Finance Minister Grant Robertson said New Zealand’s economy is “holding its own in an uncertain global environment”.
It comes as Treasury released the Pre-Election Economic and Fiscal Update today, which showed interest rates are not likely to begin to ease until late next year, unemployment forecast to rise and wage growth to slow.
A return to surplus was also now expected in the in the 2026/27 fiscal year - a year later than previously forecast.
Crown expenses – government spending – remained “elevated” this fiscal year, it said, and was $6.9b higher across the forecast period (2024 to 2027) than anticipated in May’s Budget update.
That elevated spending was due to “decisions at Budget 2023, the rephasing of unused spending from the 2022/23 fiscal year, the response to the North Island weather events, and the increasing costs of debt servicing”, it said.
Robertson said it had been an “extremely tough time” for many New Zealanders, but today’s update showed government finances that were solid, resilient and a “cause for optimism”.
He said Prefu 2023 showed no recession, a growing economy, and overall wage growth over the forecast period.
“The economy is holding its own in an uncertain global environment. The Treasury is forecasting average annual growth of 2.6% between 2023 and 2027, the addition of 105,000 new jobs and wages to grow faster than inflation.”
He said the Government’s economic plan to “support New Zealanders dealing with the cost of living while investing in building a stronger, more resilient and inclusive economy” was working.
He said the economy was 2.9% bigger than a year ago and 7% larger since the start of the pandemic.
The number of people in work rose by 113,000 in the year to June, 69,000 more than forecast at the May Budget.
“We have a solid base as we face the challenges ahead. Unemployment is forecast to remain below the long-term average of 5.8%, peaking at 5.4% before declining to 4.6% at the end of the forecast period.
“Wage growth will outpace declining inflation, meaning household budgets will stretch further.”
He said the economy was “turning a corner” but challenges remained “very real”.
Robertson said the pandemic continued to have an effect, as did the North Island cyclone and flood recovery.
That was reflected in Crown accounts, he said, with core Crown tax revenue $2.9b behind where Treasury had forecast it to be in May.
There had also been a further deterioration in the global economy since May, he said.
He said the North Island cyclone and floods would have a “sizeable impact” on the government’s finances in the coming years, with Treasury estimating costs of asset damage between $9b and $14.5b, half of it related to central or local government.
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