Treasury will release its Half-Year Fiscal and Economic Update later today, giving Kiwis a snapshot of the Government's books heading into 2026 – and on what may be ahead at the precipice of an economic recovery.
The Half-Year Fiscal and Economic Update (HYEFU) will be released this afternoon alongside Finance Minister Nicola Willis' Budget Policy Statement, which outlines high-level priorities for next year's Budget.
Here's what to expect at 1pm.
What will the update show?
The update will provide the latest picture on how long it's expected for New Zealand's books to remain in deficit – a politically sensitive issue for Willis and the Government.
While the update deals primarily with the Government books, the Treasury's forecasts give an indication of what lies ahead for growth, jobs, and the broader economy.
The update comes as the country appears to be finally emerging from a prolonged economic downturn – albeit still in an unsteady and bumpy recovery.
It comes alongside a new ASB economic forecast which suggests signs of recovery incoming. (Source: 1News)
What the numbers might show, according to experts
Economists expect the update to show the Government's finances are broadly tracking in line with forecasts from May's Budget 2025.
A key figure to watch for is when the Government will begin running a surplus again – whether it's bringing in more money than it spends, or spending more than it takes in.
The Government's operating deficit, using its preferred measure known as OBEGALx, which excludes ACC, is expected to remain in the red until at least 2028/29.
(Although using the traditional measure that includes ACC, known as OBEGAL, the books are not expected to return to surplus until the next decade.)
Fifty point cut after ‘considerably larger than expected” second quarter GDP reading. (Source: 1News)
National had campaigned before the 2023 election on returning to surplus, through the old OBEGAL measure, by 2026/27. That target has been pushed back as the economy underperformed and tax revenue fell short.
In a preview published earlier this month, Westpac economists said the Government's funding needs appeared to be tracking in line with the Budget forecast, noting outcomes in the first four months of the financial year had been mixed.
Why has this update been controversial for the Govt?
Willis has been under sustained criticism from her ideological right flank over not going far enough to balance the books and to reduce New Zealand's debt load.
Fifty point cut after ‘considerably larger than expected” second quarter GDP reading. (Source: 1News)
In the past week, this culminated with the Taxpayers Union, a prominent right-wing lobby group, launching a campaign against the Finance Minister, accusing her of not cutting enough spending, nor reducing public service headcounts by far enough.
A to-and-fro then ensued between Willis and the organisation's chairperson, former National Party finance minister Ruth Richardson over a challenge for the two to debate.
Meanwhile from the left, Labour argues the Government's spending reductions — it calls them "austerity" — are helping to strangle economic recovery.
With an election looming next year, they believe voters will punish the coalition for weaker growth and ongoing cost-of-living pressure.
What it means for households
If the Government's deficit remains large, it may continue limiting spending on public services or find savings elsewhere.
Treasury forecasts from May projected economic growth of around 3% over the next few years, supported by lower interest rates, stronger exports, and rising house prices.
Willis will also release the Budget Policy Statement alongside the update, providing early signals about where the Government plans to direct spending in next May's Budget.
Later on Thursday, the latest GDP data will reveal more about the state of the economy and whether Prime Minister Christopher Luxon was correct in his assessment over the weekend that Kiwis were feeling a recovering economy.
Figures for the three months ending in June surprised many with a sharp 0.9% contraction, indicating lagging growth.
"The Kiwis that I talk to every week are saying very clearly, look, we can see the economy strengthening. We can see things are turning and they are hopeful, and I can see that more New Zealanders are starting to feel that, and that's a good thing," he said.
"I want to make sure that's what happens over the course of the coming year."
The morning's headlines in 90 seconds, including the Bondi hero speaks about his decision to confront a gunman, and an arrest after a famed Hollywood director is found dead. (Source: 1News)
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