PM: Budget 2011 will be responsible, affordable

Prime Minister John Key today said Budget 2011 will be responsible and measured, and ensure expensive programmes like KiwiSaver, Working for Families and interest-free student loans are affordable into the future.

In a speech in Wellington, Mr Key said the Budget will balance a number of the National-led Government's aims.

“Budget 2011 will set a credible path back to surplus while at the same time continuing to protect the most vulnerable New Zealanders, boosting frontline health and education services, and helping to pay for the rebuilding of Christchurch,” Mr Key said.

“It will contain significant savings, but will by no means be a slash and burn Budget. It will be a responsible Budget which helps ensure growth is built on the solid foundation of savings, exports and productive investment.”

Mr Key said the Budget will contain changes to KiwiSaver, Working for Families and interest-free student loans – programmes which collectively cost almost $5 billion a year.

“These programmes were introduced during a debt and consumption-driven economic bubble, and it is clear that they are unaffordable,” Mr Key said.

“None of the changes we will be making will affect people before the election so New Zealanders will be voting with all the information they need and can make their own choices.”

The Government intends to reduce the amount of money it has to borrow from overseas to put into KiwiSaver, and increase the amount of genuine savings from the private sector.

The mix of contributions to KiwiSaver accounts will change, with less coming from the Member Tax Credit and more coming from both individuals and employers. The $1,000 kick-start for new KiwiSaver members will remain as it is now.

“The changes to KiwiSaver won’t happen immediately, and this will give people and businesses time to adjust,” Mr Key said.

“Increased contributions from people and businesses will happen at a time when the economy will have well and truly recovered, and both wages and employment will be increasing.”

The changes will maintain total contributions into KiwiSaver funds, which are expected to accumulate rapidly. Officials have advised that the KiwiSaver changes will modestly improve the rate of national savings.
Mr Key said Working for Families will also be better targeted at lower-income families, who have a much greater need for assistance, and a little less generous to families higher up the Working for Families scale.

“We will do this gradually, in a way that minimises the impact on families,” Mr Key said.

The student loan scheme will also be adjusted but will remain interest-free.

“The changes we are making in the Budget will make all of these programmes more affordable and ensure they survive into the future,” Mr Key said.

“Here in New Zealand we have a chance, now the economy is gathering steam again, to build a solid platform for future growth.

“Budget 2011 will make the most of this opportunity for New Zealanders.”