Spending remains tight as New Zealand government focuses on debt

Finance Minister Bill English pledged Thursday to keep a tight rein on New Zealand government spending, saying it would focus on repaying debt.

Delivering his eighth annual Budget -- with some of the most substantial increases in health and education spending --English said the government's books were in good shape.

"We turned an 18.4 billion NZ dollars (12.37 billion U.S. dollars) deficit in 2011 into a 414 million NZ dollar (278.45 million U.S. dollars) surplus last year, but a tight rein on spending is still required to start repaying debt," English said in his broadcast Budget speech to Parliament.

Treasury forecasts showed the government was on track to meet its target of reducing net government debt to around 20 percent of GDP by 2020.

Modest operating surpluses were expected in the 2015-2016 fiscal year and in 2016-2017, increasing to a forecast 2.5 billion NZ dollars (1.68 billion U.S. dollars) the following year, and 6.7 billion NZ dollars (4.5 billion U.S. dollars) in 2019-2020.

Some spending previously earmarked for Budget 2017 had been brought forward, recognizing pressures from higher population growth, and opportunities to invest in core public services and economic initiatives.

However, additional new capital spending would be funded from "capital recycling" and as a result, total new spending on capital in this year's Budget was 2.6 billion NZ dollars (1.75 billion U.S. dollars).

"These changes reduce Budget allowances for new spending by 1.2 billion NZ dollars (806.88 million U.S. dollars) over the next five years, helping to further reduce debt while still investing in public services," English said.

"A higher allowance in Budget 2016 means the government can invest in public services, addressing the long-term drivers of social dysfunction to reduce long-term spending pressures," said English.

Treasury was forecasting real gross domestic product (GDP) growth of around 2.9 percent over the coming year, and 2.8 percent on average over the five years to June 2020.

Net debt was expected to peak at 25.6 percent of GDP next year and to fall to 19.3 percent of GDP in 2020-2021.

However, the leader of the main opposition Labour Party, Andrew Little, said in response that the government had offered nothing to solve the country's housing crisis or to help the thousands of people without homes.

He said the government was out of touch and "they just don't care" about the poorest New Zealanders.

While the average wage might be increasing, around half of New Zealand workers received no pay rise last year, Little said in his speech.

"This Budget has failed to deliver for middle New Zealand," said Little. Endit