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Budget on May 16

Budget 2013 will be delivered on May 16, Finance Minister Bill English says.

The Budget will focus on continued rebalancing of the economy, encouraging savings, investment, trade and growth, and on delivering a government surplus by the 2014-15 financial year, he told parliament's finance and expenditure select committee today.

The most recent updated forecasts show a surplus of $66 million in that year.

The hearing was dominated by debate not so much about the forthcoming Budget but by about what, if anything, the government or the Reserve Bank could do about the high New Zealand dollar. 

Facing a barrage of questions from opposition MPs on the issue and on the state of the manufacturing sector, Mr English responded that there is little anyone can do about the exchange rate.

The emphasis of government policy is on improving New Zealand's competitiveness so firms can live in a world where New Zealand's currency is valued more highly than it once was. 

He also told Labour, Green and New Zealand First MPs that in arguing for a lower exchange rate they are effectivley seeking a cut in spending power.

"Oddly enough, I'm saying workers need a voice in this debate."

In a particularly testy exchange, NZ First leader Winston Peters demanded the government and Reserve Bank "take action" to bring the currency down. 

"Yes, but what action?" was the response from Mr English. 

"Should the Reserve Bank put interest rates up or down? The market is likely to look at a rate cut and say, 'well, clearly the next move is up and therefore let's go buy New Zealand dollars'.

"And that will put the exchange rate up further."

While other countries had engaged in quantitative easing and other related money-printing methods, they were nations where real interest rates are negative and real incomes are declining – neither of which is happening in New Zealand.

Countries which have used those methods are also "doing something which has never been done before" and will likely face a painful adjustment further down the track, he says. 

More by Rob Hosking

Comments and questions
9

Tax cuts in 2014 then?

New Zealand has massive and escalating soverign debt issues. Another sovereign credit downgrade is quite possible which will make a few farmers happy on their export prices, but really it is quite a bleak outlook until the country can become more productive and earn more than it spends.

Exactly... And that is also why NZ Inc needs to free up some of her capital in depress imaging assets to finance the running of the country and the rebuild and certainly not go and loan several billion instead.

Would the overall standard of NZ Inc improve by insisting on anyone trying to enter parliament - especially as a list MP - actually had to pass a basic IQ test, as well as Economics 101?

Mind you, then Labour and the Greens would be completely snookered trying to invent fully-costed fiscal policy.

Indeed. We have people stuck in parliament for years, like Jo Goodhew for Timaru, who is a former nurse, and little more than a mouthpiece of what any Pols 101 student gabbles out.

Such politicians offer little hope for change because they don't have the brain power to think through new solutions.

Playing around with figures are we??
Must be an election year !!!

Wonder if housing affordability is on the agenda. There has been enough talk from all ends to warrant this

Anonymous, why would "housing affordability" be on the agenda when like the "manufacturing crisis", it is itself manufactured, and manufactured by the parties of the left? The old saying of "if you say it enough, people will start believing it" is a truism in these instances.

I wonder if means testing for retiring Baby Boomers is on the agenda?

With 600,000 on superannuation, 400,000 on working for families, 200,000 with interest free student loans, 350,000 on welfare and 1.7 million claiming ACC, some very simple adjustments or pruning to achieve a balanced budget would be a relatively simple job.

Past election bribes are killing us and JK refusing to make any necessary changes.