Budget 2009 set to be a grim affair

Next year's budget is set to be a grim affair with Finance Minister Bill English grappling with dramatic rises in government debt and a dark economic outlook.

Treasury released today its updated fiscal and economic updates which showed growing spending deficits pushing up debt.

Gross debt is set to double from the current levels of 16.8 percent to 33 percent of GDP by 2012-2013 and the long term prospect is for this to rise to 57 percent by 2022/23 if policies do not change.

Mr English said the mid-term levels of debts and cash deficits were beyond prudent levels and his first budget in 2009 would be an austere one.

Unfunded promises of the last government would be dropped and "wish lists" such as large increases in rail infrastructure would have to be re-examined to see if they made sense, he said.

Departmental bosses would be told by Mr English and Prime Minister John Key the upcoming budget would result in ministers focusing on their campaign pledges with little or no room for new spending bids.

There would be an emphasis on controlling growth in the cost of government administration.

Despite the books dripping red ink, Mr English said the economy needed stimulus and in the next five years capital spending would be boosted by $5.8 billion.

Mr English said the Government's relatively low debt meant he was relatively well placed to deal with the economic uncertainty.

source : NZPA