Finance Minister Steven Joyce has announced Budget 2017 on May 25 will include $11 billion worth of new capital infrastructure spending over the next four years, which is an effective $2 billion upgrade in forecast spending since the Government's last forecasts in December.
Speaking at a pre-Budget luncheon event in Wellington, Joyce also announced the Government would set a new debt reduction target of 10-15 percent of GDP by 2025. This is down from the current target of 20 percent by 2020 and the forecast net debt level of 24.3 percent by the end of the current financial year to June 30, 2017.
Joyce described the extra capital spending commitment as the biggest addition to the Government's capital stock in decades.
He said in Budget 2016 the Government had forecast $3.6 billion of new capital spending between Budget 2017 and Budget 2020. The Government had changed its forecast for new spending on capital in Budget 2017 to $11 billion over the same period.
"The $11 billion in additional spend on top of investments already planned by the Government," Joyce said, adding that the details of how that would be spent would come in the Budget. Including spending from the National Land Transport Fund, total Government infrastructure spending was forecast to be $23 billion a year or an average of $6 billion per year.
The Government forecast in the December Half Year Fiscal and Economic Update (HYEFU) that it would spend $9 billion on capital over the next four years so Joyce's forecast today represents a net $2 billion increase in forecast capital spending.
Elsewhere, Joyce announced the Government had set a new medium term fiscal target of reducing net debt to between 10-15 percent of GDP by 2025, saying the Government wanted to ensure it had the capacity to absorb future shocks.
"We have learnt from the Global Financial Crisis and the Canterbury earthquakes that shocks can come along at any time, and sometimes they come in pairs," Joyce said.
He pointed to a 20 percentage point increase in the Government's debt to GDP ratio since the GFC as the right thing to do when the economy was stressed.
"But now it is the time to get net debt down -- to make sure we have the capacity to absorb and respond to the next challenges New Zealand will face," he said.
Joyce made no mention in his announcements about when contributions to the New Zealand Superannuation Fund would resume. They were scheduled in the HYEFU and Budget 2016 to resume once the Government hit its previous target of getting debt to GDP down to 20 percent.
Meanwhile, Transport Minister Simon Bridges announced Budget 2017 would include spending of between $1.1 billion and $1.33 billion to reinstate the road and rail corridors between Picton and Christchurch, including $812 million to reinstate State Highway 1. The new forecast range of $1.1 billion to $1.33 billion is down from a previous estimate of $1.4 billion to $2.0 billion.