housing in Auckland by making under-utilised and vacant Crown land available for residential development;
- Supporting a further 3000 private sector homes at Hobsonville and 7500 homes in Tamaki;
- Supporting the delivery of 500 extra social housing places in Auckland with a request for a proposed further 1000 places open for response;
- Extending working prisons and developing a drug and alcohol post-release programme;
- Establishing a multi-agency gang intelligence centre led by the Police;
- Releasing a White Paper on Defence to address defence and security needs over the next 25 years;
- Wind up the Canterbury Earthquake Recovery Authority and establish a new organisation, Otakaro Ltd, for anchor projects, to augment Regenerate Christchurch to oversee long-term development issues, planning changes and the residential red zone;
- Introduce a withholding tax on sales of residential property by people living overseas;
- Cutting ACC levies;
- Progress trade agreements with the European Union and upgrade the FTA with China;
- Review the refugee quota programme.
Laws the Government plans to introduce this year include measures to:
- Require insulation and smoke alarms in all rental properties and to boost enforcement of housing standards;
- Strengthen the Domestic Violence Act following the 2015 review;
- Integrate the New Zealand fire services;
- Applying GST to cross-border services and intangibles supplied by offshore suppliers;
- Amend the Resource Management Act to speed up housing consents;
- Allow information on student loan borrowers to be shared with Australian tax authorities.