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Money Expert - Diana Clement - Financial Planning, Career, Investing, Economy, Property - MSN NZ

The fat-busting budget

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It was heralded as one of the gloomiest budgets in decades. The good news is that although we've gained little, we've not faced swinging cuts either. The Key Government has taken away things we were promised, but not what we've got already.

The promised tax cuts in the next couple of years are gone. And there's nothing else in the budget to make us fat. But Minister of Finance Bill English's budget is unlikely to make it into the annals of notorious budgets, such as Arnold Nordmeyer's Black Budget of 1958 and Ruth Richardson's Mother of All Budgets of 1991.

Here's what you need to know about the budget 2009:

  • Goodbye tax cuts for 2010 and 2011.
  • Unemployment is forecast to peak at 8 percent in late 2010.
  • The deficit in the year to June 2010 is $7.74 billion, compared to last year's $2.4 billion surplus.
  • The economy is expected to shrink by 1.7 percent in the year to March 2010 then begin to expand.
  • Spending growth has been cut to $1.45 billion, compared with an average of $2.8 billion over the past five years.
  • There is $3 billion extra spending on health.
  • An extra $1.68 billion will be spent on education, although that's a smaller increase than in recent years.
  • Broadband projects have had $290 million allocated.
  • Justice initiative have attracted $900 million, including 600 additional police.
  • Payments to the government super fund have been suspended until 2020, and national superannuation benefits locked in at 66 percent of the average wage.
  • Treaty of Waitangi settlements to be fast-tracked with a $22.4 million boost.

The budget was tight with surprisingly little complaint. That's partly because we've been softened up for months so we weren't expecting any sweeteners. The worst economic conditions in 80 years gave the Key Government a get-out-of-jail-free card to put us all on a strict diet. It will be picked to bits over next few days by commentators and many pressure groups.

Government budgets usually come laden with sweeteners. Not this time. There was little room for new initiatives.

Rising debt was the big bogey and the National Government didn't surprise. Contributions to the government's super fund were suspended for a whopping 10 years — which is bound to worry baby boomers.

And in many other areas, spending — although increasing — didn't increase at the same rate as in previous years.

The big worry, we heard from Prime Minister John Key was that the Standard & Poors ratings agency would downgrade New Zealand's rating — which would make it more expensive to borrow and could add 1.5 percent to our mortgage and personal loan rates. These agencies determine what New Zealand pays to borrow money internationally. On a $200,000 mortgage, a downgrade would cost you $3,000 a year, The Listener stated in its editorial.

Initial responses from the public on one newspaper website focussed strongly on the tax cuts, or lack thereof. Many felt the promises from National had been fantasy. But as one poster pointed out, Labour had also offered tax cuts in its election promises last year.

So who will benefit? The government would argue that we all benefit. A prudent budget which has put us on a diet and attempts to keep debt in check will slim us all down and make us more productive.

Although there may be no fat in the budget, there is one thing to keep us warm. That's the $1,500 subsidies offered to all home owners to insulate. The plan is to spend $3 million over four years to insulate and heat 180,000 homes — but the subsidy won't be means tested.

Another move that could prove popular is money to increase police numbers by 600. On the law-and-order front, money has also been put aside for 246 extra probation officers, more Corrections Department staff and space for 1,000 extra prison inmates.

So is this it? The New Zealand public was expecting a bitter pill. We'd already heard that tax cuts were off the agenda. But the Dominion Post's Vernon Small said that there were no big cuts — they're just on the back burner. "The knives are being sharpened," he said. "The cuts will have to wait."

Full budget 2009 coverage

User comments
ha ha ha another Billy English revival. When is this man going to sling his hook. If I were John Key I would be wearing body armour as it won't be long before English has a knife in John Keys back. English is after the top job again, he blew it last time, and will if he ever got into prime ministers office again. But I don't think there is a snow balls chance in hell of English ever becoming PM again. But having said that the knives just the same will be out for John Key whom I like very much as a leader.
eventualy only 2 occupations criminal and corrections these are only growth forseen those who offend and those who benefit from the offending with generous salaries conditions of a no brainer polcy with no outcomes not sustainable
LETS GET THIS INTO PERSPECTIVE GUYS. THERE IS ONLY 4 MILLION PEOPLE LIVING IN THIS COUNTRY. IF WE PUT HALF OF THAT, SAY 450 MILLION INTO MORE COMFORTABLE HOUSING IN THE EXTREME NEEDED AREAS. EDUCATION THATS AFFECTIVE & ENJOYABLE. - EDUCATING OUR KIDS MORE ON ALCOHOL, DRUG, GAMBLING & PHYSICAL ABUSE. RESPECT FOR THEMSELVES & OTHERS ETC. WAYS TO MAKE MONEY & HOW TO KEEP IT! YOUTH RECREATION & SPORT THAT HAS A POSITIVE EFFECT ON THEM. THE LIST GOES ON. WE WOULDN'T NEED ALL THESE POLICE AND WE WOULDN'T BE TUNING OUT SO MANY UNEDUCATED SO CALLED CRIMS. MONEY WOULD BE SPENT MORE WISELY, NOT GIVEN TO SYSTEMS TO SWALLOW UP. - THAT ARE PROVEN TO BE MOSTLY IN AFFECTIVE. YOU KNOW MANY OF THESE POOR BUGGARS ARE JUST VICTIMS OF THE SPIDER WEB SYSTEM THAT KEEP THE LAWYERS JUDGES POLICE & CHILD YOUTH AND FAMILY WORKERS EMPLOYED. JUST TO NAME A FEW! NEW ZEALAND WAKE UP! DON'T JUST SIT AROUND HAVING A CUP OF TEA OVER THE PRO'S & CON'S OF THE SO CALLED BUDGET. - IT'S YOUR MONEY?
I can't but help to think that this Govt could have executed the biggest fraud elections ever!! Surely they would have known that we couldn't afford the tax cuts as the global economies started plummeting months before the elections. This govt has the youngest and the smartest people working for them and you can't tell me that they didn't see it coming? Do you remember the previous Govt saying we can't afford it? The biggest reason this govt came to power for most middle to low income kiwi were tax cuts and other promises. Now the Govt and big business are using the big R word as an excuse to pull back on promises made prior to the election and the restructure, lay off staff across industries that the R word doesn’t affect? Was it a ploy to get into power? This govt has been the opposition for a long time needed to do what ever it takes to get in? WAKE UP NEW ZEALAND!!! Let’s watch with interest and see what else they blame on the R word
hahaha i knew national couldnt go through with it, that's why i didn't vote them. yes Monkey, Auckland has it so RIGHT but think about it if went with that idea there's the money for your super fund. oh and wont need extra police or Corrections Department staff, so can give that to the pension considering its a bloody crap amount!!!!!!!!!! BUT... national has improved from the past at least they didn't stop kiwi saver all together and SPEND the money! so 1 point to them. all up bring on the elections cant wait to see them GONE!!!!!!
I think the government has done a reasonable job in tough circumstances. It is all very well to complain we each wanted more but there is no "more" to be had. I challenge all those that are unhappy to provide a balanced answer that includes a source of income for every expenditure.
I think that if keys gets half a chance to do his job he will do good for N.Z. The problem being that like times befor in the past when national have come into power after labour they are playing clean up to the lie's and deceving of the N.Z people that labour have delt to them and then the N.Z people get sick of labour cause they have made claims on the info from labour and have based there election campaign on this info,facts and then olny to find out that once in power it is not as good as labour has made out to be, So if national stays in for two terms we will probley see some good things happen if they are givin the chance and the N.Z people can see that and dont vote them out cause they cant see into the fature cause in the past it has been national cleaning up labours mess and we cant seem to see it and vote them out to have labour come back in and destroy all the hard work. It would also help if people where not so money hungry and out sorced just to make more.
I'm not so worried about missing out on a tax cut but I think the government is being a bit short-sighted by not investing in the super fund. There are always going to be old people who need a pension - and with improvements in our health and an aging problem, there will soon be more of them. I think this government is just going to create a problem for future governments.
It's no use the Labour Govt going on about tax cuts. They had nine years to do give us tax cuts and Michael Cullen was too mean. At least we have had ONE! Thank goodness neither Michael Cullen or Helen Clark are in Parliament otherwise we would have to put up with their high-handed arrogance going on about what they would have done and how much better it would be. Yeah right!! We all have to make the best of what we have so that we can come out of the recession without too much damage. Tightening our belts now just might help.
National seemed to wait until after the election to find out that it could not afford tax cuts. yet anyone who could read a financial forecast, before the ecletrion would have understood that tax cut would not happen.

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