Return to surplus pushed out again in New Zealand
New Zealand is on track to record its worst budget deficit this decade, going through the entire 2020s without a budget release.
The new fiscal outlook from the half-yearly economic and fiscal update presented by Finance Minister Nicola Willis in Wellington on Tuesday was another dire reminder of the country’s financial situation.
The headline figure was a deficit of NZ$16.9 billion (NZ$14.7 billion) this financial year; this was NZ$1.3 billion worse than forecasts in the May budget.
Using the government’s choice “OBEGALx” figures Excluding the Accident Compensation Authority, the deficit is estimated to reach NZ$13.9 billion, equivalent to three per cent of GDP.
New Zealand last ran a surplus in 2019, under Jacinda Ardern’s government, in the last pre-COVID budget, before fiscal stimulus sent budgets into the red.
According to new figures, the next surplus will come in 2029/30 instead of the previous year.
Ms Willis said she would “not get too hung up on small changes” and would still aim for a return to surplus in 2029.
“We are sticking to our strategy,” he told reporters.
The government’s fiscal strategy has been a matter of great debate in recent weeks; Right-wing coalition partners ACT and former finance minister Ruth Richardson have called on Ms Willis to take a bigger scalpel on public spending.
Ms Richardson, who is now chair of the Taxpayers Union waste watchdog group, even challenged Ms Willis to a much-hyped debate that has yet to conclude.
“When Nicola Willis took the reins as chancellor of the exchequer in December 2023, we were only three-and-a-half years away from the surplus… now it will now run for six-and-a-half years instead, with the surplus shifting towards 2030,” Taxpayers Union spokesman James Ross said.
“We seem to be walking backwards. Every time the Treasury opens the books, balancing them seems more like a pipe dream.”
Ms Willis argued New Zealand was poised to run a surplus faster than Australia, Britain and Canada.
Earnings have been hit by the worsening economy, having contracted 0.9 per cent in the June quarter this year, but growth looks set to rebound when third-quarter figures are published on Thursday.
This will be good news for Prime Minister Chris Luxon, who said at the start of the year that his priority for 2025 was “growth, growth, growth”.
Opposition finance spokeswoman Barbara Edmonds said weak economic performance had led to worsening unemployment and increased migration to Australia.
“It’s no wonder 200 Kiwis are leaving the country every day for better opportunities abroad,” he said.
“Nicola Willis made matters worse… she said front line services wouldn’t be cut, but they did. National had to borrow even more money to keep the lights on.”
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