New Zealand is one election away from a Budget of the severity seen this year in the United Kingdom, in which households are certain to be hit by another big tax rise and where benefits and pensions will be indexed against the Consumer Price Index rather than the Retail Price Index, a move that will drag more workers into higher tax brackets.
The Government is unlikely to lift taxes next Thursday but it will cut spending, as already demonstrated by its restructuring of the public service and announcement of a "zero Budget".
Prime Minister John Key is today expected to forecast changes to KiwiSaver, with the most likely being the removal of the $1043 member tax credit for existing and future members.
That would save about $800 million a year.
To keep faith with the electorate, Mr Key will have to postpone any changes until after the November 26 election, as he has with the proposal to partially sell some state-owned energy assets.
Working for Families is also set for a revamp to ensure wealthy people cannot hide income to qualify for government help.
Finance Minister Bill English warned yesterday the country was heading for a deficit for the year ended June 30 of about $16 billion to $17 billion - its largest deficit yet.
The Government accounts showed the operating deficit, excluding losses and gains, reached $10.2 billion in the nine months ended March, $1.3 billion ahead of forecasts, largely because of the $1.5 billion already allocated for rebuilding Christchurch.
Net debt was similar to forecast at $39.4 billion, equivalent to 20.2% of gross domestic product.
ACC and New Zealand Superannuation investment returns have been strong in the past 12 months but have still not recovered from the losses caused by the global financial crisis.
If National retains the Treasury benches after the election, New Zealanders can expect the partial sale of energy assets and a reduction in government ownership of Air New Zealand.
More public private partnerships will be introduced for infrastructure building, including roads, prisons and government assets such as police stations, schools and perhaps hospitals.
Where a subsidy can be cut, it will be. Where cost savings can be made in Government Inc, it will be - and next week's Budget will be the first course in a stark diet for the next few years.
