By Ian Llewellyn of NZPA
Wellington, May 25 NZPA - There might be some surprise at the amount of money to be spent on insulating homes in this Thursday's budget, Prime Minister John Key said today.
The Government has been indicating that the budget will not contain tax cuts and also put a hold on contributions to the New Zealand Superannuation Fund, while warning there is little money for spending increases.
Mr Key confirmed there would not be many shocks in Finance Minister Bill English's first budget.
"I don't think there will be huge surprises in the budget, I think it has been reasonably well forecast," Mr Key said.
However there were parts that people would find interesting.
"I think when you see the insulation programme, that is something of note in the budget, you might be a little surprised by that."
National has been working with the Greens on the insulation policy and during the election campaign it signalled more money for state housing upgrades.
However there have been signals that this could be extended to the private sector.
Last week, the Greens said if they had their way they would spend $297 million over a number of years for home insulation, school and business upgrades, Crown loans and training to get the insulation roll-out under way.
The Greens got the previous Labour government to agree to the 15-year $1 billion household insulation scheme -- in return for the Greens' support for emissions trading scheme (ETS) legislation.
National said the fund could not go ahead as there was no money set aside for it.
Mr Key said the extent of savings found inside government departments would also be notable.
"I think when you see the levels of savings the Government has found over the last six months, I think you will be ... slightly surprised at that number."
He repeated his belief that the budget would deliver a credible plan to reduce long term debt projections and stave off a potential credit agency rating downgrade.
However, Mr Key believed the Government's books would remain in the red for the next three to five years and forecasts after that were difficult to make.
Three executives from ratings agency Standard & Poor's are in the country looking at whether to take its AA+ rating off negative watch and back to stable, or to downgrade it.
S&P wanted to see operating surpluses to be recorded within three to five years.
Mr Key said that a downgrade would add up to 2 percent to interest rates.
"That's every homeowner, every business paying 2 percent more."
He did not believe New Zealand was not being judged more harshly than other countries with larger debt to GDP ratios.
S&P had always been concerned about New Zealand's current account deficit and the amount of debt that it had with other countries.
The strong Government balance sheet had offset this in the past, so they had greater concerns about its deterioration.
Mr Key felt that the Government was getting the balance right, borrowing more now to ensure the economy did not contract in the short term, but it had to show a plan that had debt levels coming under control.
He felt the agency would leave New Zealand's credit rating alone, but leave it on a negative watch.
The agency would be briefed on Tuesday or Wednesday and issue its verdict on Thursday evening.