World

NZ govt borrows for $12bn infrastructure

By AAP Newswire

Banking on low interest rates and future budgets in the black, the New Zealand government will borrow and set aside $NZ12 billion ($A12 billion) for new infrastructure investment.

Finance minister Grant Robertson announced the bumper election year fund on Wednesday in Wellington at the government's Half Year Economic and Fiscal Year update (HYEFU).

The Kiwi economy is projected to grow on average at 2.5 per cent over the next four years - one of the highest rates in the OECD.

Almost $NZ7 billion will be spent on transport projects - particularly road and rail - though the government won't announce the projects until early next year.

More than a billion dollars will also go towards capital funding on schools ($NZ400m), regional investment ($NZ300m), regional health assets ($NZ300m) and decarbonisation of public estates ($NZ200m).

The government foreshadowed the big spend last month, arguing that it inherited an "infrastructure deficit" from the National party on assuming office in 2017.

"It would be ludicrously stubborn to not respond to the fact that there is an infrastructure need," Mr Robertson said.

"We have the room to do this because we have been fiscally prudent."

The budget policy statement released gives operating allowances between $NZ2.4 and $NZ3 billion in 2020, 2021 and 2022.

The government also unveiled its priorities for the 2020 Wellbeing Budget on Wednesday, with transition to a low-carbon economy top of the list.

The other four priorities are "future of work", Maori and Pacific people, child poverty, and wellbeing, and physical and mental health.

The HYEFU also projects unemployment will remain around its current rate of 4.2 per cent and wage growth averaging 3.5 per cent.

"The new investment is forecast to increase the size of the economy by a further $NZ10 billion over five years, with further positive impacts on GDP beyond that period," Mr Robertson said.

"The cost of borrowing is low, the projects are there to be done, the books are in good shape, and the economy could do with it."