WELLINGTON, May 16 (Reuters) - New Zealand forecast better growth, a return to surplus in two years and a lift in social spending in its annual budget on Thursday as the economy recovers from the global financial crisis.
The government had delivered "zero budgets" for the past two years, with no new spending, as it battled a weak growth outlook and a slide in its tax take.
But Finance Minister Bill English said the economy has perked up, and government finances were on a more sound footing to allow new spending.
"This year there has been a bit more room to move in the budget," English told reporters.
The Treasury forecast a slightly bigger surplus in 2014/15, the long standing date for a return to the black, of NZ$75 million ($62 million) from NZ$66 million forecast in last December's mid-year update.
The deficit for the current year to June 30 was cut to NZ$6.3 billion from a previous NZ$7.3 billion forecast, but the forecast deficit for the 2013/14 fiscal year was held steady at NZ$2 billion.
The Treasury revised up its growth for the year to March to 2.5 percent from 2.3 percent in the December update, but saw growth at 2.8 percent in March 2014 from 2.9 percent.
Government net debt is seen peaking at 28.7 percent of GDP in 2014/15, from an earlier forecast of 29.5 percent in the same year.
In December, the government reiterated the need for spending controls and cut growth forecasts as the economy went through a soft patch.
But data this year has shown a lift in business and consumer confidence, moderate growth in retail sales, building consents, record house prices, strong commodity prices, and a fall in unemployment.
English said NZ$900 million had been set aside for new spending in the coming fiscal year, although growth in later years has been limited to NZ$1 billion a year from NZ$1.2 billion previously advised.
The budget showed much of the increased spending was for housing, health, and education.
English confirmed that power company, Meridian Energy Ltd, valued at more than NZ$6 billion, would be the next state owned company to be partially privatised, with up to 49 percent to be sold in the second half of this year.
Reporting by Gyles Beckford; Editing by Lincoln Feast