In this May 20, 2021 file photo, New Zealand Finance Minister Grant Robertson discusses the annual budget plan with media, economists and other groups in Wellington, New Zealand. (PHOTO / AP)
WELLINGTON – New Zealand on Thursday announced a worse-than-forecast budget deficit as a lower tax take, higher inflation and a slowing economy hit its coffers, forcing the ruling Labour government to keep new spending at a minimum and raising its bond program.
In his last budget ahead of what is set to be a close-run election in October, Finance Minister Grant Robertson announced billions towards rebuilding infrastructure following severe weather events at the start of the year and some new initiatives to help those struggling with increased costs.
"We’re focused on how we reduce the pressure of cost of living, delivering public services, cyclone recovery and increasing economic resilience," Robertson told media.
The New Zealand government raised its bond program with gross issuance up NZ$20 billion in the four years to June 2027 to NZ$128 billion
"We can’t go on with the high levels of spending we’ve seen in previous budgets because it’s not fiscally sustainable," he said.
Even so the government’s accounts are looking worse than they did last December. The country is projected to record a NZ$6.96 billion deficit for the year to June 2023 versus previous expectations for a deficit of NZ$3.63 billion, and will not return to surplus until 2025-26, a year later than previously forecast.
The government raised its bond program with gross issuance up NZ$20 billion in the four years to June 2027 to NZ$128 billion.
A bright spot is that Treasury no longer expects the country to move into a recession in the second half of this year due to the cyclone rebuild boosting activity and the return of tourists now the border has reopened.
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Treasury sees inflation slowing to 3.3 percent by mid-2024, down from the current blistering 6.7 percent pace.
Much of the worsening in the accounts is due to falling tax revenue as the country’s economy slows.
Adding to the pressure on finances were two significant weather events at the start of the year that caused an estimated NZ$9 billion and NZ$14.5 billion in damage. The government announced a NZ$6 billion infrastructure fund, which would help with rebuild costs and fund new more resilient infrastructure over the longer term.
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“There is not a lot of discretionary spending in this budget,” Robertson added.