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Budget numbers support family assistance package

Budget numbers support family assistance package

A Future Directions package to assist low and middle income families will be the centrepiece of next year’s budget, Finance Minister Michael Cullen announced today.

“We indicated in Budget 2003 that we would move in this direction if the fiscal position permitted. The December Economic and Fiscal Update, which revises up sharply the surplus forecasts for the next two years, means that we can confirm that commitment in today’s Budget Policy Statement.

“The better fiscal outlook, with a structural increase in tax revenue, will allow us to spend a little more in our next three budgets than we flagged in Budget 2003 while still more than delivering on our fiscal objectives,” Dr Cullen said.

The DEFU has surpluses of $6.1 billion in 2003-04; $6.3 billion in 2004-05; $5.8 billion in 2005-06; $5.9 billion in 2006-07 and $6.2 billion in 2007-08. It has gross debt as a proportion of GDP falling from 28 per cent currently to 20.4 per over the forecast period.

“The debt track is well under the government’s 30 per cent of GDP target and raises the issue of whether the target should be lowered. There will be some discussion of this in Budget 2004,” Dr Cullen said.

The DEFU economic forecasts are for growth of 2.8 per cent in the next two years rising to 3.4 per cent in 2005-06, with unemployment remaining below 5 per cent across the forecast horizon.

“Despite the increased fiscal headroom, we will continue our cautious fiscal stance both as a buffer against future economic shocks and because, with the domestic economy running close to capacity, too great a spending stimulus could place undue pressure on monetary policy.

“Budget 2004 will commit $1 billion in new operating spending, above the $1.1 billion already either signalled or incorporated into baselines, in the first year. The total in subsequent years will rise to $3.3 billion. Much of the increase will be through Future Directions, funding for which will begin next year.

“Health, education and the Growth and Innovation Framework will receive spending increases of a similar size to last year’s budget.

“The budget will also allocate money to building capacity in the public sector and will support a significant capital investment programme while meeting our commitments to the New Zealand Superannuation Fund. “The government puts a high value on consistency and prudence and on governing for the long-term.

“Budget 2004 will reflect that, blending a prudent fiscal strategy with continued steady progress on our policy objectives and a suite of measures under the Future Directions umbrella to improve the living standards and life prospects of low and middle income New Zealanders,” Dr Cullen said.

ENDS

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