Austere budget to roll off the printing press

Thursday's austere budget has been called black, then grey, but it will tomorrow roll off the printing press covered with a National-blue.

Finance Minister Bill English will visit Printlink near Wellington to watch the printing of his third budget tomorrow morning.

Inside, the Government says New Zealanders will find a conservative budget, aiming at reducing debt and rising national savings by making "modest" changes to Working For Families, KiwiSaver and student loans.

But critics fear the cuts would leave families worse off and pull New Zealand further into debt.

Among the changes would be a reduction in the KiwiSaver tax credit, worth about $20 a week, to be made up by higher contributions from members and employers.

Standard&Poor's analyst Kyran Curry today told Radio New Zealand changes to KiwiSaver could negatively hit national savings, unless part of an overall package aimed at boosting savings.

Mr English today said he didn't share the rating agency's concerns.

The budget would focus around lifting national savings and the Government was satisfied with its direction.

"I think the whole package is what matters and they'll get to see the whole package on Thursday."

Mr English ruled out tax break on savings in the form of inflation indexing as recommended by the Savings Working Group, and would not be drawn on whether there was a smaller sweetener in the budget.

Labour leader Phil Goff was "really worried" following S&P's comments and said the Government was "reversing its reversal" of two and a half years ago.

The National Government reduced compulsory contribution from 2 to 4 percent when it came into office, and Mr Key today said it was because of the economic environment at the time.

As for Working For Families, Mr Key said some families would be worse off following the changes, and acknowledge focusing on those earning more than $100,000 would not save much money.

"If they're going to do anything meaningful in terms of savings, they're going to be cutting into low and middle income families that rely on Working For Families to make sure their kids get a fair go. That's the concern that I have," Mr Goff said.

Funding would be targeted at lower-income households and be "less generous" for higher income earners, with changes taking into account the number of children in a family.

The cost of the $2.8 billion scheme would continue to rise if left unchecked, Mr Key said.

Treasury was forecasting strong growth in wages and jobs over the next two years.

He wouldn't give away budget figures, but said wage growth of between 4 percent and 5 percent could be taken as "an educated guess".

Mr Key was questioned on the credibility of the positive prediction as Treasury has got it wrong before, and said the forecast was solidly based.

"We are seeing strong commodity prices, we've got stimulus coming from the rebuild of Christchurch and we've got stimulus coming from the fact we've got low interest rates and the Rugby World Cup."

But when asked in the House this afternoon, Mr Key said he could not guarantee the economic projections would be met.

"Around the world economists are having trouble in forecasting economic growth," he said.

He said the Government was looking to save from a couple of public sector initiatives, but confirmed no government departments would be dropped before the election.

"We have a long-term programme of public sector reform we want to embark on."

Mr Key indicated the books were going to balance sooner that might have been expected.

If the situation had been left unchecked, Treasury would be forecasting a return to surplus in 2016-17 with debt peaking at 34 percent, he said.