NZ Economic Forecast Upgraded as Deficit Shrinks and Surplus Grows

The New Zealand government's economic forecast is looking up, according to Finance Minister Nicola Willis. The Treasury's Pre-election Economic and Fiscal Update shows that the deficit in the year ending July this year was $3.4 billion smaller than forecast in the Budget in May.

This improvement is due to stronger economic momentum, which has fed into the government's bottom line through increased tax revenue. As a result, the operating balance deficit is shrinking from $11.4 billion to $6.8 billion this financial year and to less than $1 billion next year.

Over the following three years, the surplus is forecast to grow from $4 billion to almost $12 billion. Debt is expected to start declining as a proportion of the economy in 2028/29 and to fall in dollar terms in 2030/31, which will be the first such fall since 2017/18.

According to Minister Willis, this improved forecast means the Government will borrow $15 billion less over the next four years through reduced bond issuance. This is on top of the $6 billion reduction in forecast borrowings at the Budget and will result in lower borrowing costs.