Key flags possible delay in surplus

The government may review its target of returning to surplus by 2014/15.

In his first speech for the year, Mr Key said the government now expects a surplus of $300-500 million in that year - down from earlier forecasts.

But - for the first time and as picked by NBR – he said the government would review that target for a return to surplus if the overall economic situation deteriorated.

"If the absolute worst happened, and there was a major shock to the global economy, the government would look at whether retaining that surplus target would actually harm the economy by forcing sharp reduction in demand."

The Pre Election Economic and Fiscal Update (PREFU), released in October, forecast a surplus of $1.5 billion.

"Given the events in Europe, this surplus is understandably smaller," Mr Key told a business lunch in Henderson today.

A fuller outlook would be revealed when the government releases its Budget Policy Statement (BPS) on February 16, he said.

The government has put together a "120 point plan" for economic growth over the next three years and Mr Key said the two ministers in charge of the plan – Finance Minister Bill English and Economic Development Minister Stephen Joyce – would release the first update to that plan in the middle of the year.

The prime minister also signalled further shake-ups in the public sector.

"The state sector as a whole could do much better at delivering value-for-money, and it could do much better at achieving results, particularly in areas that cut across multiple departments, and which have proved difficult to get traction on over many years," Mr Key said.

Details on the government's intentions in this area would be released "in the next month or two," Mr Key said.

"There needs to be significant change in the way the state sector is run.

Greater efficiency across government is an important part of this, but it is by no means the only part.

We are also focused on the quality and responsiveness of services, on strong and effective leadership, and on orienting the state sector around achieving results that really matter to New Zealanders."