Finance Minister Bill English says the Govt came into office with a plan to lift NZ’s economic performance after a decade of under-performance and missed opportunities. The deepening global recession has reinforced the need to implement the plan with even more urgency. The Govt’s books are in worse shape than Treasury predicted in the December downside forecasts. “We now expect the NZ economy to lose permanently about $50bn of output over the 3 years to 2012. The combination of an already high current account deficit and deteriorating Crown accounts leaves us especially vulnerable. That is why we must act now.”

English says year-on-year increases in Crown expenditure cannot continue at the same levels as in recent years. Core Crown expenditure is to be $63.5bn in the current year, or 51% up over the past 5 years, but the economy has grown just 23% in same period, and tax revenue by 24%. “While the previous Govt refused to use surpluses for tax cuts, they did use them for permanent spending increases.” With no policy change, Crown debt will hit 45% of GDP by 2013, and will exceed 70% by 2023. This is “unacceptable.”

English says the budget will set out a plan to ensure Crown debt does not get out of control. It will require trade-offs. He says he’s been “quite surprised” by how much low-quality spending has been found. English says the Govt will get debt under control and trending down, it’ll improve NZ’s ability to compete internationally, create a Govt sector which provides better services and delivers better value for taxpayers, and raise NZ living standards.

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