NZ Government Sees Smaller Budget Deficit Ahead of Election

New Zealand Prime Minister Christopher Luxon highlighted an improving fiscal position and stronger-than-expected economy as evidence of his government's economic management credentials.

The government on Tuesday forecast a smaller budget deficit, with an operating balance before gains and losses (OBEGAL) deficit of NZ$8.73 billion ($4.94 billion) in the fiscal year ending June 30, 2027, compared to a NZ$14.09 billion deficit forecast in May.

Luxon said this was the result of hard work from his centre-right National Party-led government, but opposition parties argued that the economy's weakness over the past three years and continuing pressure on household budgets from rising living costs meant the improved forecasts had yet to translate into meaningful relief for many New Zealanders.

The Treasury forecast an OBEGAL surplus in 2028-29, a year earlier than projected in May. It also noted that inflation was expected to return to its target band of 1% to 3% in the second quarter of 2027, and annual GDP would be at 2.9%.