14 May 2014


11:58 am on 14 May 2014

The Government is not promising any election year sweeteners in this Thursday's Budget as it unveils a paper-thin surplus for the coming financial year.

Instead the narrative of the Prime Minister, John Key, and the Finance Minister, Bill English, is that Mr English's sixth budget will continue the Government's theme of restraint and caution.

But there will be - as signalled in earlier budgets - one billion dollars allocated to new spending this time, compared with the Mr English's earlier zero budgets.

That is why the Finance Minister says the theme of the Budget is "building on a growing economy".

Just how the billion dollars gets spread around will be influenced by the looming general election despite Mr Key's exhortations that this will not be a vote-buying budget. So it appears the Government will attempt to spend money in areas it feels it might be vulnerable to Opposition attacks.

It is increasingly likely that more money will be allocated to extending paid parental leave to more than 14 weeks. How much more is unclear but the Government will not go as far as signing up to Labour's policy of providing paid parental leave for the first six months of a baby's life.

Mr Key has also hinted the Government will make paid parental leave more widely available. He points out that under the current scheme only 40 percent of workers are eligible for the leave.

Again just how far the Government will relax the rules to allow more parents to get paid parental leave is unclear.

Much will depend on the cost. Already the Government has committed more money to health, education and the Defence Force, as well as this week announcing it will boost Inland Revenue's spending to allow the department to crack down even harder on tax avoidance and evasion.

Mr Key argues National's budget will be fiscally responsible and pave the way for continued growth.

He contrasts New Zealand's position with that of Australia. Here the Government is heading back into surplus. Across the Tasman the Government faces ongoing deficits as it struggles to get its spending under control.

Mr Key says a Labor Government there left the new Coalition Government with heavy debt and ongoing deficits and compares that to the position here.

In this case though the former Labour-led Government left this Government with net debt at zero, giving it the room to borrow heavily, as it has done, to get the country through the worst of the global financial crisis.

Now the National-led Government, through tight control of spending, has put itself in a position from which it should soon be able to start repaying the debt it ran up in the past six years.

In the lead-up to the Budget and in the days after it much of the political debate will revolve around which party - Labour or National - is the better economic manager.

Labour says it too would get the books back into surplus. Its leader David Cunliffe points out Labour delivered surpluses year after year from 1999 to 2008. But he says managing the economy is more than about keeping the public finances in good shape.

Mr Cunliffe has announced that if Labour leads the next government, it will reduce the unemployment rate from 6 percent now to 4 percent by 2017. Mr Key calls it a dream but then confirms the Budget will forecast unemployment will fall to 4.5 percent that year. So Labour's dream is not too far off the official prediction.

The Green Party has also made a pre-Budget announcement, promising to set up a green investment bank to foster investment in clean technologies and green industries.

But what matters this week is the actual Budget.

The Government, after two weeks of political difficulties, will be hoping Mr English's Budget puts it firmly back in charge of the political agenda.

Follow Brent Edwards on Twitter @rnzgallerybrent