Budget will give home buyers little warmth

Expectations about the scale of any measures to help people into home ownership have been hosed down by Finance Minister Michael Cullen.

"It will not be huge in this year's Budget," he told the finance and expenditure select committee yesterday.

However, he hoped the measures could be geared up over time.

"I am quite concerned that expectations may be raised of large-scale assistance like the 3 per cent loans of the past. That is not going to happen," Cullen said.

"The level of assistance required to assist many modest-income people into home ownership, especially in the Auckland area, would be high indeed and probably beyond what was affordable or wise."

The Government was wary of the risk of "chasing its own tail" by pushing up house prices, which would be counter-productive.

Prime Minister Helen Clark said in her state of the nation speech on February 1 that the Government was concerned about falling rates of home ownership and criticised National's dismantling of state support for first-home ownership.

"How to encourage savings which could lead to home ownership is under consideration now," she said.

Three months ago, Housing Minister Trevor Mallard told the Herald that three options to make home ownership easier for people on low incomes were under consideration, including one similar to a British scheme in which the Government covered the interest for an initial period.

Cullen also said there was little scope for taxpayer-funded sweeteners to encourage saving for retirement through workplace superannuation schemes. Possible incentives include tax deductibility, matching grants or a contribution to management fees.

"After I've paid for health, education, defence and a few other bits and pieces, there's not a great deal left over," he said.

Cullen said he had made it clear to his Cabinet colleagues that the growth in Government spending was not sustainable. He was looking to constrain the increase in spending to about $2.1 billion a year after inflation, from $3 billion a year now.

"That's a hard ask. But it would be foolish to assume [economic] growth rates of 4 or 4.5 per cent can be maintained."

Wrong and right

The Budget would be delivered on March 19, Finance Minster Michael Cullen told the finance and expenditure select committee yesterday.

As the colour drained from Treasury officials' faces, and journalists' faces brightened, thinking an early budget would deliver early election stories, Cullen hastily corrected himself.

Budget day would be May 19.