The Government's books have improved on previous forecasts, with a bigger return to surplus projected, but Treasury is highlighting long-term challenges including the cost of superannuation.
The numbers were revealed at Treasury’s Pre-election Economic and Fiscal Update in Wellington today.
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A higher-than-expected tax intake for 2025/26 helped improve the fiscal outlook.
A $4 billion surplus is forecast for 2028/29 on the OBEGALx accounting measure – that’s about $1.4 billion higher than previously projected.
Debt is forecast to rise and peak at 43.9% of GDP in 2028 before declining to 39.5% by 2031.
Spending is forecast to fall below 30% of GDP in 2030/31.
The economy is growing at 2.6% a year.
“We believe the recovery has been delayed rather than derailed,” said Treasury Secretary Iain Rennie, referencing the conflict in the Middle East pushing up oil prices.
Finance Minister Nicola Willis called it a "very positive set" of forecasts.
She said she was "proud" of the books today, but said they weren’t a reflection on her, rather than on New Zealanders.
Infometrics economist Brad Olsen was worried the positive outlook will tempt politicians to make promises they can’t pay for or be ill-disciplined on spending.
“The risk is that a better fiscal position provides more options for political parties this election even though the long- term costs are still mounting.”
Willis said the forecasts were “not a green light to open the cheque book".
She said the debt track was a big improvement and promised this would be the last year the Government is “borrowing for groceries".
From next year she said borrowing would be to invest in capital projects like infrastructure.
New Zealand faces significant long-term headwinds, with Treasury pointing out that 28% of the tax take will be spent on superannuation and interest rate costs by 2031
“Demographics place us on an unsustainable financial position,” said Rennie.
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