This week's budget from Finance Minister Bill English has already been labelled the most important budget since Roger Douglas brought down his first Rogernomics budget in 1984.

As a 14 year old in 1984, I can still remember the first feelings of angst that that budget generated within the wider community. Supplementary Minimum Prices (SMPs or as it was more satirically called 'social welfare for sheep') where farmers received extensive state subsidies were abolished. The first steps towards user pays for government services were taken. Subsidies on essentials like milk and bread were abolished in favour of top up payments which were then known as Family Care. The proposal for a comprehensive consumption tax known to be known as the Goods and Services Tax (GST) was mooted for the first time and the concept was expanded upon in the 1985 budget statement.

So began the large scale application of free market economics into New Zealand, effectively ending nearly 50 years of Keynesian social democracy in this country by the very party, Labour, that had introduced that policy prescription after 1935. It was followed nearly seven years later by the so-called 'Mother of All Budgets' in 1984 written by Ruth Richardson and the same Treasury acolytes who had prepared Douglas's efforts. Richardson preceded to venture into territory where Labour had not dared to go into by tearing at the rest of the edifice of the Welfare State.

Well, what's Bill English preparing for us on Thursday? We already know that there is $50 million allocated for a nationwide cycle track (which will probably be John Key's greatest legacy), $103 million for better maternity services and some millions for a home insulation installation scheme and biofuels. Otherwise, the good news is being shunted out the door quick fast before the budget as, unusually, I get the feeling that National wants this to be seen as a sober budget after nearly ten years of economic expansion that has now come to a sudden and violent halt.

Yes, Bill's preparing a 'bad news budget' or as Labour Party finance spokesperson David Cunliffe said on TV One's 'Q and A' show this morning a 'dark, grey one'. The budget will therefore shy away from being a totally neo-Rogernomics or Ruthenasia affair but it will still carry the hint of strong Treasury influence and calls for 'belt-tightening' and 'restraint'. Both Bill English and Treasury want to use this budget in order to reduce what they call 'the forward debt track' so that budget deficits are again turned into surpluses which can then be invested in debt repayment.

The policy and expenditure implications of this Thursday's budget could therefore be significant. For what it's worth, we already know that National's next planned round of tax cuts scheduled for 2010 and 2011 are gone (practically postponed, if not cancelled) and that payments into the Cullen Fund will be suspended. Money is also being set aside to conduct a wholesale market-driven review of ACC, the outcomes of which will probably be the centrepiece of next year's budget.

But on Thursday, watch out for Bill English signalling the following moves:
*A freeze on public spending for at least the next three years with no additional money being pledged for each financial year has been the practice in the past;
*The scrapping of the universal primary health care subsidy meaning that doctor's visits and prescription charges will go up for all non-Community Services Card holders and they will be held at their present rate for CSC holders;
*An extensive modification of the Student Loans Scheme interest free debt policy in that all borrowing undertaken from the 2010-11 year will again incur interest but there will be incentives introduced down the line for faster repayment by borrowers - however, this policy might not impact on borrowers who take out loans prior to March 31st next year (but John Key has said that interest free student loans for all students are safe - we'll see about that);
*Government departments will be asked to look for even more 'efficiencies' within their existing operations meaning more service cuts and redundancies at the front line, despite National's pre-election pledges, and this will impact on all areas of government except in health, education and social development;
*The Government will signal the privatisation within the next two to three years of what it regards as 'non-core assets' such as the Meterological Service, TVNZ and other smaller SOEs.

This is what I'm predicting and by no means have I heard any rumours apart from those which have been widely reported regarding student loans. It will be a New Right budget once again but a 'softer, gentler' kind of budget than could have been produced by, say, either Ruth Richardson or Roger Douglas.

English has been Finance Minister (albeit briefly) before and will realise that he presided over the 1999 budget which was the previous National Government's last effort before being swept away by Labour in that year's election. Therefore, he will be crossing both sets of fingers behind his back and hoping that economic recovery arrives in time for the 2011 election as he wouldn't want to choke off National's hopes of victory (but it is likely he will slide the last nail into the coffin of Melissa Lee's already dimming chances for victory in Mount Albert). Otherwise, a Labour Party that really doesn't deserve to be in office might come back in an unexpectedly close election.

And perhaps then we might get the ultimate New Right dream - a National-Labour grand coalition. Would Bill English really want that? This budget might be the one that decides whether that possibility actually comes to pass or not as that might truly be a dark-grey government.