NZ Government Cuts Budget Deficit Forecast Amid Slow Economic Recovery

New Zealand's government has forecast a smaller budget deficit and lower debt than initially projected in its May Budget. The Treasury update shows an operating balance before gains and losses (OBEGAL) deficit of NZ$8.73 billion ($4.94 billion) for the fiscal year ending June 30, 2027, down from a previously forecasted NZ$14.09 billion.

The government now expects to return to an OBEGAL surplus in 2028-29, earlier than initially predicted. Finance Minister Nicola Willis attributed the improved results to higher-than-expected tax revenue and lower government spending.

However, Willis warned that there are still risks to the forecast, particularly from ongoing instability in the Middle East. The economy is only gradually emerging from prolonged weakness, with the Treasury update indicating a slow recovery beyond the export sector.