Key: No big Budget spend-up

Prime Minister John Key. Photo / NZ Herald

Prime Minister John Key says don't look to National for a big spend-up in the Budget or in the election campaign, despite the forecast surplus in the next financial year.

And he said some of Labour's promises, such as extending free early childhood education to 25 hours week, would send New Zealand back to deficit.

He said he would be spelling out the general approach to the Budget in a speech in Auckland on Wednesday, but he said that returning the books to surplus in the 2014 - 15 year would not mean a big increase in expenditure.

"If you are looking to us to have a massive lolly scramble either on Budget day [May 15] or going into the election [September 20] you are looking at the wrong political party," he said at his post cabinet press conference today.

Part of the surplus had to be used to repay debt and could also be used potentially to build the New Zealand Superannuation Fund or build up the EQC fund.

"In the end if you are going to have the argument that in the bad times, like a Christchurch earthquake or a recession, the Government should borrow money to stimulate or support the economy, by definition in the good times you've got to prepare for another rainy day."

The half yearly fiscal update in December forecast the first surplus to be just $86 million, reach $5.6 billion in 2017 - 18. Finance Minister Bill English had set the new spending allowance for the next four years at about $1 billion a year.

"Bill English's view is that $1 billion is pretty much the new normal," he said.

It did not mean there could not be some increases over time.

He said the cost of some Labour and Green promises had been unrealistic, would send New Zealand back into deficit and would put pressure on the Reserve Bank Governor to increase interest rates.

Mr Key cited Labour's promise to increase early childhood education from 20 free hours a week for three and four years old to 25 hours a week.

The policy doesn't take effect until July 2017 but Labour has costed it at $57 million in the first year and about $60 million after that.

Mr Key said the cost was more likely to be $600 million, $700 million or $800 million.
Labour in Government spent on average $3 billion to $4 billion extra every year for the last five years in office.

"That will put pressure on interest rates and it will cause New Zealand to borrow more money and that borrowing will have to come from foreigners.

"I just don't think that is what New Zealanders want."

The reason Labour was going down in the polls [DigiPoll, Ipsos, Reid Research, Colmar Brunton] was because their policies were "not a recipe to take New Zealand forward."