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New Zealand government flags further cuts in zero budget

04-26-2012 14:33 BJT

WELLINGTON, April 26 (Xinhua) -- New Zealand's government announced Thursday that further spending cuts are in the wings as it seeks to rein in the country's deficit over the next three years.

With the second consecutive budget of near-zero new spending to be unveiled next month, the government was also considering legislation changes to limit spending increases to population growth and inflation rates, Finance Minister Bill English said.

This year's annual budget would aim to keep the government on track to return to surplus in 2014-2015, while addressing a deterioration of 1 billion NZ dollars (815.79 million U.S. dollars) in the forecast operating balance since the Budget Policy Statement in February, English said.

"It's important that we return to surplus because New Zealand is one of the most indebted countries in the world as measured by our net international investment position," English said in a published speech to Wellington business leaders previewing next month's budget.

"We need to start rebuilding a buffer when the next global crisis comes along. Surpluses give us choices we simply don't have while we're running deficits."

Returning to surplus on target was a significant challenge, requiring tight control over spending for the foreseeable future, which was highlighted in preliminary budget estimates ministers received in recent weeks.

"They revealed a 1 billion-NZ-dollar deterioration in preliminary forecasts of the operating balance before gains and losses in 2014-201515, compared to the Budget Policy Statement in February," said English.

The preliminary budget estimates showed a deficit of 640 million NZ dollars deficit in 2014-2015, compared with the predicted surplus of 370 million NZ dollars in February's figures.

The new estimates reflected a number of factors, such as the impact of lower global growth on the country's short-term growth forecasts, leading to lower government revenue expectations.

In addition, New Zealand Superannuation Fund revenue and state- owned enterprises profits had been revised downwards, and finance costs and earthquake costs were revised upwards.

To remain on track to achieve a surplus, the government had decided on a very close to a zero Budget, meaning little new net government spending in this budget out to 2014-2015.

He also indicated further public service cuts, saying the government would continue to "reprioritise existing spending into higher priority areas" and consider the "appropriate level of future operating allowances."

The government would also proceed with public sector savings of 1 billion NZ dollars over the next three years.

It would exclude spending on natural disasters, finance charges, unemployment benefit and asset impairments, as they were either outside the government's control or helped to stabilize the economy in a downturn.

"Under the proposal, if a government decided to temporarily exceed the limit they would need to clearly explain the reasons and outline how they intended to ensure future expenses remained within the limit," said English.

The government intended to consult other political parties on the proposed changes, which would be included in a bill to be introduced around the middle of the year, he said.

The opposition Green Party said the ruling center-right National Party's plan would cut vital public services while leaving poor tax and spending decisions unchanged.

Green Party Co-leader Russel Norman said it was a damning indictment on National's economic management and its lowering of the tax rate on the upper tax bracket in 2010.

"National is borrowing over a billion dollars a year for its 2010 tax changes, which have had no positive effect on the economy, " said Norman in a statement.

Finance spokesperson for the main opposition Labour Party, David Parker, said the need for a law changed indicated incompetent economic management.

"We all know what happened in the aftermath of the last 'zero budget'-- there were two credit downgrades and a greater than anticipated increase in debt," said Parker in a statement.

Editor:Wang Lingfei |Source: Xinhua

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