19 Jun 2012

Govt will drop surplus target if conditions too tough

9:01 am on 19 June 2012

Prime Minister John Key says the Government will abandon its target of getting back into surplus in 2014/15 if things get too tough.

Mr Key says the economic crisis in Europe poses the biggest risk to the New Zealand economy.

Treasury forecasts released in the Budget in May showed the Government expected to post a modest surplus of $197 million in 2015/15.

He says the Government still has the intention of getting back into surplus in by this time, but won't keep to that aim if it hurts the economy.

"We're not going to get to the surplus in 2014/15 come hell or high water - if that was just going to drag the economy back into recession then I don't think it would be worth it because it can be a self-fulfilling spiral that just takes you lower and forces a deeper recession.

"I think at the moment we've got that balance about right."

Last week the Reserve Bank released more pessimistic economic growth forecasts than in the May Budget.

Labour Party leader David Shearer says Mr Key is now shifting the goalposts on the surplus target.

Green Party co-leader Russel Norman says he welcomes the level of pragmatism in Mr Key's approach to the surplus target.