Budget for fair economy and a strong future

Providing relief to workers and planning for a strong future are at the centre of Finance Minister Michael Cullen’s ninth Budget.

“Over the past eight years New Zealand has enjoyed the longest period of economic expansion since World War II,” Dr Cullen said.

“That growth has seen rising household incomes, hundreds of thousands more jobs, rising profits for firms, and significant reductions in child poverty.  It has allowed the government to invest in health, education, and infrastructure and to deliver tax relief to families, businesses, and savers.

“But after the best run we have had in more than a generation, in 2008 we face real challenges arising from the global economic slowdown.  Rising international oil and food prices are seeing all New Zealanders pay more at the pump and the supermarket checkout.

“The continued fallout from the global credit crunch is seeing mortgage interest rates go up in many countries throughout the world. In New Zealand, we have added economic pressure from the drought affecting farmers in a number of regions.

“These challenges are not of New Zealand’s making, but it is the government’s responsibility to help guide New Zealand through them. And because over eight previous budgets we have managed the public books responsibly, we are much better placed than many other governments to manage our way through this slowdown without missing a step in planning for the future.

“This Budget delivers $10.6 billion in personal tax cuts plus boosts to Working for Families tax credits that should provide some relief to households. It also continues to invest strongly in public services and infrastructure, including major investments in a modern rail system and broadband.

“This government’s commitment to a fair and strong economy is evident in more than just what is in Budget 2008, however.  It is evident in what is not included.

“Previous downturns have been used by other New Zealand governments as an excuse to penalise the poor and as cover for cuts to New Zealand Superannuation or essential public services. Our government refuses to give in to an economic cycle by cutting support for New Zealanders when that support is most needed.

“The outlook for growth going forward is slower than previously forecast with growth to March 2009 expected to bottom out at 1.5 per cent before taking off again to 2.3 per cent in 2010 and 3.2 per cent in 2011. 

The Treasury expects the headline rate of inflation to generally fall within the 1-3 per cent target band during the forecast period,” Dr Cullen said.