By Political Editor Duncan Garner
Finance minister Bill English has confirmed there will be next to zero new spending, with cuts likely in next month's budget.
He says the economy has worsened to the point where fresh cuts will have to be made if the Government is to achieve its surplus target in 2015.
And now the criteria and eligibility for the costly interest free student loans may be about to change.
The economy is so tight that 600 people recently applied for 130 jobs at a supermarket in Palmerston North that has not yet been built.
Mr English says it is just as challenging for him.
The economy has worsened - which means getting back to surplus in 2014/15 is under threat.
“[It] just demonstrates what a challenge it is.”
The Government was heading for a $370 million surplus. But there has been a $1 billion deterioration of the accounts in recent weeks, meaning it is heading for a $640 million deficit in 2014/15.
This is unless new cuts to Government spending are made with no new spending in next month's budget.
“We're focussed on controlling expenditure pretty tightly this year," Mr English says.
However National will not tackle the big ticket items like the increasing cost of national superannuation.
But 3 News understands there will be some changes to interest free student loans and queried Mr English on this.
“There'll be a set of changes across a whole line of spending items.
“There will be tight spending and cuts across a range of programmes. I don't want to get into a game of what's on and what's off. Those decisions are yet to be properly finalised.”
Britain slipped into a second recession overnight and the question was could New Zealand follow?
“No we don't see that,” Mr English says. “But if there is a dramatic meltdown in Europe then all bets are off.”
Voters in our last 3 News Reid Research were asked: How well off are you feeling after 3 and a half years of National? Figty-seven percent felt the same; 28.5 percent felt worse off; 15 percent felt better off.
Next month's budget will be no lolly scramble and neither will the one next year or the year after that.
National is determined, almost at all costs, to get into surplus. It is now a political target that it is intent on reaching no matter what the economic circumstances.