SPEECH TO BUDGET POLICYTreasurer
Beehive Banquet Hall
Today the Coalition Government is releasing the Budget Policy Statement setting out the Governments fiscal intentions and priorities for the 1997 Budget and an associated publication of the Coalition Agreement.
It is appropriate the two should be seen together as the Budget Policy Statement weaves the Coalition Agreement into the Budget process.
The Coalition Agreement is the policy difference effected by MMP. It is the Coalition Governments vision . . . the Budget Policy Statement is the first step in implementing that vision.
It is a vision for a healthier New Zealand, a better educated New Zealand, a safer New Zealand.
To fulfil the Coalition Governments vision there will be increased spending in education, health and other social areas, but within the fiscal constraints set down in the Coalition Agreement.
There will be no backtracking.
The Budget Policy Statement is our answer to those who thought we couldnt stay within the three-year, $5 billion limit on new spending established in the Coalition Agreement.
This statement shows that this Government can deliver on its promises and keep within its self-imposed limits.
During 1997-98 we will start implementing the full range of policies planned for the first year. The total cost of new spending in the first financial year, 1997-98, will be no more than $950 million and in the region of $1.2 billion when fully implemented.
The first year cost is below $1.2 billion because well-managed programmes need to be built up steadily over time. We will spend what needs to be spent to get our most important initiatives moving.
This is good management. It provides us with more room across the three years to implement this Coalition Governments $5 billion programme.
This Budget Policy Statement shows that you can have responsible government which strives for better outcomes for New Zealanders and yet remain fiscally responsible.
This Government is committed to spending wisely and not simply for the sake of it.
The Coalition Agreement is a package for three years and beyond, not just next year.
The Coalition Governments spending programme should be put in context. The total macro-economic impact of the Coalitions policies to be initiated in 1997-98 will, when fully implemented, be about the same as the second round of tax cuts the National Government signalled last year.
Thats good news for homeowners and exporters because it ensures that fiscal policy is not putting undue pressure on interest or exchange rates.
Its good news for all New Zealanders because this Budget Policy Statement signals the Governments commitment to providing extra spending in priority areas that will improve the well being of all New Zealanders.
Delivering for the very young, and the old, by providing increased quality spending in education, health, housing and repealing the surcharge is what this Coalition Government is about.
And as the Budget Policy Statement shows it is also about spending money wisely within the limits agreed to in the Coalition Agreement.
Recent data on the housing market, wage rates and price expectation surveys demonstrate that inflation remains a risk in New Zealand. In addition the rise in the Balance of Payments deficit is evidence of the fact that domestic spending is putting pressure on our external competitiveness.
Now is not the time for a fiscal easing, which might increase the imbalance between domestic strength and external pressure. Instead, it is the time for steady change and that is what you will see in the Budget Policy Statement.
Taken together, the Coalition Agreement and the Budget Policy Statement show a consistent pattern of stability, predictability and responsibility.
The December Economic and Fiscal Update, published on 2 December last year, is the Treasury statement of affairs prior to the 10 December Coalition Agreement. Today, I have signalled the Coalition Governments economic and social expenditure programme over the next three years.
The difference over three years is $5 billion of expenditure.
Thats the difference.