Surplus date looks increasingly tough, says Key

John Key. Photo / Getty Images

Prime Minister John Key says the target of returning to surplus in the 2014-15 year is getting harder to reach because of global economic conditions.

"But we are making decisions to ensure we get back to surplus by our target date of 2014-15," he said at his post-Cabinet press conference yesterday.

"It is important to meet that target because every year we are in deficit we have to borrow more to fund that."

That was why it was "highly likely" next month's Budget would be another "zero Budget", meaning no extra funding for new initiatives.

Any spending boosts, including those for education and health, would have to be funded by cuts from other areas "and tightening up tax loopholes and tax avoidance".

Mr Key began his press conference by saying the May 24 Budget was still being put together and the target was still to return to surplus by 2014-15.

"It won't surprise you to know that the target has been getting harder to reach. That is a result of the weakness in the global economy and, for example, some increasing earthquake costs."

As recently as February 16, in the Budget Policy Statement, Finance Minister Bill English was sticking to the $800 million operating allowance for this year's Budget and next year's, then upping it to $1.2 billion in the 2014-15 year with increases of 2 per cent a year after that.

Mr Key said yesterday that in fact the last Budget, while technically a zero Budget, was actually a net reduction of about $1.2 billion in discretionary spending over four years.

"This one is looking pretty likely to be zero over the forecast period [four years]."