NZ Treasury Sees Smaller Deficit and Early Surplus Forecast Amid Election Uncertainty

New Zealand's government released an updated economic forecast ahead of the general election in November. According to the Treasury, the country is expected to have a smaller budget deficit and lower debt than previously projected. The operating balance before gains and losses (OBEGAL) deficit is forecasted at NZ$8.73 billion ($4.94 billion) for the fiscal year ending June 30, 2027, compared to a NZ$14.09 billion deficit in May.

The government also predicts a return to an OBEGAL surplus by 2028-29, two years earlier than previously forecasted. Finance Minister Nicola Willis attributed the improved results to higher tax revenue and lower government spending than expected.

However, Willis warned that there are still clear risks from global instability, particularly in the Middle East. The economy is only gradually recovering from prolonged weakness, with inflation back above 3% and unemployment at a decade high.

The Treasury expects inflation to return to the government's target band of 1% to 3% in the second quarter of 2027. Recent polls show Labour edging out the incumbent National Party ahead of the general election on November 7.