Govt on track for 2015 surplus - English

Finance Minister Bill English. Photo / Sarah Ivey

The Government remains on track to return to surplus by 2014/15 but its current "firm" control on spending will continue beyond that date, Finance Minister Bill English said in a pre-Budget speech this afternoon.

Aiming to reduce net debt to 30 per cent of GDP by 2015, the Government was also targeting a 20 per cent figure by 2020, Mr English told the Wellington Employers' Chamber of Commerce.

The May 16 Budget would confirm the Government remains on track to reach its surplus target "as a result of our careful management of the accounts".

"This is a considerable achievement - and a significant turnaround in the space of a few years" Mr English said in his speech notes.

Relatively low debt helped New Zealand weather the last financial storm, but "we need to get ready for the next one".

However, "we still have some way to go in rebuilding the fiscal buffers that have been run down in recent years".

"This means fiscal responsibility will be permanent."

"We need to shift our focus to using the forecast surpluses after 2014/15 to achieve our second fiscal objective: bringing down the Government's net debt to 20 per cent of GDP by 2020."

That meant maintaining "firm expenditure control" beyond 2015, "so we can run big enough surpluses to have choices about paying down debt, topping up the New Zealand Super Fund and investing more in priority Government services.

"By reducing the resources the Government absorbs, we are making room for private investment while minimising upwards pressure on interest rates and the exchange rate.

"That is important for households and businesses. Budget 2013 will reflect those realities."

Mr English also indicated the Government's intention to take firm action to address house price inflation which "can create financial instability for households and the financial system when prices eventually drop".

"Regulations that drive up housing costs push many families into higher debt, making every New Zealander more vulnerable when things go wrong."

The Government would continue to work with regulators, builders, developers and councils to improve housing affordability.

However, Mr English said his Government would hold on to New Zealand's "conventional monetary policy, predictable fiscal policy and financial system" which were "precious advantages in a an unstable world".