Good afternoon and welcome to this ONE News Budget special, as Finance Minster Bill English prepares to deliver his fourth budget. Tough economic times mean we already know it'll be another zero Budget. The Government's indicated there'll be no new money to spread around. Instead, any extra spending in priority areas like health and education will be countered by budget cuts elsewhere. The Government says it's determined to get back to surplus by 2014/2015, but that objective has been hit hard by a weaker global economy and delays to the Christchurch rebuild. The debate's also growing over the need for austerity balanced against achieving economic growth and jobs. We already know some of the Budget winners and losers, as pre-Budget announcements have drip-fed changes. Those with student loans are going to face paying them back faster. That's already proving unpopular, with protests in Wellington and Auckland as we go to air. In health, prescription fees are set to rise, and more money's going towards home care with people with disabilities. Shortly we'll get the full Budget picture when we cross live to Parliament for Bill English's Budget speech, and we'll stay with that live coverage for the opposition's response. Budget 2012 will also be streamed live on our website at tvnz.co.nz, where you're also find detailed analysis. This afternoon I'm also joined by two commentators. In the studio looking at the numbers is Westpac chief economist Dominick Stephens, and for the lowdown on the politics, Associate Professor Raymond Miller from the University of Auckland. Welcome both of you. The Finance Minister, Bill English, has taken issue with people calling this an austerity budget. Does he have a point or is he just trying to make it sound not as bad as it is? It's a gently austere budget. Australia's is twice as harsh. When asked in a recessionary area at the moment, so a cautious approach is right. The appropriation of 2013 Bill is sit down for this reading presently. Departmental statements of intent. Those papers are published under the authority of the house. Thank you. Dominick, we had a zero Budget last year. Why are we having another one this year? Essentially the government is telling us there is nothing in the town. Partly because it's difficult to anticipate what that GST and income tax which last year was going to do. Are the public on board with this zero budget message? The Australian budget was good for the low income earners. Does that make this budget a hard sell? If those areas are the neglected, it will be a hard sell for particular sectors of our society. Minister what needs to move to the first. The question is that the motion be agreed to. Those of that agreement will say aye. The ayes have it. A party vote has been called for. The clerk will conduct the party vote. Maori party. Mana. Act NZ. United future. In favour. The ayes are 64. The nose are 57. The motion is agreed to. At this side of the house, we observe the act party voted nothing. Why the delay? If they know they don't have the numbers, what is the point? They're stating their opposition to what they know is coming. a sharp recession, a global economic crisis and earthquakes in Canterbury. Mr Speaker, I move that the Appropriation (2012/13 Estimates) Bill be now read a second time. It's a privilege to deliver the National-led Government's fourth Budget. This Budget is about investing in our future. It shows the Government is responsibly managing its finances. We are on track to post an operating surplus in 2014/15, when we will start bringing debt down to prudent levels. That is a considerable achievement given the difficulties NZ has faced over the past three years ` a sharp recession that started in early 2008; the global financial crisis, which is still being felt around the world; the destructive earthquakes in Canterbury. Good fiscal management is important because it helps us pursue the other three priorities of this Government. The first of these is building a more productive and competitive economy. The NZ economy lost competitiveness and built up large imbalances during the 2000s. Those imbalances have to be reversed if we are to achieve sustainable growth. The Budget is another step in creating an innovative and productive economy that sells more to the world; where people have the jobs, opportunities and higher incomes to get ahead here in NZ. Secondly, the Government is committed to delivering better public services. The Budget shows we are continuing to reform public services to deliver better results, protect the vulnerable in our society, and at the same time bring down many of the long-term social costs that drive public-sector spending. And thirdly, the Budget continues the Government's strong commitment to rebuilding Christchurch and the surrounding areas. Collectively, these priorities are about building a brighter future for NZers from all backgrounds and walks of life. Working constructively with the ACT, United Future and Maori Parties, we will continue to make balanced and fair decisions to support all NZers through challenging times and put the economy on a more competitive footing for the longer term. Mr Speaker, The NZ economy has grown modestly but steadily, despite significant headwinds. The efforts of all NZers, supported by the Government's policies, are delivering results in difficult circumstances. Since the recession, the economy has expanded in nine out of the past 10 quarters. Looking ahead, growth is forecast to rise to more than 3% in 2014/2015. Though moderate by historical standards, NZ's growth outlook is stronger over the next few years than that forecast for the euro area, the United Kingdom, Japan, the United States and Canada. It's similar to forecast growth in Australia. Households and businesses have started to save and pay down debt. NZ's household savings rate is positive for the first time in a decade and is forecast to increase to almost 4% by 2016. That is a positive and encouraging sign. Increased savings will temper economic growth a little in the short term, but over time will leave NZ considerably less vulnerable to economic shocks. Job creation is picking up. Over the past two years, 60,000 more people have been employed, and the Treasury expects a net 154,000 new jobs over the next four years. Unemployment is forecast to drop below 5% by 2015. Growth in the near term will be driven by a number of factors. The rebuilding of Christchurch will be a key driver of domestic activity and is expected to contribute about one percentage point to annual growth in each calendar year from 2012 to 2016. Our two largest trading partners ` Australia and China ` are forecast to maintain reasonable growth rates, therefore keeping up demand for our exports. We are also well placed to benefit from trade with other fast-growing economies in the Asia-Pacific region. And our terms of trade are expected to remain relatively high on the back of demand for our major export commodities. These opportunities will be supported by Government policies to encourage businesses to invest, grow and employ. However, the global environment remains volatile. In particular, the euro area and the United Kingdom have yet to resolve the huge problems caused by a long-term reliance on debt and government spending to drive economic growth. This global weakness and volatility means NZ must focus on the issues it can directly control, including getting back to surplus, reducing government and private sector debt and improving competitiveness. New jobs are created and incomes grow only when businesses have the confidence to invest, take risks to employ more people and pay better wages from higher revenues. Growth in the 2000s was built on unsustainable foundations excessive spending, including from the Government, and high levels of household debt. We are moving towards growth that is driven by savings, exports and productive investment in the parts of the economy that trade with the rest of the world. It is within this context that I present Budget 2012. Mr Speaker, I want to talk first about responsible financial management before I go on to talk about the other three, equally important, priorities of this Government. Over the past three years, the Government has faced very considerable fiscal challenges. In 2008, net government debt was $10b. Today it stands at $50b and is forecast to reach more than $70b before we return to surplus and start paying down debt. That build-up in government debt has been the appropriate response to the triple shocks of a domestic recession, the global financial crisis and the Canterbury earthquakes. The alternative would have been to dramatically slash spending or dramatically increase taxes, both of which would have brought considerable pain to households and damaged the economy at a time when the recovery was still fragile. The Government chose to run larger deficits and absorb much of the impact of these shocks on its own balance sheet to protect vulnerable NZers and enable the economy to get back on track. But as we made clear at the time, this could not continue indefinitely. So the Government maintained spending, but slowed its growth significantly. As an illustration, over its last four Budgets, from 2004 to 2008, the previous Government's final-year spending on new discretionary operating and revenue initiatives totalled around $15b. For this Government, the corresponding figure over four Budgets is about $750m This Government's discipline means NZ is on track to return to fiscal surplus in 2014/15 and then to start reducing debt. The forecast fiscal surplus in 2014/15 is $197m. This surplus is forecast to grow to $2.1b in 2015/16 and $4.4b in 2016/17. Mr Speaker, these surpluses will allow the Government to rebuild NZ's resilience to further shocks, help lift national savings, keep interest rates lower for longer, take pressure off the exchange rate and reduce future finance costs. A significant surplus will also give us choices when it comes to public services which we don't have while we're running deficits. This Budget takes a number of balanced decisions to ensure the Government reaches surplus in 2014/15. These decisions include running a zero Budget again this year, where $4.4b of new operating spending over the four-year forecast period is matched by a combination of savings and revenue initiatives. The Government is making significant new investment in priority areas, while at the same time keeping a tight rein on growth in spending and public debt. In terms of savings initiatives, we are continuing to reprioritise existing spending to ensure NZers receive better public services, especially in health, education, welfare, law and order, and science and innovation. This will allow core Crown expenses to fall progressively from 33.5% of GDP in 2011/12 to 30.2% of GDP in 2015/16. We are also focusing on improving the effectiveness of spending across the board. Effective public services that get results are good for individuals and their families and will also generate sustainable long-term savings. In terms of revenue initiatives, the Budget continues the Government's focus on broadening the tax base, closing tax loopholes and improving the fairness of the tax system. This builds on the measures introduced in Budgets 2010 and 2011. The Inland Revenue Department will receive an extra $78.4m to further improve its tax auditing and compliance functions. These extra compliance activities are estimated to have a net positive impact on the operating balance of $345.4m over the four years to 2015/16. We are also broadening the tax base by tightening the rules for deducting costs of assets that are used both by their owners and rented out for income, such as holiday homes, boats and aircraft; putting changes to livestock valuation rules into Budget legislation to prevent farmers who change valuation schemes receiving an unintended tax break; removing three tax credits that no longer fit the purpose for which they were created. Together, these changes will save about $410m over the next four years, and I thank the Honourable Peter Dunne for his work in this area. Mr Speaker, when the Budget is in sufficient surplus, the Government is committed to resuming contributions to the NZ Superannuation Fund. On current forecasts, this is expected to happen in 2017/18. Furthermore, decisions will also need to be made on the rate of debt repayment to meet the Government's longer-term objective of reducing debt to 20% of GDP by 2020. Resuming NZ Superannuation Fund contributions and repaying debt will require an ongoing commitment to responsibly manage surpluses. Budget 2012 proposes changes to the fiscal responsibility provisions of the Public Finance Act to reinforce fiscal disciplines. We are proposing additional principles for Part two of the Public Finance Act, which ministers will have to take into account when setting fiscal policy. These changes will bring more transparency to government spending decisions and how they affect the wider economy and future generations. The Government is also consulting other political parties about the possible introduction of a spending limit, as set out in the National-ACT confidence and supply agreement. I acknowledge the initiative on this issue of the Honourable John Banks. Mr Speaker, the new operating allowances for future Budgets remain as they were ` at $800m for Budget 2013, $1.19b for Budget 2014 and thereafter rising at 2% each Budget. This allows the Government to maintain some flexibility to deal with future spending and revenue pressures, while still achieving a surplus in 2014/15. Mr Speaker, as I said earlier, good fiscal management is important because it helps us pursue the other three priorities of this Government. So I want to turn to the first of these ` building a more productive and competitive economy. The Budget continues to support the wide range of actions the Government is taking to raise productivity and therefore create more jobs and raise incomes. I want to mention just a few of them. Budget 2012 contains $385m of new investment over four years in research, science and innovation. We need to support businesses and farms to innovate and stay ahead of the competition. And we need to ensure NZers have the right skills to compete in an increasingly global labour market. Over the next four years, Budget 2012 investments include $166m to redevelop an Advanced Technology Institute, which will help NZ's high-tech firms grow, increase exports and ramp up productivity; $60m to support a series of National Science Challenges, which will seek innovative solutions to specific questions of national significance; $100m additional funding for the Performance-Based Research Fund to support world-class research in NZ's universities; $59m to boost funding for science and engineering courses. Funding rates for engineering degrees will be increased by 8.8% and for science degrees by 2%. In its first three years, the Primary Growth Partnership has stimulated more than $430m in research and development investment from government and industry. A further $270m of investment by the Government and industry is awaiting approval of business plans or negotiating contracts. Mr Speaker, Budget 2012 continues the Government's programme of investment in productive infrastructure and other major capital projects. In particular, the Budget establishes the Future Investment Fund. This fund will receive all proceeds from the Government's sale of up to 49% of shares in four SOEs and Air NZ. These proceeds are expected to be between $5b and $7b. The Future Investment Fund will reinvest these proceeds in other public assets, such as modern schools and hospitals, over the next few Budgets. The Government will do this without having to borrow to pay for those new assets. We have earmarked $1b of the fund for modernising and transforming schools as part of the Government's 21st Century Schools programme. This demonstrates that the partial sale of shares in the five companies does not result in any net loss of publicly owned assets, but simply changes the mix of those assets. The Government would rather build new schools and better hospitals without having to borrow more from overseas lenders and still retain a majority shareholding in these companies. The share offers will provide NZers with an opportunity to invest their savings in large NZ companies and will help to improve the transparency and accountability of the companies. As part of the Budget, the Future Investment Fund is allocating its first $559m. This includes the first $34m of funding for 21st Century Schools; $250m towards KiwiRail's Turnaround Plan; $88m for health sector initiatives, in particular hospital redevelopments; $76m for the capital costs of the new Advanced Technology Institute. We expect to make a significantly larger contribution from the fund in Budget 2013 once the share offers are underway. In addition, the Government is investing around $12b in improving state highways over the next 10 years. We are also investing more than $500m a year in improving and maintaining local roads and completing the $2.1b upgrade of the metro rail systems in Auckland and Wellington. Through Transpower, the Government is investing $4.6b in upgrading the national electricity grid over the next 10 years. NZ's size and geographic isolation from the rest of the world mean communications technology matters. That is why this Government is investing up to $1.35b in the roll-out of ultra-fast broadband and an extra $300m in the Rural Broadband Initiative currently underway. Mr Speaker, as part of the Government's programme to deepen capital markets, the Budget last year made several changes to KiwiSaver. We announced an increase in the minimum contribution from individuals and employers from 2% to 3% to take effect from 1 April 2013. About 15,000 NZers a month are joining the scheme, and since March last year, total KiwiSaver funds have grown from $9b to more than $12b. Budget 2012 further strengthens KiwiSaver. New disclosure rules, to take effect from April 2013, will allow people in KiwiSaver to evaluate and compare the performance of different funds. Fund managers will be required to report their performance and returns, fees and costs, assets and portfolio holdings, and liquidity and liabilities. In addition, the Government is today issuing the terms of reference for a review of KiwiSaver default-provider arrangements to ensure they are working in the best interests of investors. The Government is also deferring its auto-enrolment exercise for KiwiSaver. Proceeding with auto-enrolment in 2014/15 as originally intended is now not possible without putting the updated forecast surplus at risk. Therefore, public consultation on auto-enrolment has been deferred until after 2012. In building a more competitive economy, the Government will develop initiatives across its business growth agenda. This will help businesses with the research, capital, ideas, skills, natural resources and infrastructure that they need to grow, employ and trade successfully with the rest of the world. This is how the Government will support job growth. Mr Speaker, another of the Government's priorities is delivering better public services within tight financial constraints. A better-performing public sector is central to the Government's plans over the next three years. The Government wants to see better results and improved services, as well as reduced costs and more efficiency. To assist those changes, the State Sector Act, the Public Finance Act and the Crown Entities Act will be amended, as recommended by the Better Public Services Advisory Group. Earlier this year, the Prime Minister announced 10 challenging results for the public sector to achieve over the next three to five years. We can help create better communities by achieving these results, which include reducing long-term welfare dependency; supporting vulnerable children; boosting skills and employment; reducing crime; and improving interaction with government. We've already announced one of the targets ` 85% of 18-year-olds having NCEA level 2 or equivalent in five years, up from 68% currently. Today we are announcing two more as part of Budget 2012. The first is reducing prisoner reoffending by 25% in five years. Reaching this target would mean 18,500 fewer victims of crime every year. The second is increasing the rate of participation in early childhood education to 98%, up from 94.7% currently. This will ensure that as many children as possible have a strong platform for learning when they start school. We are still finalising our other Better Public Services targets, and they will be announced by 30 June. Progress towards achieving the results will be reported publicly, so NZers can judge for themselves how well we are doing. As we've said, achieving these results will be demanding. In fact, for some of them, it will be quite difficult. We make no apology for that. Mr Speaker, despite tight financial constraints, this Government has made investing in better front-line health services a priority over the past three Budgets. This continues in Budget 2012. Over the next four years, the Government is committing almost $1.5b extra to Vote Health, partly funded by $129m of savings identified in 2011/12. This will deliver 4000 more elective operations a year; provide better service for cardiac and cancer patients; provide $12m to reduce rheumatic fever; invest $133m in disability support services. In addition, the Government will provide $60m in capital for new buildings and hospitals. As we've already announced, pharmaceutical co-payments will be increased from $3 to $5, up to a maximum of 20 prescription items per family per year, after which items are free. Prescriptions for children under 6 will remain free. This is a modest increase that allows us to spend more on front-line health services than we would otherwise have been able to. As part of its wider health policy, the Government will also continue to increase tobacco excise by 10% over and above inflation each year for the next four years. The first increase will occur on the 1st of January 2013, followed by annual increases on the 1st of January in each of the following three years. Previous increases in the excise have reduced tobacco consumption, as smokers have given up or cut back, and fewer young people begin smoking. I acknowledge the work and support of the Maori Party and its ministers, the Honourable Tariana Turia and the Honourable Pita Sharples, in this area. Mr Speaker, raising student achievement and improving the tracking of student performance is important for NZ and therefore a priority for this Government. As we have confirmed, the Government is committed to the ambitious goal of 85% of 18-year-olds with NCEA Level 2 or equivalent qualifications. Reaching this goal means resources must be managed to get better results for all students. Evidence shows the single most important thing we can do to raise achievement is to improve teaching quality. So Budget 2012 makes a significant investment in this area. Over the next four years, the Government will commit $512m towards new front-line education initiatives. This takes the Government's total investment in early childhood education and schooling to $9.6b in 2012/13. This Government wants to create a flexible, skilled and professional workforce through these initiatives to support principals and teachers. We are committing an extra $60m to lift the quality of teaching in our schools. This is in addition to the $304m we are spending on professional learning and development for teachers in primary and secondary education over the next four years. Budget 2012 also sets aside further funding to support priority learners. This includes $83m in school-operating grants; $51m to continue the roll-out of ultra-fast broadband in schools; $48m to increase participation by vulnerable groups in early childhood education; $19m to support Maori-medium early childhood education providers. The Government will provide extra parenting programmes and relationship education in secondary schools at a cost of $4m over four years. We will also support a variety of youth mental health initiatives with an extra $17m over four years. To increase investment in raising student achievement and to manage the costs of increased primary-school-age children over the next four years, we are making small changes to current school funding ratios. Mr Speaker, I have already mentioned some of the new initiatives in tertiary education. In addition, Budget 2012 invests in providing more pathways into work and further training for young people leaving school. It provides an additional free 3000 tertiary-based Youth Guarantee places at the cost of $37.7m over four years. The Government will also continue to better target student assistance to where it is most needed and ensure better value for taxpayers. From the 1st of January this year, we implemented tighter income rules to ensure the student allowance is fair. Budget 2012 confirms a number of further student loan changes from the 1st of April 2013, including increasing student loan repayments from 10c in every dollar earned over the income threshold to 12c; widening the definition of income for student loan repayment purposes; for student allowances, continuing the freeze on parental income thresholds until the 31st of March 2016; targeting allowances to first degrees only, and removing exemptions for long programmes such as postgraduate training, taking effect from the 1st January 2013. These changes are consistent with the Government's intention to see better value for NZers, ensure the longevity of the student loan scheme and improve alignment with Working for Families and other social policy initiatives. Mr Speaker, it is concerning for our future that around one in eight NZers aged 18 to 64 is on a benefit and around half of them have spent at least five of the past 10 years on a benefit. This Government has embarked on ambitious reforms focused on supporting NZers out of welfare and into work. The Budget invests $287.5m over four years in the first phase of this programme. This funding provides more education and training for young people. It will also focus on work availability and preparation for sole parents, widows, women alone, partners within the benefit system, and parents who have subsequent children while on a benefit. The second phase of welfare reform will be implemented in July 2013. This will involve changes to benefit categories. Both phases of the reforms are a shift towards a new investment approach to welfare. The investment approach provides greater transparency over the long-term cost of welfare and focuses government agencies on reducing this cost through employment support and training. Mr Speaker, Budget 2012 continues the Government's policy of staying strong on crime. The justice sector, including the Ministry of Justice and the Departments of Police and Corrections, is developing new ways of working together and making better use of existing resources. This includes more flexible funding arrangements and shared use of staff and assets. This will allow the sector to focus on results ` reducing total crime, violent crime and youth crime, and reducing reoffending. For example, the Policing Excellence programme helped reduce total crime by 5.6% between 2010 and 2011. As I've confirmed today, the Department of Corrections aims to reduce reoffending by 25% by 2017. To help achieve this, it will invest $145m of reprioritised money from prison closures and cost reductions out to 2019/20 in rehabilitation programmes. Modernising court services will ensure that people can access services faster and more conveniently. Mr Speaker, working with non-government providers, the Government is committed to improving housing affordability and providing assistance to households in need. Budget 2012 provides funding of $104m for this over three years. This will be used to trial greater innovation, diversity and scale in the social housing sector. The Government's housing policies will work alongside welfare reform to assist people towards independence. We are working with the housing sector to use our $15b investment in state houses and almost $2b of annual subsidies more effectively to house people in need. The Government will also work with councils to improve housing affordability for all NZers. Mr Speaker, the Government's final priority is rebuilding Christchurch. The Government remains absolutely committed to supporting the rebuilding of Christchurch, our second largest city. The total cost of the damage is estimated at more than $20b, so it is without doubt the largest and most complex economic project in NZ's history. I want to pay tribute to the work of my colleague the Honourable Gerry Brownlee and the many public servants, community organisations and families who have worked so hard to help each other through this disaster. Considerable progress is being made. Work on about three-quarters of the 1000 buildings required to be partially or fully demolished in the Christchurch CBD has been completed. Some 13,000 repair jobs are under way across greater Christchurch. A significant number of infrastructure repair projects worth about $820m have been completed, are underway or in the design stage. And nearly 5000 of the 7000 property owners in the residential red zone have formally accepted the Government's offer to purchase their properties. About half of these owners have already settled, allowing them to move on and restart their lives. Mr Speaker, the Government is providing considerable resources for the Canterbury rebuild. We set aside $5.5b in Budget 2011 for the Canterbury Earthquake Recovery Fund, we established the Canterbury Earthquake Recovery Authority, and we passed special legislation so the Government can step in where required to remove structural barriers to reconstruction. Looking ahead, the Government is developing a blueprint for the central city to take forward the draft Central City Plan prepared by Christchurch City Council in consultation with the people of the region. That blueprint will focus on anchor projects and precincts and provide sufficient direction to encourage the investment needed for rebuilding. The Government has assisted with land supply for housing by using special earthquake-recovery powers to amend land-use rules to allow rezoning of residential subdivisions. There is now a significant amount of residential land available in greater Christchurch ` potentially 26,000 sections over the next five years. About 6600 greenfields sections are expected to be released to the market within the next two years. The Government is determined that residents can rebuild and move into their new or repaired homes as soon as possible. Finalising the remaining residential land zoning decisions and the settlement of outstanding insurance claims is therefore a priority. Mr Speaker, it is now almost four years since the collapse of Lehman Brothers, which set off the global financial crisis and global recession. Since then, we have witnessed significant disruption to economies around the world, and that is likely to continue for years to come. The euro area and the United Kingdom are going back into recession this year. The United States has low and uncertain growth. By comparison, NZ is going through a moderate adjustment. We are avoiding the substantial cuts to public services and living standards that we are seeing in many other developed countries. Our outlook is more positive than most. We are a food-producing economy on the doorstep of a rapidly growing middle class in the Asia-Pacific region. Providing we stick to the Government's balanced and ongoing economic programme over the coming years, I am confident we will grasp these opportunities. Mr Speaker, Budget 2012 sets out the next steps in that programme. It's about investing in our future. It's about implementing the Government's plan to build opportunities for NZers from all walks of life. It's about returning to surplus in 2014/15, when we can start reducing debt brought on by the recession and the earthquakes. We are building a more productive and competitive economy, where NZers have the jobs, higher incomes and opportunities to get ahead in their own country. We are delivering better public services within tight financial constraints. And we are firmly focused on getting better results for NZers and their families. We are helping to rebuild Christchurch and standing beside the people of Canterbury. NZers have shown great resilience through challenging times. Budget 2012 supports their aspirations for a brighter future. Mr Speaker, I commend this Budget to the House. So that was Bill English, the Finance Minister, delivering his fourth Budget. We'll take a break there. We'll return with more Budget coverage from Parliament, including reaction from Labour leader David Shearer in what will be a crucial performance for the new leader and, of course, analysis from our commentators here in the studio. You're with a ONE News Budget live special. Let's now return to Parliament for the Budget address from the Labour leader, David Shearer. that doesn't give our kids the best start in life. I'm talking about all kids around New Zealand, and I'm talking about my kids as well. They will be affected by this as well. This is where the rubber hits the road. They pick up on the fact that the kids are going to have less of an opportunity now in schools than they did before. there are cuts to police. That goes into the back room. There are going to be on the streets looking after you and me. Murray McCully has insisted cuts to the foreign affairs and has cut the very future of our trade relations with the rest of the world. all over the world, our future prosperity has been cut on the front line. Another front line cut as bio security. This is the security that keeps the Queensland fruit fly out of New Zealand. The government knows the cost of everything and the value of absolutely nothing. Mr Speaker, we've heard the various projections from the Minister of Finance. But do we really believe it? Do we really believe it? this is the fourth Budget we've heard. It hasn't delivered. why would you want to listen to Mr English tyres this projection or be better in the future? after three times, after four times, you get sick of it. Exports are down 17%. $800 million down. That's the record of this government, Mr Speaker. In 2011, he's said New Zealand's growth is accelerating. It isn't. It slowed right down. this government and office delivered the worst growth in 15 years. take a look at this graph. this is disgraceful. people are going to Australia. Let's just look at the main points of the Budget now when it comes to the state of our economy and the Government books. The deficit for this financial year is $8.4b. That's down by close to $4b on what was forecast earlier this year. Growth is forecast to pick up from 2% this year to 3% next year. And Treasury expects 154,000 NZers to find jobs over the next four years. So what does our panel think? Re-joining me now Westpac chief economist Dominick Stephens and Associate Professor Raymond Miller from the University of Auckland. So, we've got our zero Budget. It forecasts a surplus. Does it look realistic they will achieve it, Dominick? Is growth realistic? there is always uncertainty around economic forecasts. Treasury's economic forecasts are similar to our own. There will be huge uncertainties on either side of the argument. previous numbers didn't eventuate. What faith can we haven't these numbers? Treasury is forecasting construction growth. Any potential fishhooks here, Raymond Miller, politically, given where they've chosen to cut and where they've chosen to spend? I had to remind myself there was zero budget. A lot of techy from the left hand and giving to the right. It creates an impression that there is a lot of new money, but in fact there is relatively little new money. for someone like David Shearer, there are opportunities to detect the government on issues such as unemployment, and job creation, which I think got little attention in this budget. Shearer hitting on bigger class sizes. I think this affects children in low decile schools. some of David Shearer speech sounds like a was written a few days ago. they've hang their hat on this achievement of getting back to surplus. How forgiving of people going to be if they don't? comes down to the issue of fairness. How fair is the government? People are going to see this surplus with achieving. One of the Government's key priorities this Budget is the Christchurch rebuild. Let's just look at the main points of the Budget now when it comes to the Christchurch recovery. There's just under $115m of extra money for the Canterbury Earthquake Recovery Authority to oversee reconstruction work. That's on top of the $5.5b already in the Canterbury Earthquake Recovery Fund. And $13m in social development money has been set aside for non-government organisations to help Cantabrians. Joining us now for more reaction to the Budget, live from Christchurch, is the chief executive of the Canterbury Employers' Chamber of Commerce, Peter Townsend. There's been delays and problems in getting the rebuild of Christchurch underway. What's your reaction to these measure the Government's going to take? I think it indicative of the government's continuing support of Christchurch. It's in the top 4 priorities, and so it should be. probably not enough money, but certainly a good indication that they are prepared to hang in there with us. further down the track, we may have to look for more funding. at the any other areas in the study need attention? one of the things as the accelerated growth of the rebuild of Canterbury. We need to make sure that we do rebuild our city and our region. there are some money for non-government organisations is that going to be welcome? absolutely. All that is welcomed by the city. The city is ready for strong leadership, strong input from central governments, local government. what we got here but is enormous. Unfortunately for Christchurch, it's a difficult challenge. we will show the rest of New Zealand some spectacular growth how would you rate this budget? we're stepping in unknown territory. Will see further down the track. Lets take a quick look at what Treasury is forecasting in terms of growth and jobs. Growth is expected to pick up from 2% this year, to 3% next year. Over the next four years, 154,000 NZers are expected to get into work. In a bid to spark job creation, $385m is being spent over the next four years on science and innovation. And there's funding to get 3000 more young people into training for a trade. Re-joining me now is our panel ` Westpac chief economist Dominick Stephens, Associate Professor Raymond Miller from the University of Auckland. let's talk about this job creation. Where are these 154,000 jobs coming from? This is all about the Christchurch rebuild? I think it's about contraction rates and all the New Zealand. There will be lots of demand for workers over the next few years as we rebuild Christchurch. I'm not so certain about that ability to find those workers without upping the pay and that could cause inflation and roadblocks on the path to rebuilding the city. it would squeeze on the economy and driving up construction cost. the government talks a lot on the importance of getting the economy going. Can you see what they're going to do about it? it is good they are spending money on trade training, but averages around about $9 million a year over the next four years. The rhetoric is there. It is hard to see the figures to back that up, and the government has missed some job targets over the next year or two. We know that unemployment has risen to 6.7% it's all very well training young people at school in giving the opportunity to do level 2 but what about the jobs when they get out of school? That really has to be a big challenge to the government. some of the forecasts about how much building is going to pick up over the next few years are quite huge. Are they really going to pan out like that? I'm not sure New Zealand really has the resources to undertake the level of construction activity. Treasury forecasting the construction sector to go to one half times the level of activity had achieved a military thousand five boom era. so what does that mean for the growth of the economy if it doesn't get it? the Treasury is also pessimistic about export fronts. I'm not so pessimistic. They are expecting a domestic led recovery here. I am not so pessimistic on exports. there are also money for an advanced technology Institute. Commercialising some of the good ideas we have. This is a good idea? it's more on long-term growth. There will be a bust at the end of this construction boom. What New Zealand has lacked for a very long time as productivity growth. Kiwis are full of great ideas, but what we don't have is the ability to commercialise those ideas and turn them into actual revenue. these measures, are they going to be enough people do say that the government has a plan for beyond the rebuild of Christchurch to get the economy moving? Stephen Joyce is a major winner here. His ministries have achieved quite a lot of attention. This opportunity is to increase the number of science graduate from university and putting money into greater excellence among university staff. The innovation in terms of the advanced technology Institute. These are all very good initiatives which will reach some fruition in several years, but we can't expect them to produce much early on. thank you gentlemen. We will come back to you soon and talk about some of the areas that have not been touched Let's now return to Parliament for part of the Budget address from the Prime Minster, John Key. all of these countries have higher unemployment rates the New Zealand. Mr Speaker, the National led government has been very ably supported by offering is an act and United future and the Maori party, and we thank them for their support and contribution to this budget. They are sensible people, who are committed to growth, jobs and economic stability. Anyway, apparently, if I didn't pick anything up from David Shearer speech, on planet Labour it easy to create jobs. Let's play a little test, shall we? Let us go through all the pro growth initiatives and let's see for a moment which ones the inhabitants of planets Labour are in favour of. Signing off, let me give you a small tip. It is longer than Letterman's top 10. Do they support future a agricultural sector? Do they want more mining or gas exploration? do they want to reform? Do they support any other labour market reforms? Do they support the money we put into our ultra-fast broadband? today support all the money that came out of making the hobbit movies? do they support the national convention centre? But they will go to the opening, I reckon. that is assuming David she actually knows there are no opening, because they didn't know we were building a convention centre, which we announced in June with sky city. Do they support public sector reform? Do they want a less onerous emissions trading system? do they support roads of national significance? Do they support reform of local government? Do they support $5-$7 billion coming out of the mixed ownership model? They have passed the test. They do not agree with any progress initiatives at all. Not one of them? That's right. David Shearer did not have one progress initiative in his speech, but on planet Labour, money grows on trees. I give up on them, because that is what the rest of New Zealand has done. to the budget. It was a very sensible budget for uncertain times. let's have a look at what it delivers. One and a half billion dollars into health over the next four years. there will be more New Zealanders getting elective surgery. 4000 elective surgical operations. Mr Speaker, more money going into cancer care. More money to support the people of New Zealand, following a government which its first action was to fully pay for Herceptin free after hours doctors visits under six. More money for maternity care. More money for dementia care. More money to eradicate a Third World disease a slightly more theatrical approach. we'll have more reaction and analysis, Now to see how the financial markets have been reacting to the Budget measures that've been revealed, I'm joined now by Mark Lister from Craigs Investment Partners. Mark, you've been monitoring the financial markets. What sort of reaction has there been to the Budget? Very unexciting budget. we didn't see any reactions on any of the markets. A lot of it was well Telegraph too, so there wasn't any reaction. So, can we interpret a lack of reaction as a good thing? How might the rating agencies look on this Budget? yes. We can take this is a good thing. a lot of young people don't have enough growth assets and accuse him of funds. The government acknowledged that, so they can look to tweaking that is to make sure some of the younger Kiwisaver members end up with a more long-term growth oriented portfolio. it makes expensive if more people sign up. we don't have much costs are. You get $1000 cost start-up. You get incentives. If everyone is staying in, it would be a one-off hit. does this budget provide reassurance for investors? years. We don't rely with Europe. The code more with Asia. We don't have this the issues. As far as you could be going well, we certainly doing better in a sense than those in Spain or Greasley with the United States I think they are good assets that they are looking applying this model to, so the demand will be there. The are not wavering from this timeframe, which is the third quarter. The only thing there was new is how they might spend some of this money in terms of the social initiatives that they wanted to, there's nothing in terms of an update there. Steady as she goes. Let's look at some key figures around the cost of superannuation. It's forecast to increase from $8.8b now to $12.3b in 2015-2016. By then, it's estimated 680,000 people will be receiving super. That's 20% up on current levels. Re-joining me now is our panel, Westpac chief economist Dominick Stephens, Associate Professor Raymond Miller from the University of Auckland. this is kind of the looming threat or has been the looming threat. Has that arrived now? yes. The lack of addressing the ageing populations with this budget falls down. you can't help spending on health as a population ages. We haven't heard about the increasing cost of national super. Raymond, is that a political impossibility, when you got 680,000 people on political superannuation? 1 in 4 voters is in that age group, and most of them are voted national. that becomes a problem for the government. When you think about health care, we are all living longer, and we are all supported by health system that could be under huge pressure in the next few years. Many countries are already dealing with the issue by raising the age to 67. Labour has already advanced the idea. countries that aren't dealing with the ballooning costs of is granulation are doing a crisis time. Up next ` we'll look at tax in the Budget and hear from a Budget expert who's now covered 34 Budgets. Welcome back to this ONE News Budget special. In this year's Budget, a number of tax loopholes have been tightened up and tax credits axed. Here are some of the main ones. The childcare and housekeeper tax credit is being stopped. The Government says Working for Families is already providing the support needed. The tax credit for those earning less than $9880 will also end. Changes to livestock valuation rules are being made which will save $184m in the next four years. And if you own a bach and rent it out sometimes, you'll no longer be about to claim such large tax deduction on your costs. For analysis on these changes, we're joined by a Budget veteran. He's now covered 34 Budgets. If there was a medal for that, we'd give it to him. Joining us now is the chairman of accountancy firm Price Waterhouse Coopers, john shewan. how much revenue earner is the excise tax on tobacco? quite significant. No surprises there. The other tax changes are pretty modest really. What do these tax changes mean? presumably you run a higher income bracket if you own yacht. What does it mean? these people were owning deduction through their expenses for the virtually the entire year. The government has said that is not good enough Anil restricted to the time you have rented the batch relative to the total days in the year. The changes don't go as far as they could. Not talking about thousands of people affected. the big news is about the about of tax they expect to get over the next few years. there was a far more significant aspect in the budget rather than the tinkering. but tax revenue has been undershooting expectations. tax increase of nearly 30% over the next four years is very much dependent on the growth assumptions average growth of 3% per year over the next four years. If the tax is lower than that it will drop. the good thing about the tax system as it is holding up really well and withstanding the recession. The European countries are really struggling. We have tackled our tax system comprehensively 20 years ago. Understanding us in good stead. the childcare and housekeeper tax credit Was introduced back in the 30s. outdated? yes it is. These credit should have been eliminated earlier. They are not significant in dollar terms. Some people must them, but they are not easy to justify in policy terms. It is better to target assistance to those who need it most. They are going to replace it with a small exemption the children. if you are young and unemployment, you're not going to be eligible for a tax refund? there is great. But you will end up paying tax at the appropriate rate. The exemption will cover babysitting and such. We don't want children suffering tax on that. It will stop children having to file tax returns to get refunds. I do not think they are controversial changes. They make sense. so this is your 34th budget. How do you rate it? Are we heading in the right direction? this is a very disciplined budget. to keep government spending basically flat for the next four years is a remarkable achievement, especially with the hike and superannuation. The bullish part is an expectation of 3% growth per year over the next four years. Release 1% of that is attributable to the Christchurch rebuild. the government has come down with a predictable budget, and it needed to be predictable. When I go back to the late 70s, we had similar fiscal situations there that would have been borrow and hope. Let's cut in now and return to Parliament for part of the Budget address they are not just only mining our soils. They doing everything they can to promote unsafe drilling and mining. They are providing subsidies oil corporations. and safe mining is on the way to build prosperity in New Zealand. Deep sea oil will bring hardly any jobs for locals and taxes. the risks are high and real. The rewards will not belong to us. New Zealand's future prosperity depends on investment in clean green technology and sustainable jobs. The Green party has a smart economic plan for the New Zealand economy, a plan that takes our national debt seriously while moving our economy on to a more sustainable footing. It is great to see the announcement today that the home and installation program will now reach 230 homes. We want to look after New Zealand and all of its people, and the scheme is an example of how we can work with parties across the political spectrum to achieve that. We congratulate national in doing that. It is a shame they have not extended the scheme. as the speaker, there is a synergy between smart green economic objectives and the objectives of increasing the physical resilience of the government and rebalancing the economy. When you look at our capital gains tax, it enhances the physical resilience of the government and helps the economy rebalanced by shifting capital away from unproductive property sector. You get resource into the clean technology sector as well. This is just one policy for Richard Greener New Zealand. There are many others. Re-prioritising transport spending. Commercial use of water. Boosting research and development. High standards of freshwater. Higher mining royalties. A real price on carbon. Supporting a living wage. lowering fees on KiwiSaver accounts. I am not offering a single silver bullet, but a number of practical cost alternatives that will address are dangerously high current account deficit and get our economy on to a more resilient sustainable and fair footing. The national government inherited a economy seriously out of balance. And then rocked by series of earthquakes. It was remarkable opportunity to rebuild our economy. They have failed to do that you have an unique opportunity to fix it. As the moment when powerful vested interests are open to acting differently for the greater good of the nation. The national government has done the opposite. The economy is getting more unbalanced. Public assets are threatened with privatisation. The casino owners the oil companies and polluters are all doing really well and John key's watch the National have turned their backs on the belief that we're all in this together. from the Green Party co-leader Russel Norman. We're taking a short break now, but we will be back with more analysis and reaction to the budget. For the first time, the Government has announced when it plans to start spending the money it makes from the partial sale of state assets. The Future Investment Fund's been established to invest the proceeds of those sales. Of the $5b to $7b the Government hopes to raise, just under $569m has been carved up in the 2012 Budget. $33.8m will be spent on fitting out schools with ultra-fast broadband. $88.1m will go to the health sector, most towards redeveloping hospitals. And $250m will be spent on KiwiRail's turnaround plan. Now let's return to our guests for one final wrap-up of the Budget. they are planning on spending this. We don't yet have a legislation to support this. I think government should spend on things they will yield society a good return. to me, whether the Saudi assets are neither here nor there. After all, the country is in debt. The Kiwi saver turnaround and hospitals do smack of rescues instead of a fundamental rescue plan. Rehman, given that the state asset sales are still controversial, it is interesting to see them laying out how the plans that spending the money, as a way of convincing people might be a good thing. yes. It is interesting to see how the government has responded to Public opinion on this. they are spending on schools and hospitals, hoping the take a lot of heat out of the debate. let's look at David Shearer. What is your opinion? he is not a particularly effective debator? does they give the government some lee way? maybe. final thoughts. How did national do? it was predictable and these unpredictable times. the plan was to get the surplus, and delivered. Will this see national suffering the polls? I think voters will give national time. At times running of the government. It has got to start thinking long term, rather than thinking about short-term. It has to stretch out as a thing of how to create a really fair society. These are festering sores. Joining us now life from Wellington is ONE News anchor Simon Dallow. Simon, what can you tell us about the Budget coverage you and theam at 6 o'clock will have for us? we will be building a wedge of just heard. We'll be talking to the experts. Students `if you are a a science student or engineering students, you'll be doing well. we will also look at more reaction to Kiwi saver announcement. And that almost ends this ONE News Budget special. A big thanks to Westpac chief economist Dominick Stephens and Associate Professor Raymond Miller from the University of Otago for contributing their views and analysis. We have a ONE News break up next, followed by Te Karere which will look at how Maori have fared in the budget. ONE News at 4.30 will be along after than and, of course, the news hour will be along at 6. But from me, Nadine Chalmers-Ross and the rest of this ONE News special team, good afternoon.