Be bold, says Labour, and spend to aid recovery

Labour leader Phil Goff. Photo / Christine Cornege

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If Labour were writing today's Budget, it would spend more than National to ensure the recovery from recession remained on track, says finance spokesman David Cunliffe.

Labour leader Phil Goff has already sparred with Finance Minister Bill English over the tax changes expected today, with Mr English saying last week that Labour's policies were a recipe for more debt and higher taxes.

However, Mr Cunliffe told the Herald that his party, as "very prudent managers" of the Crown's finances, would keep a tight rein on spending at present.

"Right now, the country's coming out of recession and well into recovery, and with growth rates forecast between 2.5 and 3.5 per cent of GDP this year and higher next year, this would not be the time that we would want to increase the amount of fiscal stimulus in the economy."

Having said that, Mr Cunliffe believed an argument could be made that the $1.1 billion earmarked for new spending in the Budget "is quite contractionary given that around half of that will be chewed up by the automatic cost increase of health alone".

Last year's Budget increased health funding by $750 million and set out the Government's intention for increases of a similar size for the following three years, although there are some expectations that will be scaled back this year.

But it remains to be seen how much of the increase will come from the $1.1 billion in new money and how much from the $1.8 billion the Government has said it will free up over four years by reallocating existing money.

"Bill English is behaving like an old-fashioned Treasury vote analyst pinching a few pennies here and there. Well that won't solve the problem," said Mr Cunliffe.

Increased savings, investment and exports were the keys to improving economic performance and those would be areas of focus for a Labour government.

KiwiSaver, "a spectacular success" under the previous government whose growth had levelled off under National, would probably receive a tune-up.

"We need to go beyond where KiwiSaver was and so Labour is looking at a package of enhancements which we might call KiwiSaver Plus. We won't be announcing the details yet but we are absolutely serious about getting New Zealand's savings up."

Labour would also promote a "genuine step change in innovation and R&D".

And the state sector shouldn't expect an easy ride under Labour.

"We would say to the public service you need to be innovative, there's no point in flooding Labour with the Budget bids that National turned down."