Further spending discipline is needed, says Finance Minister Nicola Willis. Photo: RNZ / Samuel Rillstone
- Return to budget surplus delayed a year until 2030
- Deficits forecast to be bigger because slow economic recovery
- Growth forecast below 1 pct this year rising to more than 3 pct in 2027
- Debt expected to peak later and higher
- Finance Minister Willis says further spending discipline needed
The government's financial position is looking worse for longer with a delay in getting to surplus and bigger deficits, according to new Treasury forecasts.
The Half Year Economic and Fiscal Update (HYEFU) showed the expected deficit for the year to next June would be $13.9 billion, $1.8bn worse than forecast in May, with no surplus now forecast until 2029/30.
The downward revisions reflected a slower economy, lower tax take, higher debt costs, but steady expenses.
Finance Minister Nicola Willis said the government was continuing to repair the books and the revisions should not be over emphasised.
"It's the path to surplus that counts."
She said the government was looking for the economy to get "fresh air in its lungs" and recover strongly from 2027 onwards which would boost the tax take.
Willis said the government would run a tight financial regime, with the amount of money available for new spending next year to remain capped at $2.4b, but it was determined to get back to surplus a year earlier than Treasury's forecasts.
The Treasury forecasts generally showed an economy hitting a peak of growth at 3.4 percent in 2027 before easing back to around 2.5 percent for the next three years, while inflation eases back to around 2 percent over the forecast period, with unemployment also easing below 5 percent.
Treasury said it was basing its forecasts on a pick up in housing, an increase in migration, and continued solid export trade, but saw risks to its forecasts in both directions.
The positive risks included the economic recovery being quicker and stronger than anticipated, while the downside risks were that the recovery was softer as consumers and businesses remained cautious.
Net debt was forecast to peak at 46.9 percent of GDP in 2028/29 before edging lower from 2030.
The Debt Management Office reduced the borrowing programme by $5bn over the next two years, but increased it by $8bn in total in 2027 and 2028.
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