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Executive Summary

Minister's Executive Summary - Budget 2010
MINISTER’S EXECUTIVE SUMMARY   |   1 
Minister’s Executive Summary 
Budget 2010 is part of a programme of considered, broad-based reform  
Budget 2010 marks a new phase in the Government’s economic strategy.  Last year’s 
Budget was focused on getting New Zealand through the worst global crisis in living 
memory.  The Government’s economic management struck a balance between softening 
the impact of the recession, providing fiscal stimulus and maintaining control of the 
country’s finances. 
This Budget is about our long-term objective of lifting New Zealand’s growth rate and 
New Zealanders’ living standards.  It is designed to strengthen the recovery, help 
New Zealand families get ahead and maintain sound government finances. 
The key features of Budget 2010 are an improvement in the fiscal outlook through 
spending discipline and shifting resources to those areas that really matter, and an 
overhaul of the tax system that will better reward work and savings and make the system 
fairer.  The Budget continues the process of shifting the economy away from borrowing, 
consumption and Government spending and back towards saving, investing in productive 
areas and exporting.   
Lifting the long-term performance of the economy 
The Government’s focus is on accelerating the recovery and ensuring the economy 
expands in a sustainable way.  This requires addressing significant problems around the 
rate and composition of economic growth. 
New Zealand’s trend growth rate has gradually declined over recent years.  The 
International Monetary Fund (IMF) recently estimated that New Zealand’s potential growth 
rate had halved over the past decade, falling to around 1.6% per year in 2009.  By 
contrast, the IMF assessment was that Australia’s rate had remained almost unchanged. 
New Zealand entered recession before the Lehman collapse in late 2008 that sparked the 
global recession, and the economy had grown by less than 1% a year in the three years 
before that.  This was less than half our trading partner average, and less than one-third 
of Australia’s growth rate.  The economy is little bigger now than it was in 2005.   
From mid-decade on, this growth was fuelled by a mix of rising household debt and 
ballooning government expenditure, which grew 50% in the five years to 2009.  Through 
this period New Zealand became less competitive and more exposed to external shocks.  
Our net external debt position grew to $168 billion, over 90% of GDP.   
This Budget addresses the root causes of these problems.  The Government is committed 
to the sustained improvements that will tilt our economy away from debt and consumption 
toward savings, investment and exports.  The six key drivers of stronger economic 
performance that we have identified – a better regulatory environment for business; skills 
and education; quality infrastructure; science, innovation and trade;  improved public 
sector performance; and tax – form a programme to address these imbalances. 
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