New:Budget 2008 Presented by Michael Cullen Part Three of Four

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Budget 2008 Presented by Michael Cullen Part Three of Four
         


            
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            The government's plan for tax cuts and increases in health and other spending mean its budget surplus is whittled down to almost nothing over the next four years.

This meaning heavy infrastructure spending and contributions to the New Zealand Superannuation fund push it into a cash deficit and mean it will have to be funded with debt issues and by reducing the Reserve Bank's reserve assets by NZ$10 billion.

Finance Minister Michael Cullen said the debt issues combined with forecast GDP growth meant that the debt to GDP ratio would remain around 20% through the forecast period.

He also denied that the fiscal stimulus contained in the budget would increase inflation and therefore interest rates.

Treasury had forecast that inflation would drop to 2.8% in the 2009 year.

Cullen said the delay to the introduction of transport to the emissions trading scheme and slower than expected economic growth meant the government could afford the fiscal stimulus without adding to inflationary pressures.
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               Added: May 22, 2008

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