Source: New Zealand Government
Today’s Half Year Economic and Fiscal Update confirms that continued fiscal discipline is required to restore the books to surplus and bend the debt curve down, Finance Minister Nicola Willis says.
“Despite the challenges of global events, Treasury is forecasting an accelerating economic recovery, underlining the importance of the Government’s focus on economic growth.
“The economy is forecast to grow 3 per cent next year and inflation to remain low throughout the forecast period. New Zealanders can expect wages to grow faster than inflation every year and about 270,000 jobs to be created over the five year forecast period.
“At the time of the Budget, Treasury forecast a small surplus in the headline operating balance measure – OBEGALx – in 2028/29. Forecast adjustments now show a small deficit that year.
“Despite this, the Government is targeting an OBEGALx surplus in 2028/29. This will support our goal to put net core Crown debt on a downward trajectory, ensuring New Zealand is better placed to respond to future shocks.
“We are sticking to our strategy of taking a deliberate, medium-term approach to fiscal consolidation, and not over-reacting to movements in the forecasts.
“Today’s forecasts confirm the Government’s approach to fiscal repair puts New Zealand in good stead internationally. We are on target to return the books to surplus faster than Australia, the United Kingdom, Canada and many other advanced economies, while maintaining a prudent debt position.
“Achieving these fiscal goals will require ongoing restraint and tight control of discretionary spending. As such, we have confirmed our operating allowances will not exceed $2.4 billion in next year’s Budget. This compares with the previous government’s repeated blowouts and average operating allowances of $4.8 billion in its last three years in office.
“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. Without this disciplined approach, this year’s deficit would be $25 billion and debt would be on track to blow out to 59 per cent of GDP.
“Health, education, defence and law and order will be priorities in next year’s Budget. Beyond this, any new funding will need to be found from savings and reprioritisation. Government agencies have been instructed to keep seeking savings and efficiencies that support this disciplined approach.”
