Budget will get books in order - Key

Prime Minister John Key says the budget needs to get the country heading back into surplus, or future generations will be left with a hefty bill. Photo / Ben Fraser

The November 26 general election will be a test about economic management and tomorrow's budget will show the Government is up to the challenge, Prime Minister John Key says.

As Finance Minister Bill English prepared to present his third budget, Mr Key said there was no choice but to get the Government's books back in order.

"The alternative is that the country doesn't get back into surplus, we keep borrowing and the Reserve Bank puts interest rates up," he said.

"We get a scenario where the country has a future generation that has to pick up the tab for that."

Mr English will present a "zero" budget, with no new money in it and extra funds for health, education, justice and infrastructure coming from savings in other areas.

Expensive programmes such as KiwiSaver and Working for Families will be trimmed, others considered to be "poor quality" are likely to be axed and the public service will feel the pinch.

Mr English is expected to announce significant cost-cutting for government departments, setting an overall savings target with details still to be worked out.

Public service chief executives will then be left to work out for themselves how to meet their targets.

Mr English has already said he is facing a record deficit of about $16 billion, and his budget will set out the path to paying back borrowing that is running at $380 million a week.

There is an acute need to avoid a downgrade by international credit rating agencies, and the Government thinks its fiscal management plan will satisfy them.

"I think New Zealanders are expecting responsible, balanced economic management and that's what they are going to get tomorrow," Mr Key said.

"I think everyone was prepared to have the country borrowing at a time when that was the right thing to do because there was a global financial crisis, but now we have come out of that. The heavy lifting has to go back to the private sector, not the Government."

Mr Key said it would be an unusual election year budget, and there was going to be an unusual election.

"In the end it's going to be a test about economic management."

The good news tomorrow will be Treasury's projections for strong growth in wages and jobs over the next two years.

Mr Key said the growth was driven by improving international circumstances, lower interest rates, higher commodity prices and stronger global trade.

Labour leader Phil Goff said the country was going to see a timid, tinkering budget leaving problems that would have to be tackled after the election.

"We need some big changes in our system," he said.

"It's under-delivering, we shouldn't be borrowing $380m a week -- for nine years, a Labour government ran a surplus not a deficit."

The party's finance spokesman, David Cunliffe, said the budget would fail the tests of fairness and sufficiency.

"Given the magnitude of the debt mountain in front of us and the depth of the rut our real economy is stuck in, Labour believes that now is the time for boldness, for decisive moves that will actually fix the structural problems, and not slap on a coat of paint," he said.

ACT finance spokesman Sir Roger Douglas said Mr English was going to deliver a gambler's budget.

"If your idea of good parenting is to weigh your children down with over a billion dollars worth of new debt every month, then bet on Bill and John, the head honchos of the Beehive Casino," he said.

"But if you'd rather your country was run responsibly, so it doesn't go broke, maybe you want to put your money on someone who will help us make sure we live within our means."

- NZPA