The Government has been forced to, yet again, push out its expectation for a surplus as economic headwinds persist.
New forecasts from the Treasury reveal a surplus is now not expected until 2030 – when the books will be in the black by $2.3 billion.
At the Budget earlier this year, Finance Minister Nicola Willis predicted a relatively small $214 million surplus in 2029. But today, that’s been significantly revised down to a $945 million deficit.
That’s a more than $1.1 billion difference, when using the Government’s OBEGELx method of calculating a surplus, which excludes all ACC liability.
“We are sticking to our strategy of taking a deliberate, medium term approach to fiscal consolidation, and not over-reacting to movements in the forecast,” Willis told reporters this morning.
New forecasts from the Treasury reveal a surplus is now not expected until 2030 – when the books will be in the black by $2.3 billion. (Source: 1News)
She talked up the Government’s commitment to making savings to help balance the books and confirmed next year’s Budget will contain $2.4 billion more spending than it did last year.
That figure, officially called the operating allowance, remains lower than it was in previous years.
But there is only $1 billion left in the pot, due to already pre-committed spending, predominantly in health.
“Over the past two years, the Government has had to take some tough decisions which collectively have delivered about $11 billion a year in savings,” Willis said.
“Without this disciplined approach, this year’s deficit would be $25 billion and debt would be on track to blow out to 59% of GDP.”
Willis claims that the $25 billion would be the deficit under Labour’s spending, but she said those calculations were done by her office and not Treasury.
Treasury’s figures show this year’s deficit is $13.9 billion and net debt is 43.3% of GDP – or $197 billion.
Today’s figures come just two days before Stats NZ is due to unveil New Zealand’s third quarter GDP growth level.
Economists are expecting a significant bounce back – with ANZ picking a 1% quarter-on-quarter increase. That comes off the back of a 0.9% decrease in the second quarter.
This morning, Willis was optimistic about that growth number, saying she expects it to make the beginning of the economic rebound.
“The fight, is behind us. With fresh air in its lungs, the economy is picking up.”
Today’s numbers also show the Government is expected to take on tens of billions of dollars of debt over the coming years.
At present, net core crown debt is $197 billion. Treasury’s forecasts show that number rising to $254 billion by 2030.
Even by the Government’s preferred measure – comparing its debt levels to New Zealand’s GDP growth – Treasury is still expecting an increase from today’s 43.3% to 46.1% of GDP.
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