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Govt's debt targets are firmly on track

28 May 2001 Media Statement

Govt's debt targets are firmly on track

"Bill English continues to misrepresent the Government's fiscal policy, and the funding mechanism for the proposed New Zealand Superannuation Fund," Finance Minister Michael Cullen said today.

"He is dead wrong when he says the Government cannot afford to meet the projected contributions into the Fund.

"We have always said the payments would come from the operating balance - and the Budget shows a surplus of $1.4 billion in 2001-02, followed by surpluses in the subsequent three years of $2.4 billion, $3 billion and $3.7 billion.

"This is more than adequate to meet forecast contributions to the Fund of $600 million, $1.2 billion, $1.8 billion and $2.5 billion respectively.

"Yes, the Budget shows a modest increase in net debt over the next few years. But that has nothing to do with the proposed Superannuation Fund. Instead it reflects the Government's decision to take on to its own books the borrowing programmes of the District Health Boards and Housing New Zealand.

"This makes shrewd sense because the Government can negotiate cheaper interest rates than can these smaller organisations.

"The other reason there is a small increase in the debt profile is that the previous government allowed the infrastructure to deteriorate through persistent under-investment over many years across many activities - from transport through to corrections and defence," Dr Cullen said.

"As a consequence, the coalition Government has had to embark on a heavy capital investment programme.

"But, we are able to do this while also meeting our debt targets. We committed ourselves in our first budget to keep net debt below 20 percent as a proportion of GDP and we are easily within that range.

"The budget has net debt stable at around 18 per cent of GDP over the forecast horizon. These are the lowest levels achieved in 20 years," Dr Cullen said.

ENDS

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