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Just as the economy is gaining momentum, the last thing New Zealand needs is more taxes and more debt, Finance Minister Bill English says.

“The economy is really gathering momentum, as we saw in the encouraging GDP data today showing the economy grew significantly faster than expected in the March quarter despite the earthquake,” he says. “More taxes and more debt under Labour would put that at risk.

Considerable progress has been made in further strengthening trans-Tasman ties, New Zealand Deputy Prime Minister and Finance Minister Bill English and Australian Deputy Prime Minister and Treasurer Wayne Swan said.

After talks in Wellington today, the ministers released a stock take showing the steps taken towards the creation of a Single Economic Market between the two countries since an outcome framework was announced in August 2009.

Despite the devastating Canterbury earthquake on 22 February, the economy grew by 0.8 per cent in the March quarter amid signs that the pace of the recovery is picking up, Finance Minister Bill English says.

Statistics New Zealand today confirmed gross domestic product (GDP) has grown in seven out of the past eight quarters. The latest result took GDP growth to 1.5 per cent in the year to March 31.

The March quarter growth was 1.1 per cent higher than Treasury's Budget forecast. Statistics New Zealand also revised growth upwards in the previous three quarters.

The next steps in progressing the Trans-Tasman Single Economic Market will be on the agenda when Finance Minister Bill English meets Australian Deputy Prime Minister and Treasurer Wayne Swan this week.

The ministers meet in Wellington on Thursday, before they share their views on the economic outlook for Australasia in speeches to a Trans-Tasman Business Circle lunch in the city.

The Government’s financial statements for the 11 months to 31 May show some early signs of progress in getting the deficit under control, Finance Minister Bill English says. 

The operating deficit before gains and losses was $10.8 billion for the 11 months - $1.3 billion below forecasts due to higher than expected tax revenue and lower core Crown expenses.

20 June briefing on the economy from Finance Minister Bill English in which he speaks about the growing confidence in the economy, why that confidence is well-placed and what the Government is doing to assist the recovery.

Improving New Zealanders’ knowledge of personal financial issues will help contribute to a healthier economy based on more savings and less debt, Finance Minister Bill English says.

“Better financial literacy is not only good for the economy – it also helps individual New Zealanders make better decisions about their own personal finances,” he said today in launching the New Zealand Centre for Personal Financial Education in Wellington.

After-tax wages continue to rise faster than prices, Finance Minister Bill English says.

The real after-tax average wage increased 2.5 per cent in the year to March 2011, after accounting for all consumer price increases including food prices and the one-off rise in GST last October.

“Everyone’s circumstances are different, and we appreciate things remain challenging for many New Zealanders. But it’s encouraging to see that, on average, take-home wages continue to rise faster than prices,” Mr English told Parliament today.

The Government’s operating deficit before gains and losses is expected to reach around $16.7 billion for the year to 30 June, as forecast in the Budget last month, Finance Minister Bill English says.

This is despite core Crown expenses coming in $525 million below forecast for the 10 months to 30 April, leaving the OBEGAL deficit at $10.9 billion for the 10 months.

“We will run a record annual deficit this year and it’s essential that we take the steps outlined in the Budget to bring it down and return to surplus by 2014/15,” Mr English says.

Finance Minister Bill English leaves on 23 May for Singapore and Hong Kong, where he will speak to business, investment and political leaders about New Zealand’s progress in building faster growth and higher national savings.

“Budget 2011 sets out a faster path to healthy surplus in 2014/15 - a year sooner than expected last year, despite the large costs involved in our commitment to rebuild Christchurch,” Mr English says. “Given the significant challenges we have faced in the past three years, this achievement should not be under estimated.

The Government will launch a new Earthquake Kiwi Bond to help fund the recovery in Christchurch and provide investors with a new savings option, Finance Minister Bill English says.

The new four-year bond is similar to a term deposit and is available to New Zealand residents from today.

“This is a great opportunity for Kiwi investors who want to help fund the Government's contribution to the multi-billion dollar recovery in Canterbury, while still getting a solid return on their money,” Mr English says.

Budget 2011 builds a strong platform for jobs and growth, sets a credible path back to surplus by 2014/15 and helps increase national savings, Finance Minister Bill English says.

“The Budget does this while continuing to protect the most vulnerable New Zealanders, increasing investment in health and education, and establishing a recovery fund to help pay for rebuilding Christchurch,” he says.

Budget 2011 contains several spending and savings initiatives.

Builds a platform for savings and growth, sets a faster return to surplus

The Government has confirmed several measures to increase national savings, including mapping a faster path back to budget surplus and providing New Zealanders with a wider range of investment opportunities.

“It’s important that New Zealand, across households, businesses and the Government, increases its level of savings and moves away from relying heavily on foreign debt,” Finance Minister Bill English says. “Budget 2011 takes several steps to help achieve that.

The Government believes there is significant merit in extending the mixed ownership model to four state-owned energy companies and reducing the Crown’s majority shareholding in Air New Zealand.

It will help reduce Government debt, increase investment opportunities for mum and dad investors and improve the companies’ financial performance, Finance Minister Bill English and State Owned Enterprises Minister Tony Ryall say.

Changes to KiwiSaver will encourage a higher level of private savings, make the scheme more financially sustainable and build a large pool of local capital, Finance Minister Bill English and Revenue Minister Peter Dunne say.

“While KiwiSaver has been very effective in attracting new members, it has done so at a high cost to taxpayers, with the scheme costing the Government over $1 billion a year in subsidies and tax breaks," Mr English says.

Why are changes being made?

1.  35-year old couple on average household income. Ben and Megan are both 35 years old. Ben works full time and earns $52,000 a year and Megan works part time earning $25,000 a year. Their combined income is equivalent to the average household wage. They join KiwiSaver on 1 April 2013 and both contribute the new minimum rate – 3 per cent of their gross wages. Ben contributes $29.92 a week and his employer contributes 3 per cent, or $24.68 a week after tax. He receives the equivalent of $10 a week in government contributions through the annual Member Tax Credit.

The Government is making changes that will better target Working for Families to lower income earners and ensure its cost remains sustainable into the future, Finance Minister Bill English, Social Development Minister Paula Bennett and Revenue Minister Peter Dunne say.

Working for Families will be altered over time so that eventually the scheme has:

Why are changes being made?

1.  Low income one-child family

Lisa is a sole parent. She earns $30,000 a year and has a 10-year-old child. She currently receives $148.04 a week in Working for Families tax credits. From 1 April 2012, this will go up to $152.64 a week – an increase of $4.60. 

2.  High income four-child family

Budget 2011 has freed up $5.2 billion out to 2014/15 – including $700 million in 2011/12 - to invest in improving frontline public services and reducing debt, Finance Minister Bill English says.

“At a time when the Government's finances are constrained as it deals with ongoing costs from the global financial crisis and two Canterbury earthquakes, these savings provide significant funding for better frontline services in areas like health, education, and law and order,” Mr English says.

The Government expects the wider state service to find $980 million in savings over three years to go towards improving frontline public services and reducing debt, Finance Minister Bill English says.

Agencies will be required to find the savings from 1 July 2012. They will comprise two main parts:

Documents released today show the Government has taken a balanced and responsible approach in providing a back-up financial support package for AMI policyholders, Finance Minister Bill English says. 

Treasury today proactively released a range of documents on its website relating to the Government's $500 million back-up support package, which was announced on 7 April.