Labour has knocked off its first Budget but it lived up to Prime Minister Jacinda Ardern's "no surprises" promise leaving some underwhelmed and offering little for middle income workers.

Finance Minister Grant Robertson and Prime Minister Jacinda Ardern kicked off the day with a cheese roll and the Budget proved just as simple fare.

It included the expected boost in spending for health ($3.6 billion) to help pay for hospitals and DHB costs, as well as plans for 6000 more state houses, but there was a lower increase for education of $1.3b.

That will deliver just a 1.6 per cent increase in schools' funding and a similar increase in funding for early childhood centres, which had hoped for a 4 per cent increase.


Labour's operating allowance of $2.8b was more than $1b higher than National's but the increases in spending were conservative and relatively thinly spread, targeting those on low incomes with little for middle New Zealand.

The first steps of its promise for universal cheaper GP visits were highly targeted at school children (it lifted free GP visits to include 13-year-olds) and low-income earners such as state house tenants and those getting accommodation support.

The restraint meant Labour could answer the critics of its economic handling by returning a surplus of $3.1b raising to $7b over the next four years and steady growth forecasts of around 3 per cent.

While debt will increase by about $10b over the next few years, it is on track to drop below the target of 20 per cent of GDP by 2022.

However, the Budget left many groups underwhelmed. The primary school teacher union NZEI described it as "a disappointment" and the Salvation Army welcomed moves such as cheaper GP visits for those on low incomes but said "it is not the transformational change we had hoped for".

Ardern denied the Budget had failed to live up to the hype of Labour's promises for change on the election campaign, saying it had delivered a lot prior to the Budget such as its Families Income Package which would begin in July.

"It might not be exciting to put money into hospitals or DHBs or into schools, but actually that's what we needed to do. And that's what we've done."

Ardern, who had promised the Budget would address the "squeezed middle", said that would be done through the widening eligibility of Working for Families for those on middle incomes.


National leader Simon Bridges said the ones missing out in Labour's Budget were middle-income workers.

"In fact middle-income families are getting steadily worse off, with the cancellation of National's tax changes and the coming big increases in fuel taxes that will take petrol and diesel prices to record levels.

"Borrowing more and taxing more in strong economic conditions makes no sense and risks undoing all the hard work New Zealanders have done over the last few years."

Finance Minister Grant Robertson gives interview following his announcement of the 2018 budget.

The Budget forecast the average wage to hit the $70,000 mark in the next three or four years, which is when the top tax threshold kicks in.

That could leave Labour defending failing to move on tax bracket changes while it has healthy surpluses and higher than expected tax revenue.

Robertson said the Tax Working Group would look at whether that threshold should now shift but did not show much enthusiasm for it.

"I'm not philosophically opposed to it but we have to create the balance in the economy and the surpluses we have allow us to manage our debt, allow us to make the big infrastructure investments we have to make and allow us to have the buffer for unforeseen events."

Robertson said the aim of the Budget was to get balance.

"We never said we could fix every problem in one Budget. We've got three in this term and hopefully more to come. It's really important for us to show that we can afford what we promised. I don't think anyone will find a hole."

The Budget included provisions for NZ First and the Green Party, such as $1b for NZ First's provincial growth fund, $900m for Foreign Affairs and the Green Party's $100m "green investment" fund.