13 Apr 2013

Govt still on target to return to budget surplus

10:20 am on 13 April 2013

Finance Minister says the Government is still on target to return the budget to surplus in two years' time.

In March, Mr English said drought conditions would curb economic activity and make it harder for the Government to reach its goal of a surplus by the June 2015 financial year.

But he says he's confident an improving tax take and tight control over spending has the Crown accounts on the right path.

Mr English says getting back to surplus, and then reducing net debt to 20% of GDP by 2020, are the Government's two main goals.

He says reducing fees and levies to households would be the Government's next target, rather than considering further large tax cuts.

The New Zealand dollar has surged in recent days and analysts expect it will soon break the post-float high of US88.5 cents.

Mr English says the currency's strength will start to ease once US interest rates begin to rise, though that could be two years away.

Mr English says he would prefer a lower exchange rate to encourage the export sector. He says a high dollar creates more headwinds for the sector and tends to reduce its profitability and therefore its tax.

Conversely, he says, a high dollar increases the purchasing power of New Zealand households and the Government.

Mr English also warned the currency and interest rates could rise if housing prices remained high in Auckland.