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Budget 2011 Building Our Future Hon Bill English, Minister of Finance Three Budgets: One plan Budget 2009 • Helped New Zealanders through the recession • Turned around forecasts of ever-rising debt Budget 2010 • Built platform for growth on savings, investment • The biggest tax reform in 25 years Budget 2011 • Sets a faster path to surplus, repays debt • Rebuilds Christchurch • Builds faster growth, higher national savings From record deficit to surplus OBEGAL, $ billions 6 4 2 0 -2 -4 -6 -8 -10 -12 -14 -16 -18 Forecasts 2008 2009 2010 2011 Budget 2011 2012 2013 Earthquake costs 2014 2015 Progress over three Budgets … OBEGAL, % of GDP 8 Forecasts 6 4 2 0 -2 -4 -6 -8 -10 2008 2010 2012 Before Budget 2009 2014 2016 Budget 2009 2018 2020 Budget 2010 2022 2024 Budget 2011 … keeps debt below 30% of GDP … Net debt, % of GDP 70 Forecasts 60 50 40 30 20 10 0 2008 2010 2012 Before Budget 2009 2014 2016 Budget 2009 2018 2020 Budget 2010 2022 2024 Budget 2011 … and we help rebuild Christchurch • Rebuilding Christchurch a priority of Budget 2011 • Govt costs $8.8b, including $3.3b for EQC, ACC • $5.5b Canterbury Earthquake Recovery Fund • Quake costs absorbed, back in surplus by 2015 Instrument Costs Funding source Canterbury Earthquake Recovery Fund EQC + ACC $5.5 billion $4.8 billion new funding including from Canterbury Earthquake Kiwi Bonds $3.3 billion $740 million Reserves from existing (levy funded) funding Economy rebounds after quake Real GDP growth % 5 Forecasts 4 3 2 1 0 -1 -2 -3 Mar-08 Mar-09 Mar-10 Mar-11 Budget 2010 Mar-12 Mar-13 Budget 2011 Mar-14 Mar-15 More jobs, lower unemployment Unemployment rate % 8 • Unemployment falls below 5% by 2012 • 170,000 new jobs over the next four years Forecasts 7 6 5 4 3 2 1 M -0 r a 3 M -0 r a 5 M -0 r a M 7 -0 r a 9 M -0 r a 1 M -1 r a M -1 r a 3 5 -1 r a M Budget 2011 avoids over $10b of borrowing by 2015 $5.6b through the operating allowance … • Previous allowance out to 2015: • Actual net spending to 2015: • Savings in operating spending: $4.4b -$1.2b $5.6b … reducing the need for extra borrowing … Budget 2011 avoids over $10b of borrowing by 2015 … and $5-7b in mixed ownership model proceeds • Means we can redeploy existing capital, rather than always funding more from general revenue • Funds around one-third of core investment, new schools, hospitals, broadband etc Average net borrowing falls to $100m a week in 2011/12, start repaying debt in 2014/15 KiwiSaver lifts real savings Cumulative KiwiSaver contributions, $ billions 30 Forecasts 25 20 15 10 5 0 2008 2009 2010 Members 2011 2012 Employers 2013 2014 Government 2015 Making WFF sustainable Working for Families costs, $ billions Forecasts 3.0 2.5 2.0 1.5 1.0 0.5 0.0 2001 2003 2005 2007 Budget 2011 2009 2011 Half Year Update 2010 2013 2015 A better public service … Ensuring public agencies play their part Getting better value for taxpayers • Efficiency savings of $980m over three years: • $650m from agencies meeting costs of retirement savings schemes • $330m from administration efficiency gains … and more frontline services Directing funding to frontline services • $2.2b more for health – electives, disability support, new mothers • $1.4b more for schools and early childhood Investing in key infrastructure • $942m for ultra-fast broadband • $250m invested in KiwiRail; $88m for Wellington Metro rail network • More investment in roads and electricity Promoting savings and investment Govt back to surplus, wider investment opportunities • Mixed ownership model to proceed from 2012 With New Zealanders at the front of the queue • Creates an Earthquake Kiwi Bond, inflation bond • Establishes local government funding agency • Resources the new Financial Markets Authority Early signs of progress Household debt to disposable income % 160 140 120 100 80 60 40 20 0 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 Platform for faster growth, jobs Budget 2011 next steps in Govt programme: Sets a faster path back to surplus in 2014/15 Even with the costs of rebuilding Christchurch Helps increase national savings Large programmes sustainable, Government’s books in order, national savings increase Builds a strong platform for growth Rebalancing economy, 170,000 new jobs Budget 2011 Building Our Future Hon Bill English, Minister of Finance