Ladies and Gentlemen

I am very proud to be leading a Government that is doing the right thing by New Zealanders.

And I am proud to be leading a Government that has faced the challenges of the last few years and is putting New Zealand on a path to stronger and more sustainable growth.

Yesterday’s Budget was another firm step on that path.

The plan the Budget sets out is very clear.

First, it’s about getting the government’s finances in order.

The Budget plots a remarkable turnaround from a record deficit of 8.4 per cent of GDP this year, to almost balancing the budget in only three years’ time, to a surplus of $1.3 billion the year after.

And that’s despite the difficulties that have been thrown at us over the past year – in particular, a stuttering global recovery and the two Canterbury earthquakes.

Forecast government debt has been kept below 30 per cent of GDP and is expected to reduce faster over time than previously envisaged.

These are very considerable achievements.

This Government’s responsible management of the books means New Zealand can afford to get on with the rebuild in Canterbury and continue to protect the vulnerable, while at the same time building a platform for strong, sustainable growth with lower interest rates and a more competitive economy.

If it’s possible, I would actually like us to return to surplus even earlier than 2014/15.

That’s because being in surplus means having choices – for example to invest more in public services, pay down debt, cut taxes, resume contributions to the Super Fund, or any combination of those things.

Second, the improvement in the government’s finances has been achieved by controlling expenditure, not by adding new taxes.

Other parties in Parliament want to put on new taxes to balance the books.

We don’t agree.

We think it is crucial to have a tax system that encourages hard work and savings, and ensures people pay a fair amount of tax.

That’s what our tax changes in the 2010 Budget were all about.

So we are not going to raise taxes or introduce new ones.

We think higher taxes would risk snuffing out the recovery and damaging New Zealand’s competitiveness.

And we think there is plenty of scope to be more disciplined about government spending.

Under the previous government, spending rose 50 per cent in just five years.

We are pulling that spending back, so that we can set out a credible path back to surplus while at the same time maintaining our newly-competitive tax system.

Third, the Budget is about helping to improve national savings.

New Zealanders have been saving more in the past year.

Last year’s tax changes helped this change in behaviour by reducing taxes on savings and investment and increasing taxes on consumption.

The key sector which is not saving right now is actually the government.

That’s why it is important for the government to return to surplus sooner than previously planned.

Our KiwiSaver changes will also increase national savings by raising the proportion of genuine savings in KiwiSaver accounts, and reducing the amount the government funds from overseas borrowing.

This year the Government will complete the re-regulation of the financial markets.

This includes the creation of the Financial Markets Authority, an overhaul of securities law, regulation of the insurance sector and of financial advisors, and prudential supervision of non-bank deposit takers.

And the mixed ownership model will certainly help to strengthen and deepen New Zealand’s capital markets.

Fourth, the Government has continued to invest in important infrastructure projects.

Infrastructure investment is crucial to improving productivity in our economy.

The Budget allocates almost $1 billion to ultra-fast broadband.

It makes a considerable investment in KiwiRail’s turnaround plan and in the Wellington metro rail network.

And it includes $100 million of new capital spending on schools.

These Budget investments are part of an ongoing infrastructure programme, which includes over $1 billion per year in state highway improvements, and a substantial upgrade of the nation’s electricity grid.

I doubt any government has been able to maintain such an investment programme through tough economic times before.

We are managing to balance the books and invest in New Zealand’s future at the same time.

Fifth, and finally, the Budget does all this while continuing to reflect the Government’s other priorities.

We have continued to protect the most vulnerable New Zealanders, who depend on the government for support.

We have boosted frontline health and education services.

The Budget provides $2.2 billion over the next four years for new health services.

These include improving care for first-time mothers, widening access to medicines funded through DHBs, additional elective surgery, more resources for patients with dementia, increased disability support services and training more doctors.

The Government’s commitment to raising education standards also remains strong.

The Budget provides $1.4 billion over the next four years for schools and early childhood education.

And, of course, a central goal of the Budget is to support the people of Canterbury and to help rebuild Christchurch.

The Budget establishes a $5.5 billion Canterbury Earthquake Recovery Fund to cover the government’s share of the costs of rebuilding New Zealand’s second-largest city.

This will provide reassurance to the people of Christchurch that the Government is right behind them.

Ladies and Gentlemen

This year’s Budget builds, of course, on the achievements of Bill English’s previous two Budgets.

Those Budgets have been part of the Government’s overall drive to rebalance the economy towards savings, exports and productive investment, and away from debt, consumption and government spending.

That rebalancing is crucial to the future of an economy that got thrown seriously out of kilter over much of the last decade.

As I mentioned before, government spending in the mid-2000s rose 50 per cent in just five years, as money was poured into expensive new programmes and the public sector was rapidly expanded.

The domestically-focused side of the economy, consisting of sectors like retail, construction and government services, grew strongly, fuelled by debt, consumption and government spending.

On the other hand, the internationally-competitive sectors of the economy – through which we earn our way in the world – went into recession in 2004, suffering from a high exchange rate and stiff competition for resources.

Those internationally-competitive sectors experienced a 10 per cent drop in output over the five years following 2004.

New Zealand was moving further and further away from what had previously been a successful formula – an internationally-competitive economy and well-focused government spending and regulation.

The growth generated by debt, consumption and government spending was never sustainable. The economy went into recession early in 2008, followed by the global financial crisis at the end of the year.

Our first Budget, in 2009, was about steadying the ship, helping New Zealanders through the recession, and turning around forecasts of permanent deficits and ever-rising debt.

At the same time, Budget 2009 began to implement our plan to rebalance the economy towards savings, exports and productive investment.

In our second Budget, in 2010, we undertook the biggest changes to the tax system in a generation. These changes increase the incentives to work hard, save and invest, and also remove distortions and clamp down on loopholes.

Budget 2010 also reduced the government’s forecast deficits, and pulled back our debt track quite significantly.

Budget 2011 is another important step towards rebalancing the economy.

And it continues to demonstrate the way this Government goes about doing things.

Over almost three years in government, we have made changes steadily, progressively, and by taking people with us.

We have been open with the public about why we need to do things and what we think needs to change.

And we have sought a mandate for what we are doing.

In this Budget, we are making changes to KiwiSaver, Working for Families, and the student loan scheme.

I’m sure you will have seen what these changes are from the media coverage of the Budget so I won’t go into them in detail here.

Suffice to say, the changes will ensure these programmes are more enduring and sustainable into the future.

We have managed to keep KiwiSaver as a very attractive savings scheme that will grow strongly over time.

And the modest changes we are making to Working for Families will be phased in over the best part of a decade. In fact most families will see increases in their Working for Families payments over this time.

Some people will be affected by our changes to these programmes, but none of the changes will affect people before the election.

So New Zealanders will be voting with all the information they need to make their own choices.

People will have the opportunity to decide whether a responsible approach to balancing the books and building growth is one they want to support.

Similarly, we are taking our policy of extending the mixed-ownership model into this year’s election.

That model of ownership – where the government owns most of the company but there is also some outside equity – is currently only applied to Air New Zealand.

We have satisfied ourselves, after advice from the Treasury, that extending the mixed ownership model to Mighty River Power, Meridian, Genesis and Solid Energy would meet the five tests we set at the beginning of the year.

This means that:

• the government will maintain a majority controlling stake by owning more than 50 per cent of each company
• New Zealand investors will be at the front of the queue for shareholdings, and there will be widespread and substantial New Zealand share ownership
• the companies involved will present good opportunities for investors
• the capital freed up – which could be between $5 billion and $7 billion – will be used on behalf of taxpayers to fund new public assets and thereby reduce the pressure on the government to borrow
• the government is satisfied that regulations, particularly in the electricity sector, do adequately protect New Zealand consumers.

We have therefore asked the Treasury to get some preliminary work underway now, but not to advance anything until 2012.

As we promised, we are clearly setting out our policy to New Zealanders well before the election.

I think New Zealanders will actually be excited about the possibilities this policy offers.

New, quality listings on the stock exchange will give ordinary retail investors the option of putting their savings into large and proven companies that produce something of value for New Zealand, rather than relying on property investments or putting their money into finance companies.

Electricity consumers will not be affected.

Consumer New Zealand came out a while ago and said that the mixed-ownership model wouldn’t drive up electricity prices.

That’s because power prices are actually influenced by government regulation not by ownership.

After all, power prices rose 72 per cent under Labour, when Meridian, Mighty River Power and Genesis were owned entirely by the Government.

And the companies are guaranteed to stay in majority New Zealand ownership.

That has to happen, because the Government will always hold at least 51 per cent of the shares.

On top of that, there will be considerable demand for shares from the likes of KiwiSaver funds, the Super Fund, iwi and Kiwi ‘mum and dad’ investors.

That interest will ensure there is a substantial, widespread and continuing New Zealand shareholding, on top of the majority stake held by the Government.

Ladies and Gentlemen

Budgets are about the future.

At the risk of stating the obvious, the difficulties we have faced over the past couple of years have already happened.

The Budget gives us an opportunity to set a platform for the future.

And I am hugely optimistic about that future.

The changes we have made over three Budgets are working, and reinforcing what is going on in the economy.

Over the past three Budgets we have been creating the conditions for New Zealand to make the most of the exciting opportunities in front of us.

Households and businesses have been saving more and shifting away from an excessive reliance on borrowing to fund their consumption and investment.

That is an important sign that the economy is moving onto a more sustainable footing.

Interest rates are at historical lows, which will stimulate business investment. Floating mortgage rates, for example, have halved over the past three years, and are at 45-year lows.

The Rugby World Cup will provide a boost to the economy at the end of this year, and rebuilding in Christchurch will significantly increase activity in 2012 and beyond.

Export prices are at record levels, up 25 per cent over the past year according to the ANZ’s Commodity Price Index.

The terms of trade – a measure of export prices compared to import prices – are up 19 per cent since late 2009 and are forecast to remain at high levels over the next few years.

Growth among our trading partners has remained strong, which means they will continue to want what we produce.

In particular, we have been well-served by our strong ties with Australia and our growing links with Asia.

The Government has been increasing its efforts to foster trade with Asia. In 2010, for example, the Government took six trade missions to China. Exports to that country have increased 40 per cent in the past year alone.

Our competitiveness with Australia is near an all-time high. A very favourable exchange rate is helping our exporters compete across the Tasman, and our 28 per cent company tax rate is below Australia’s.

Putting all this together, the Budget forecasts, prepared independently by the Treasury, show the economy growing at an average of 3.6 per cent a year over the next two years.

That is a return to good, solid growth.

The Treasury is not alone in forecasting this growth. The Budget forecasts are almost identical to the average of all the other growth forecasts prepared for New Zealand, by organisations like the Reserve Bank, the OECD, the IMF, the banks and the NZIER.

These organisations don’t base their forecasts on sentiment or how they are feeling that particular morning. They use their best professional judgement and they have to because there is often a great deal of money riding on those judgements.

In addition, the forecasts show very encouraging job growth, including 100,000 new jobs over the next two years.

Unemployment is coming down and we want to bring it down further – especially among young New Zealanders.

The Budget forecasts also show average weekly wage growth of 4.1 per cent a year over the next two years, considerably higher than forecast inflation of 2.6 per cent a year.

As I said at the beginning of this speech, the government is forecast to post a meaningful surplus in 2014/15.

Government debt is expected to peak at 29.6 per cent of GDP before beginning to decline rapidly.

In contrast, if we had not made any extra savings in this Budget our return to a meaningful surplus would not have happened until 2016/17, and debt would have reached almost 34 per cent of GDP.

The savings we are making in this Budget alone mean we can borrow $10 billion less over the next four years than we would otherwise have had to.

In fact the savings we have achieved across all three of our budgets now come to about $45 billion over the period to 2015.

That is $45 billion we won’t have to borrow, compared to the fiscal settings we inherited when we came into office.

And we will achieve this despite some of the most difficult circumstances an incoming government has probably ever faced in New Zealand.

That outlook is not guaranteed, however. Crucially it depends on the Government maintaining its tight rein on spending.

That is not easy.

Difficult choices lie ahead.

I am confident in this Government’s ability to navigate through those choices with the best interests of New Zealanders at heart.

But in the end, politics is a contest of ideas. That is especially true in an election year.

People can support the balanced approach we are taking.

Alternatively, they can choose to support parties which want to borrow billions of dollars more and spend up large.

Or they can support other parties which advocate for severe and indiscriminate cuts and make a virtue of conflict.

For my own part, I stand behind all the decisions we have made in this Budget. I believe this is the best proposition for the future of the country.

It contains both spending and saving initiatives.

It provides certainty of funding for the reconstruction of Christchurch and the surrounding area.

And it builds a stronger platform for jobs and growth into the future.

Here in New Zealand we have a chance, now the economy is gathering steam again, to build a solid platform for future growth.

If we get this right the opportunities are endless.

That is what Budget 2011 is all about.

Thank you.

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Ladies and Gentlemen

I want to start by thanking Business New Zealand for co-hosting this lunch.

More importantly, I want to thank them for the constructive role they play in representing New Zealand businesses and employers.

I’d also like to thank Fujitsu for their part in sponsoring this event as well.

In a week’s time Bill English will deliver his third Budget.

Looking back, it’s hard to imagine a Finance Minister having a more challenging time.

When we came into office in 2008 the financial crisis was at its peak and the New Zealand economy had already shrunk three per cent in a year.

Since then we’ve had to deal with two major earthquakes in our second-biggest city; the impact of the deposit guarantee scheme, especially with South Canterbury Finance; adverse weather events from blizzards to droughts; the cost of leaky homes; and the support package for AMI.

In difficult times like these the country needs good, responsible economic management. You only have to look at many of the countries in Europe to see how badly things can go wrong.

The events I mentioned have already happened and we are already dealing with them.

Our biggest challenge going into the future remains the task of lifting real, sustainable growth in an economy that got seriously unbalanced and out of kilter in the early-to-mid 2000s.

Government spending increased markedly in the mid-2000s, as Labour poured money into expensive new schemes and rapidly pumped up the public service.

They are astonishing facts, but government spending rose 50 per cent in just five years and, since 2004, almost 60 per cent of new jobs have been in heavily government-dominated sectors.

Not surprisingly, that increase in government spending provided a very substantial stimulus to domestic demand.

Interest rates, and therefore the exchange rate, soared.

The domestically-focused side of the economy – fuelled by debt, consumption and government spending – grew strongly.

But on the back of a high exchange rate, and competing for resources, the internationally-competitive sectors of the economy went into recession in 2004, and experienced a 10 per cent drop in output over the following five years.

Not surprisingly, export volumes grew only one per cent in total between 2004 and 2008.

And since the end of 2004, GDP per person has fallen by an average of 0.1 per cent a year – the weakest period since the late 1980s and early 1990s.

These indicators highlight very clearly the impact of a shift of resources, throughout the 2000s, away from the sectors of the economy through which we earn our way in the world, like agriculture and manufacturing, and towards domestically-focused sectors like retail, construction and government services.

Our job as a Government is to reverse that shift.

That is the only way we can support the new jobs and higher incomes New Zealanders deserve.

The 2000s are actually a lesson in how not to manage economic policy.

They stand in sharp contrast to New Zealand’s experiences only a decade before.

Between 1990 and the mid-2000s, on average, the New Zealand economy grew by over 3 per cent a year, export volumes grew by over 5 per cent a year, and the number of jobs increased by 35,000 a year.

That happened because the economy was internationally competitive and government spending and regulation were well focused.

So our plan is simple, and always has been.

It’s about creating conditions which allow New Zealand to focus on what it is good at – and where it can create sustainable jobs and higher incomes.

It’s about making sure we have a tax system that encourages work and savings, rather than providing incentives to shelter income.

It’s about having an efficient public sector that doesn’t crowd out the internationally-competitive parts of the economy.

It’s about limiting government debt, to reduce our reliance on foreign lenders and to give us a buffer against future economic shocks.

It’s about regulation that encourages enterprise and flexibility.

It’s about an education system that is producing skilled workers, and those workers knowing they have a successful future here in New Zealand.

It seems simple, but it’s very easy to get off track, as we have seen.

However, it is the only way to create permanent, worthwhile jobs for Kiwis and their families.

It’s a proven formula. It works. And this Budget is another step towards putting us back on track.

Despite very difficult circumstances, this Government has actually made significant changes since coming into office, but we have done so steadily, progressively, and by taking people with us.

That is in contrast to the point of view that says economic reform should happen all at once, involve a lot of noise and conflict, and follow a strict adherence to ideology rather than what works.

Needless to say, I don’t agree with that view.

I believe sustainable change happens over time, building on itself year after year, with the general support of the public.

Probably the most significant reforms we have undertaken have been in the area of tax.

These have been the biggest changes to the tax system in a generation.

Three-quarters of New Zealand taxpayers now face a top marginal tax rate of 17.5 per cent or less. Tax rates have been changed to favour saving, rather than consumption. And the fairness of the tax system has been improved by reducing the opportunities to avoid tax.

Importantly, we designed these tax changes so they pay for themselves over time and therefore don’t require extra government borrowing.

We have also put the squeeze on government spending.

We have reduced the size of the bureaucracy, hauled back new budget spending allowances, reprioritised billions of dollars of spending, forced efficiencies on government departments, and improved the way the government manages its capital spending.

We have continued to protect the most vulnerable in society, and support the economy through recession, but we have also kept government debt under control and avoided a downgrade from the international ratings agencies.

We have invested in much-needed infrastructure, to start unblocking the arteries of the economy.

We have introduced 90-day trial periods for all businesses, streamlined the Resource Management Act, and introduced a number of regulatory changes to make it easier to do business.

We have introduced National Standards in primary and intermediate schools to identify students who are falling behind and intervene early to help them.

And we are pursuing an ambitious free trade agenda.

All that is a good start.

But real change in the economy does not happen overnight. It is a bit like turning around a super-tanker.

New Zealand’s economic imbalances have built up over several decades, so it will take more than a year or two to fix them.

It will take a number of years and considerable effort.

But I am very optimistic about the future.

The outlook for New Zealand is hugely positive.

Households and businesses have been saving more and shifting away from an excessive reliance on borrowing to fund their consumption and investment.

That is an important sign that the economy is moving onto a more sustainable footing.

Interest rates are at historical lows, which will stimulate business investment. Floating mortgage rates, for example, have halved over the past three years, and are at 45 year lows.

The Rugby World Cup will provide a boost to the economy at the end of this year, and rebuilding in Christchurch will significantly increase activity in 2012 and beyond.

The Budget next week will show the economy growing faster and supporting a significant increase in the number of new jobs over the next three or four years. Unemployment is coming down and we want to bring it down further – especially among young New Zealanders.

Export prices are at record levels, up 25 per cent over the past year according to the ANZ’s Commodity Price Index.

The terms of trade – a measure of export prices compared to import prices – are up 19 per cent since late 2009 and are expected to remain at high levels.

Growth among our trading partners has remained strong, which means they will continue to want what we produce.

We have been well served by our strong ties with Australia and our growing links with Asia.

The Government has been increasing its efforts to foster trade with Asia. In 2010, for example, the Government took six trade missions to China. Exports to that country have increased 40 per cent in the past year alone.

Our competitiveness with Australia is near an all-time high. A very favourable exchange rate is helping our exporters compete across the Tasman, and our 28 per cent company tax rate is below Australia’s.

And let’s not forget that despite all of our significant global and domestic challenges, the economy has grown, albeit modestly, in six of the past seven quarters.

So there is much to look forward to.

But as the economy picks up, it is crucially important that our growth is not based, as it was in the 2000s, on debt, consumption and government spending, but instead is built on the solid foundation of savings, exports and productive investment.

As I said in my speech at the beginning of the year, a key part of that rebalancing is an increase in national savings.

Businesses and households are currently doing their bit, by lifting private savings.

The key sector which is not saving right now is the government.

Labour’s spending and lax fiscal management have meant the government is fundamentally over-committed compared to how much revenue it can raise.

While we have been steadily improving this situation there is still a lot more to do to reduce deficits and rein in our expanding debt.

It is very telling that one of the key recommendations of the Savings Working Group is for the Government to return the budget to surplus as soon as possible.

But there is, as always, a balance to be struck here. We want to return to surplus as soon as we can, and limit government debt.

But at the same time we also want to fund our share of the reconstruction of Christchurch, New Zealand’s second-largest city.

We want to continue to protect the most vulnerable New Zealanders, who depend on the government for support.

We want to boost frontline health and education services.

We want to give businesses the confidence to grow, invest and create new jobs.

And we want to continue to invest in important capital projects, to build up the productive assets of New Zealand.

All these are extremely important roles for the Government.

So while Bill English will be announcing some significant savings next week, it won’t be a slash and burn Budget.

It will be a responsible Budget that balances a number of the Government’s aims.

That will disappoint some people, who like the drama of severe cuts.

It will also disappoint the Labour Party, which is clinging tight to policies of borrow, spend and hope.

In actual fact, the changes we will make to programmes like KiwiSaver, Working for Families, and student loans, are to ensure their survival.

As I said earlier this week, we recognise that New Zealanders value these programmes and therefore we want to make sure they are around for the long haul in a form that is affordable. That means that they have to be affordable when it’s sunny and affordable when it’s raining.

When you look back, these schemes were in fact designed on the hottest day of summer.

They were introduced when Labour thought the debt and consumption-driven economic bubble of the 2000s, and therefore the booming tax take they were getting, would go on forever.

That idea ended quite abruptly in 2008.

Post-recession, it is clear that the high costs of KiwiSaver, Working for Families and interest-free student loans are unaffordable in the longer term.

The changes we will make in the Budget will ensure they are more enduring and sustainable.

We don’t want Kiwis to be thinking from year to year that these programmes could end up being axed.

We want to give them confidence that future governments can afford to run and maintain them.

That is not the case at the moment.

Put together, these three programmes are costing taxpayers the best part of $5 billion a year, and rising.

Since the Government has a large structural budget deficit, this is $5 billion of money that has to be borrowed from foreign lenders.

That has a particular resonance for KiwiSaver, which was created as a way to increase national savings.

People might not realise this, but currently over $1 billion a year of what goes into people’s KiwiSaver accounts comes from the government, through subsidies and tax breaks.

Over time, the government has put in nearly half the money that has built up in KiwiSaver accounts.

But that does not constitute real savings.

That’s because the government has to borrow to raise it, and the debt on one hand simply cancels out the saving on the other.

It’s a bit like someone going to Westpac to borrow some money then taking it to ANZ to put in their savings account. It’s easy to see that this is not real savings.

So at the moment, the government contributions to KiwiSaver make no difference to the level of national savings.

They do, however, increase our reliance on overseas lenders, who can at any time decide that our debt has grown too large and that we are just too much of a risk.

We recognise there is an important place for government contributions to give an incentive for people to save. And we certainly support the elements of KiwiSaver which are successfully encouraging long-term savings habits.

KiwiSaver is a very well-established savings scheme, with nearly 1.7 million members, and is gaining about 20,000 new members a month. There is no question about it continuing.

But national savings are only increased when the savings are genuine, that is, when they come from people or businesses or government actually reducing their spending.

Otherwise we are all just kidding ourselves.

So the Government wants to put KiwiSaver on a sustainable platform for the longer term, as well as increasing national savings.

In the Budget the Government will change the mix of contributions to KiwiSaver accounts, with less coming from the Member Tax Credit and more coming from both individuals and employers. The $1,000 kick-start for new KiwiSaver members will remain as it is now.

The changes to KiwiSaver won’t happen immediately, and this will give people and businesses time to adjust.

Increased contributions from people and businesses will happen at a time when the economy will have well and truly recovered, and both wages and employment will be increasing.

The changes will maintain total contributions into KiwiSaver funds, which are expected to accumulate rapidly.

After the Budget changes, total KiwiSaver funds are projected to rise from around $8 billion currently, to about $25 billion by 2015, and to almost $60 billion in 10 years.

The advice we have had from officials, who have modelled the effect of the Budget changes, is that they will result in a modest improvement in the rate of national savings.

As a result of the KiwiSaver changes alone, New Zealand’s net international liabilities – the amount the country owes to foreign lenders – will reduce by an estimated two per cent of GDP over the next decade.

I am not going into any more specifics today – people will have to wait for details to be released in the Budget.

But what I can say is that none of these changes will affect people before the election. So New Zealanders will be voting with all the information they need to make their own choices.

In terms of Working for Families, we have previously indicated that the scheme will be better targeted at lower-income families, which have a much greater need for assistance, and will be a little less generous to families higher up the Working for Families scale.

That is bearing in mind, of course, that when it comes to Working for Families, being ‘higher up the scale’ depends on how many children a family has. For example, Working for Families payments currently tail off at an income of around $75,000 when a family has only one child, but around $130,000 when a family has four children.

Working for Families, under various names, has existed since 1986, and again there is no question about it continuing.

What happened over the course of the 2005 election campaign, however, is that, for the sake of politics, the scheme was boosted overnight to a level far beyond what even Michael Cullen had originally planned for it.

This year Working for Families tax credits will cost almost $2.8 billion – roughly twice what they cost in 2005/06.

Nonetheless, families have now come to rely on Working for Families, in no small part because growth in after-tax wages only marginally exceeded the rate of inflation under nine years of the Labour Government.

Over time we intend to slightly reduce the amount spent on Working for Families each year, but at the same time target a greater proportion of the total spend at the most vulnerable families.

We will do this gradually, in a way that minimises the impact on families.

The changes will be phased in over the best part of a decade and in fact most families will see increases in their Working for Families payments over this time.

The changes will make Working for Families simpler and more sustainable into the future.

But again, none of the changes will affect people before the election.

Finally, in terms of student loans, Steven Joyce has already signalled that the Government is looking to get costs down, within the parameters of an interest-free scheme.

New Zealanders have indicated they are prepared to subsidise student loans by having them free of interest.

But their generosity is currently being stretched. For every hundred dollars lent to students, taxpayers can expect to get only $55 back (in 2011 dollars).

In particular, there is a big issue with students who subsequently go overseas. These people have over half of all the overdue debt under the student loan scheme.

That is not good value for taxpayers.

We need to ensure borrowers understand that when they choose to access the loan scheme they are also taking on all the responsibilities that come with it.

We made some changes in last year’s Budget and we will be making some more in the Budget next week.

And at the risk of repeating myself endlessly, none of these changes will affect people before the election.

Again, that means people will have the opportunity to decide whether a responsible approach to balancing the books and building growth is one they want to support.

Ladies and Gentlemen

Bill English’s third Budget will be a very measured and responsible Budget.

It will contain both spending and saving initiatives.

It will provide certainty of funding for the reconstruction of Christchurch and the surrounding area.

And it will build a stronger platform for jobs and growth into the future.

Here in New Zealand we have a chance, now the economy is gathering steam again, to build a solid platform for future growth.

If we get this right the opportunities are endless.

That is what Budget 2011 is all about.

Thank you.

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We are here today to remember the people we have lost, to express our grief and sorrow, and to re-affirm our commitment to this city and to each other.

On the 22nd of February Christchurch experienced an earthquake of such violence that it stole from us the lives of dozens of people, and dramatically altered the lives of tens of thousands more.

All who were caught up in that earthquake, all who have seen the images and read the stories, have been horrified by it its scale and by its callous disregard for so much that we held dear.

It felled buildings, destroyed roads, caused terrible injuries and tore up the very earth we walk upon.

It has left scars that will never be erased from our land, or from our hearts.

Today, in the aftermath of this tragedy, and reminded of life’s fragility, we come together to share in the unbreakable strength of the ties that bind us.

The ties that bind the community of Christchurch, and that bind us as citizens of New Zealand and of the world.

Above all we remember those who lives were abruptly taken because they were in the wrong place at the wrong time.

There is no justification for their deaths.

No fairness for why it should have been them.

Instead we must join their families and loved ones in remembering the lives that were lost.

They came from all walks of life and were mothers, fathers, daughters, sons, sisters and brothers.

Many were foreign students who had chosen to pursue their education and dreams here.

Some were travellers.

They were only visiting for a short time.

New Zealanders have come to know many of the stories behind the names of the dead.

We mourn their loss and our hearts in particular go out to their children, spouses, parents, friends and families.

I know there are many of you here today.

We do not know your pain as you do, but your experience haunts us.

I can only say to you that New Zealand is here for you, and we hold you in our hearts.

We are conscious that we are united in our loss with families in more than 20 countries whose fate was to have a loved one far, far from home at the time the earthquake struck.

We say to those families that we embrace them as part of the wider New Zealand community.

Your family members have become part of the story of this city, and of this country, and we will remember your loved ones as we will remember our own.

So let us today, in our numbers, and in our solidarity, honour those who died as a result of the February 22 earthquake.

Let us remember them.

They are the faces of a Christchurch that will never be as it was again.

The earthquake of February 22, 2011, has altered forever the lives of all those who live here.

No words or deeds can change that.

So today, we remember Christchurch as it was, and we treasure that memory.

As we focus here today on our own loss we are also aware that a week ago an earthquake and ferocious tsunami was unleashed on Japan.

All around the world people have been scarcely able to believe the images they have seen.

Even today, as we mourn here, we think of Japan’s desperate plight.

For the people of Christchurch who have lived through two large earthquakes and many thousands of aftershocks these images from Japan bring flooding back the raw emotions and pain that accompanies such a devastating event

They add to the increased sense of anxiety about your own personal security and your future.

So let me say to each and every one of you that these emotions are completely normal and understandable

It is only natural that you want things to simply go back the way they were.

That is a very human desire – to feel the familiar again.

To be angry that your loved one will never return

To long to hear again the sounds of joy and excitement that once filled your homes and your hearts

Most of all I know this is a time of great uncertainty

And I know that such uncertainty makes recovery from this earthquake slow, painful and difficult.

But today I also want to talk not only of loss, but also of hope, and healing.

From the first moments after the February 22 earthquake struck Christchurch, the response has been tremendous.

There were people, alerted by the sight or cries of total strangers, who went immediately to their aid.

People dug other people out of rubble, carried bleeding strangers to cars, driven by other strangers, who drove them to aid offered by yet another they didn’t know.

It simply is not possible to list all the ways that people have supported each other, not only because they were neighbours, colleagues, family or friends, but simply because they were fellow humans, and in desperate need.

That co-operation has spread well beyond Christchurch.

The country has rallied magnificently.

Strangers, as well as friends and families, have opened their homes, and have helped in many ways.

And it goes beyond our shores.

We are deeply appreciative to have here today Prince William,

Representatives from many governments, and also, from Australia, the Governor-General, Prime Minister and Leader of the Opposition.

On behalf of all New Zealanders, I thank you for being here today.

And personally I thank you too.

We are moved by your presence at this memorial service.

Many governments sent rescue teams and other personnel to work alongside the New Zealand rescue services, and for that unstinting service, we also today say thank you.

Whether it’s been an Urban Search and Rescue team, or whether it’s been someone taking their neighbour’s water containers to be filled, the assistance which has been given to the people of Christchurch has been of enormous practical benefit, and has lifted our spirits when we most needed it.

To the Police, the Army, urban search and rescue teams, medical teams, Civil Defence, the farmy army, the student army, and to all those workers toiling so hard to repair the infrastructure we are indebted.

On behalf of all New Zealanders, I say thank you.

I also pay tribute to the resilience of every Christchurch citizen who has done what must be done, who has resisted despair and had the bravery to go on. These have been such difficult days.

Here in the beautiful Hagley Park today we see the face of a city that is broken but not beaten.

Let us today re-commit ourselves to the resolve to rise again.

The royal commission will, we hope, provide us with answers and guidance about the toll the earthquake took on people and property.

So too will scientists and engineers.

We need to learn from the tragedy of February 22, although there are many things we have learned already.

We have learned the power not only of individuals who have done more than they ever dreamed they could have, but also the power of a community, whether it’s a neighbourhood, a school, a nation or the international community.

We have witnessed in these past three weeks the very best of the human spirit.

We have seen the coming together of a city, and of a nation.

We have learned a lot about our capacity to do good.

There is much talk that ours is a selfish generation, focussed only on money and individual gain.

What I have seen in our country, and especially here in this city since February 22 puts the lie to that.

I have seen people who are resilient, capable, practical and compassionate.

New Zealanders have been generous and brave.

And we are resolute.

This city will be rebuilt.

Ladies and gentlemen, thank you for being here today.

Thank you for caring.

That makes you part of the story of rebuilding Christchurch.

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I move that this House express its condolences to the people of Japan for the losses they have suffered as a result of the recent earthquake and tsunami.

A magnitude 9.0 earthquake struck northern Japan on Friday the 11th of March at 6.46pm New Zealand time.

The earthquake caused a huge tsunami which has devastated parts of Japan’s north-eastern coast. It was also felt to a lesser extent around the Pacific.

Thousands of people in Japan’s north-east are dead or missing.

The extent of the number of casualties is only just becoming clear.

There are no reports so far of New Zealand casualties, but our authorities are continuing to work hard to establish whether any New Zealanders have been caught up in this disaster.

Aftershocks of a magnitude greater than five are continuing, and there are concerns related to damage at the Fukushima nuclear plant.

Mr Speaker, as the extent of this terrible tragedy unfolds, I wish to express the deepest sympathies and condolences of the New Zealand Government to Japan.

Our hearts go out to all those affected, especially those who have lost loved ones or those who are waiting to hear news of loved ones.

I’d particularly like to acknowledge all New Zealanders who are in Japan.

We are thinking of you.

New Zealanders have watched in horror and disbelief the scenes of destruction in Japan following the earthquake and tsunami.

We have recently experienced our own deadly earthquake, so it was with very raw emotion that we heard of the devastation and loss of life in Japan.

Unfortunately we know all too well the pain, stress, and heartbreak that can be caused by a natural disaster such as this.

Last night I spoke to the Prime Minister of Japan.

I have met Prime Minister Kan on a number of occasions, most recently at the APEC Summit in Yokohama last November.

It was good to speak to him over the phone and personally convey my sympathies.

I asked Prime Minister Kan to pass on the thoughts and condolences of New Zealanders to the people of Japan.

He explained to me the enormous devastation that Japan is facing, and he said that the Japanese government and people are united in dealing with the situation.

He passed on Japan’s sincere appreciation for New Zealand’s support, including the swift despatch of a New Zealand Urban Search and Rescue team, which is in Japan now.

Prime Minister Kan also renewed his condolences for the people of Christchurch following the February earthquake.

New Zealand and Japan are great friends.

Japan is our fourth largest trading partner. Many New Zealanders have lived in or visited Japan, and many Japanese people have lived in or visited New Zealand.

We value the strong relationship between our two countries, and I know the recent tragedies here and in Japan will bring our people even closer.

When Christchurch was devastated by an earthquake just three weeks ago, Japan was one of many countries which offered immediate assistance.

We were delighted to accept Japan’s offer of urban search and rescue personnel to assist in our rescue and recovery operation.

Mr Speaker, New Zealand will help in any way we can as Japan overcomes this tragedy.

Japan stood by us in our time of need and we will stand by Japan in its time of need.

Our urban search and rescue team is now deployed in the field in Japan, alongside the Australian team.

We are grateful to Japan and the United States for supporting this deployment.

In addition to this team, we will be happy to provide whatever assistance we can in the days and weeks ahead.

Our heartfelt thoughts are with the people of Japan as they come to terms with this disaster and mourn the loss of so many lives.

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