$8.5 Billion Budget surplusTax cut was the question by Opposition and
economists But "NO" was the strong answer
by Dr.Cullen.
This is a budget with $8.5 billion surplus
but comes with no surprises.
Dr Cullen's speech to Parliament was a mixture of pride and prudence – New Zealand is well-placed to deal with any future economic uncertainties and the heavy cost of an aging population, but there is no room now for tax cuts or lavish government spend-ups. "The fool who spends on the upturn will find himself broke on the downturn," Dr Cullen told Parliament. "Budget 2006 demonstrates the common sense, consistent, long-term view that has been taken over the previous six budgets."
There is new spending of $1.3 billion on land transport in the budget, more than covering a shortfall of $862 million in the 10-year roading programme. Dr Cullen said more would be spent on roading than the Government gained through petrol tax, and he was prepared to create a "cushion" by issuing up to $1 billion in infrastructure bonds. The health budget will increase to $10.6 billion through an extra $750 million, and within the additional funding is $126 million for care of the aged and $76 million to fight obesity. There is more money for welfare, combating family violence and maintaining law and order – all detailed in pre-budget announcements that show Labour is looking after its core policies. Dr Cullen is also dealing with his "economic transformation" agenda. "New Zealand must lift its productivity levels and increase the value of its exports," he said. "The most important contributor to economic growth in a modern economy is human capital." To back that up, over the next four years he is putting $361 million extra into the school sector, $166 million into tertiary education and skill training, and $162 million into early childhood education. Dr Cullen said an accumulation of wealth and steady repayment of debt had left the Government with a healthy balance sheet.
Debt had fallen as a proportion of GDP, and the Government had been able to fund all its needs without borrowing. "All this means something very simple. New Zealand is in a far stronger position to cope with the fiscal consequences of the demographic transformation that will occur over the next 30 or 40 years than almost any other developed country," he said. TRANSPORT BOOST
UPDATED 5.20pm Thursday May 18, 2006
Finance Minister Michael Cullen has announced a $1.3 billion boost to transport funding in today's Budget.
Mr Cullen said the money would go on a range of projects, including the Manukau harbour crossing in Auckland and investigating Wellington's Transmission Gully plans.
The extra money, would bring total transport spending to $13.4 billion.
He said the additional funding would meet a funding shortfall identified earlier this year.
Transport minister Annette King said: "This will assure New Zealanders that the Labour-led government regards a world-class transport network, which moves people and goods safely and efficiently, as a centrepiece of our drive to transform the New Zealand economy."
The main projects are:
* Warkworth improvements stage 1 * Manukau Harbour Crossing (Auckland Western ring route), to be completed by 2011 * Tauranga Eastern Motorway * Investigation of Transmission Gully (Wellington Western Corridor) * Christchurch Southern Motorway * Arahura Bridge replacement Contractors Federation chief executive Richard Michael said the spending increase was good news for contractors.
He said the amount was "realistic" in terms of spare capacity in the road-building industry and there was a good spread of projects across the country.
Auckland Chamber of Commerce chief executive Michael Barnett said the package was "very positive" and the Government appeared to be delivering on its promises. Wellington Regional Chamber of Commerce also welcomed the announcements. |
Budget 2006: Key Points
2.43pm Thursday May 18, 2006
The Labour Government has poured money into roading and the elderly rather than cut taxes in its seventh Budget today.
Spending on land transport - mainly new roads - will rise by almost half, from around 0.9 per cent to around 1.3 per cent of the national income, in the next three years.
Residential care and home-based support for the elderly will get $126 million extra over the next four years.
Other main points of the Budget are:
* The budget surplus, after allowing for accounting changes, will shrink from $7 billion in 2005-06 to $5.8 billion in the coming year, bottoming at $3.6 billion in 2008-09. That's a drop from 4.5 per cent of the national income to 3.6 per cent and 2 per cent.
* Tax rates are unchanged.
* Economic growth is forecast to slow to 1.5 per cent both this year and next year, before recovering to 3.7 per cent in 2007-08.
* Jobs will shrink by 0.2 per cent in the coming year and unemployment will rise to 4.7 per cent.
* Money will be poured into areas aimed at "transforming" the economy from commodities to high-value products, with big boosts for science, export marketing and the Venture Investment Fund, as well as roading.
* Modern apprentice numbers will increase to 14,000 by the end of 2008.
* The Budget implements Labour's $1 billion election promise to scrap interest on student loans, and raises the parental income threshold for the full student allowance from $35,000 a year to $39,270.
* The Government will spend $76 million over the next four years on a campaign for healthy eating to stem obesity.
* Promised "school-ready" health checks for four-year-olds, improved school dental services and newborn hearing tests are implemented.
* A 10-year buildup in defence spending announced last year will continue with a $73 million increase this year.
Opinion By Leaders
The allocation of an additional $1.3 billion for new road building shows the Government has yet to fully grasp the fact that our future will be dominated by peak oil and the effects of worldwide climate change and these expensive motorway projects will be nothing but white elephants.
This is a mad, petrol-headed, road-building, vote-seeking budget; but I can't work out whose vote they think they are courting.
Aucklanders have moved out of their cars since fuel prices rose and use of public transport has doubled in just a year; despite a fare increase, buses and trains are absolutely full at peak hour. So who do they think is going to vote for this?
Are they really only interested in the votes of petrol heads and boy racers?
- Jeanette Fitzsimons, Green Party co-leader
* * *
This year's Budget represents a missed opportunity to invest towards productivity and growth gains. It contains some good policy directions for the future but lacks a true economic transformation agenda.
It's positive that roading needs are being addressed, but there are still concerns about negative incentives for the private sector to invest in infrastructure.
Comments regarding the possibility of further regulation of telecommunications send unfortunate signals to investors.
Other business-related areas including export assistance, skills training, and literacy and numeracy initiatives are positive, but the amounts allocated were small in the overall context of the Budget spend.
Incrementalism - rather than economic transformation - best describes the 2006 Budget.
- Phil O'Reilly, Business NZ Chief Executive
* * *
The minister of Maori affairs didn't get a bean -- how's he going to explain that to our people?
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Budget 2006
Opinion By leaders
Expectations were rock bottom, but still Michael Cullen managed to disappoint. This is a Clayton's budget. There's nothing in it. No plan, no policy, no vision, nothing.
The Government has a choice -- sap the wealth of the country and generate dependency, or develop policies that allow people to prosper and stand up independent, and that's what New Zealanders want.
- ACT leader Rodney Hide
* * *
I think it's very positive that at last we are getting some money which is going to be devoted to obesity because it is a really serious health problem.
When you consider $76 million over four years to the cost to the health system of obesity and diabetes it's a pretty small amount -- however it's more than we've had before. Obviously we would like some money.
The other thing we need really is regulation to change some of the environmental things that make it very hard for people to make healthy choices.
These include regulating marketing, having mandatory nutrition policies in schools and teaching of nutrition and cooking to children.
- Celia Murphy, executive director, Obesity Action Coalition
* * *
The economic transformation that the budget is heading us toward will make New Zealanders increasingly reliant on the state, and less likely to take responsibility for themselves, or for saving and investing for their own future.
Dr Cullen is not demonstrating any entrepreneurial streak. Aside from the $800 million over five years for meeting Transit's funding gap, the balance of today's budget is at the expense of tax cuts.
We are very pleased to see the guarantee of funding for roads, and the bonds issue of $1 billion of debt funding to connect up our transport networks. We have been arguing for just such a commonsense approach as this for the past six years.
But the other budget spending is at the expense of cutting taxes which would be a more efficient and faster route to economic transformation resulting in the 'flexibility and adaptiveness' sought by Dr Cullen.
To pay for the budget's spending, taxes are locked in at their current levels, removing the opportunity for personal savings and for individuals to invest on their own behalf.
Business welcomes the added investment in modern apprentices and other programmes to boost kiwi's skills, as well as more funding for exporters and R&D, we doubt it will slow down kiwis heading across the Tasman in search of higher paid, lower taxed jobs.
- Alasdair Thompson, chief executive, Employers & Manufacturers Association (Northern)
* * *
There is no coincidence that New Zealand First's five policy platforms from the 2005 election – senior citizens, immigration, law and order, Treaty of Waitangi and an export led economy – feature so strongly in today's budget, because it is a genuine MMP budget.
From the significant increase of $126 million in elder care funding and the development of a Golden Aged Card for seniors, through to the $500 million to dramatically boost police numbers, and making Tauranga's new Harbourlink Bridge toll-free, New Zealand First's imprint on this budget is unmistakable.
We have demonstrated clearly that parties who work constructively are able to deliver for their constituents across a range of fronts and make a real difference to the lives of our families, businesses and workers.
We are particularly pleased to see that the Government is now using the language of New Zealand First, from pursuing an 'export-led economy' through to 'securing our borders' in immigration.
The difference between this government and National is that this government at least gives us some credit when they borrow our policies.
While New Zealand First does see some gaps in the budget – we would like to have seen all of the petrol excise put into transport infrastructure for example – we do believe that it is generally headed in the right direction.
This budget demonstrates that some parties have matured with MMP and that the public got it right to reject those parties that simply don't understand that by working together you can get more done. New Zealand First is proud to deliver on its promises and to fix it like we promised for all New Zealanders.
- Winston Peters, leader, New Zealand First party |