The Government intends borrowing and spending its way out of the current recession and economic downturn, Finance Minister Bill English indicated yesterday.
In the short-term, the Government's bond programme would be increased and infrastructure spending on housing, education and smaller roads would be made.
In the longer term, a strong focus would be on roads but other projects would be tackled.
Although the Government wanted to undertake as many projects as possible from the capital available, it would make sure the money spent would grow the economy and help repay debt, Mr English said at a Treasury briefing on the 2009 budget policy statement and 2008 economic and fiscal forecasts.
No state assets would be sold to help repay government debt.
Instead, the $60 billion of state assets would need to be managed more efficiently.
"Success over the next two or three years will be about high-quality public services with less."
Mr English met chief executives of all government departments yesterday afternoon.
They were instructed to go through budgets "line-by-line" to make gains over a two to four-year period rather than slash and burn over the next six months.
No new bids would be included in next year's budget.
Only policies released by National during the election campaign, which were "fully and robustly" costed, would be paid for.
The Government had already decided not to proceed with unfunded commitments made by the previous government, including the $1 billion home insulation fund, a large part of the capital requirements for KiwiRail and the 2008 budget's economic transformation package, worth about $300 million but only half of which was funded.
Some of KiwiRail's funding proposals had been approved by the new Government but others had been sent back for reworking.
About $100 million of spending was being reconsidered.
While the budget policy statement and forecasts were light on spending detail, the borrowing requirements of the Government were outlined in full.
The bond requirement for the current year would increase by $500 million to $4.5 billion, increasing to $7.5 billion in the next year, $11.2 billion in 2011, $15 billion in 2012 and $15.9 billion in 2013.
Gross debt is forecast to increase by $40.3 billion and as a percentage of GDP by 15.6% over the forecast period to June 30, 2013.
By the end of the forecast period, gross debt is expected to be $71.6 billion, or 33.1%, of GDP.
Mr English said the economic and fiscal update showed the economy would benefit from the $9 billion of fiscal stimulus being pumped into the economy by the Government during the next two years.
Beyond the deteriorating forecasts, it was difficult to predict precisely how the unprecedented global market turmoil would play out in New Zealand, he said.
Treasury's forecasts of sharply increasing public sector debt and higher fiscal deficits over the next five years were outside the range the Government considered prudent.
Immediate steps
•Establish the true nature of fiscal risks that exist.
•Where possible, drop unfunded commitments made by the previous government.
•Establish a budget process for 2009 that sets out immediate priorities.
•Halt growth in the number of people employed in government administration and get better value out of government spending.
