• Winston Peters
Deputy Prime Minister

The Government has achieved its target of an additional $300 million in savings initiatives as part of its ongoing response to the Asian economic downturn, says Deputy Prime Minister and Treasurer Winston Peters.

"A significant part of the package represents deferred implementation of spending and a reduction in some contingencies. If the economy performs better than expected, these initiatives will be looked at again."

Mr Peters said the Government was pursuing a responsible programme to manage the downside of the crisis in Asia.

"These are difficult decisions made by a Government consisting of two separate political parties - with two separate constituencies. That requires extensive consultation and co-operation - and a process where both parties protect and stand up for their defining issues and policies - and the funding needed to implement them.

"If MMP is to have the transparency that the public voted for - it is pointless to pretend that these debates and discussion did not go on behind the scenes between the two coalition partners.

"Both parties have had to sacrifice funding for policies they believe in - and which reflect their respective principles and philosophies.

"But that does not, in any way, impede this Government's ability to provide stable leadership, economic direction and economic reform.

In the May Budget we established a $300 million "buffer" to safeguard the operating surplus by deferring some spending while at the same time we announced measures aimed at improving competitiveness and reducing costs to business, and prices for consumers.

The situation in Asia had since proved more difficult, and a decision was taken three weeks ago to at least double the fiscal buffer to reinforce the Government's operating surplus.

"Considerable thought was given to achieving these savings without depressing economic activity. I believe we have achieved the right balance between attending to urgent social needs, being fiscally prudent, and continuing to provide for a pro-growth environment."

Mr Peters said the major savings would come from:

cutting government administration costs
continuing ACC reform
deferring or halting policy development on some expenditure items
deferring or scaling back some initiatives announced in the 1998 Budget which had not yet been implemented
"We have targeted government administration, where we expect to make savings of more than $80 million. Part of this is a $56 million reduction in departmental operating expenses made possible by a decrease in employer contributions arising from the latest actuarial re-valuation of the Fund."

Parliament would not be excluded from this savings push. Parliamentary and Ministerial Services would be asked to achieve reductions of $1 million each, Mr Peters said.

The next step in the Govenment's response to the Asian downturn would come in early September when Cabinet considered the revised forecasts and information which the Treasury had been asked to provide.

At that time, the Government would decide what else might need to be done to ensure producers and exporters lead the way to creating new jobs and growth.

"We are going through testing times, because as a nation of traders, we cannot avoid being influenced by global events. Our economic framework is robust and the longer term outlook remains positive'" said Mr Peters.