‘Return to surplus’ pledge set to shine

After a raft of pre-budget announcements, the centrepiece of this week’s Budget looks set to be the promised return to surplus by 2014/15 as the Government starts to chip away at a looming debt mountain.

The Government has signalled that other changes will be included in Finance Minister Bill English’s fourth Budget, including a rise in the excise tax on tobacco, and possibly alcohol, to raise more revenue and cut back on consumption – a key plank of the Maori Party’s agenda.

Returning the books to the black has become a touchstone of the Government’s economic management, but rating agencies and the International Monetary Fund have indicated that a slightly slower return to surplus would not scare the horses.

But despite running ‘‘zero Budgets’’ in 2011 and this year – and maintaining debt at relatively low levels among developed nations – current forecasts see net debt soaring to more than $70 billion over the next four years. That was boosted by an $18b deficit last year and a probable $10-12b deficit in 2011/12, including the $9b-plus cost of the Christchurch earthquakes.

The $70b forecast is a steep rise from the $10b in debt the John Key Government inherited when it took office in late 2008, although even then the Treasury had fore- cast a decade of deficits as the global financial crisis started to bite.

National points to a number of main drivers of the soaring debt:

Costly programmes put in place by Labour, including Kiwisaver, Working for Families and interest-free student loans All were endorsed by National, though it has taken the pruning shears to them, especially Kiwisaver.

The global financial crisis in 2008-09 and the slowing of the New Zealand economy.

The Canterbury earthquakes.

Labour finance spokesman David Parker says the return to surplus in 2014/15 – which Labour also promised – is no big deal and Finance Minister Bill English has failed to put in place policies to boost growth and cut overseas debt.

‘‘Of course the Government’s books will limp back to surplus, but the underlying problems are not being fixed. Overseas borrowing keeps growing, the economy underperforms, and more people leave because jobs and incomes are not keeping up,’’ Parker said.

With the two main parties pointing the finger at each other, we asked more than 2000 Fairfax readers nationwide who they blamed for the current debt levels.

Almost half of those in the survey saw it as effectively ‘‘a plague on both their houses’’, with 44 per cent blaming a combination of the Clark and Key Governments. But among those who singled out one or the other, 33 per cent saw Labour as being more at fault, while only 18 per cent blamed National more.