Wage and job forecast 'solidly based' - Key

Prime Minister John Key says forecasts of strong growth in wages and jobs over the next two years are "solidly based" and Treasury has got it right this time.

Mr Key yesterday gave glimpses of Thursday's budget, saying the growth in average weekly wages was expected to "well and truly" outstrip inflation and the Treasury was also forecasting strong employment growth.

He has since been questioned on the credibility of the positive prediction as Treasury has got it wrong before.

"We think it's solidly based. It's looks to us and certainly the information in the budget is that there will be strong wage growth ahead of inflation and it also indicates there will be a significant increase in the number of jobs," Mr Key said today.

"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.

"...of course there are always things that can derail growth stories but the world's been in a difficult place for three years now it's not beyond the realms of probability that we are going to come out of this and come out of it quite strongly."

Finance Minister Bill English also said he had no doubt about Treasury's forecasts.

"I think ... we have quite a degree of comfort with the Canterbury rebuild and the continuation of high commodity prices, you can see where the growth is going to come from. Whereas last year it was more hopeful, than real."

He said $12-$15 billion of reinsurance following the two Canterbury quakes would be injected into the New Zealand economy from offshore. "That is going to give people jobs and incomes."

Labour leader Phil Goff said the Government was giving empty promises.

"The Treasury's forecasts and the Government's claims have been proven wrong every year so far.

"I remember John Key in 2009 saying that the economy next year will be aggressively into recovery and growth. He's promised it every year, he's never delivered."

Mr Key won't give away budget figures, but yesterday told reporters wage growth of between 4 percent and 5 percent could be taken as "an educated guess".

He said the people would be surprised on how much the Government was looking to save overall from a couple of public sector initiatives.

"Targets for individual agencies will be finalised after the budget based on size and current funding, then it will be over to chief executives to identify how exactly to meet these targets."

Mr Key indicated the books were going to balance sooner that might have been expected, given the extra cost of the Christchurch earthquake and having to look after collapsed finance companies.

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.

"That's the starting point, You will have to wait to see whether we have done better than that, and by how much," he said.

The Government is anxious to avoid an international credit rating downgrade and Mr Key indicated he expected the agencies would look favourably on the budget.