New Zealand’s Treasury has outlined a dire economic forecast, with rising unemployment, a slower economy, and a weaker balance sheet. According to the Half Year Economic and Fiscal Update, the government projects it will not return to surplus within its five-year forecast period. Finance Minister Nicola Willis released the update, stating that the crown’s financial position has deteriorated over the past six years.
The update projects a budget deficit of NZ$17.31 billion for the fiscal year ending June 30, 2025, wider than the NZ$13.37 billion forecast in May. The government no longer expects to return to surplus in the five-year fiscal period ending June 2029, but instead is forecasting a surplus in 2029 under a new measure that excludes the financial position of a government-owned accident health provider.
The update also projects net debt to peak at 46.5% of gross domestic product in the year ended 2027, two years later than previously forecast. To address the financial situation, the government has introduced a number of austerity measures, including cuts to public servant numbers and reduced budgets for public services. Despite these measures, the government did introduce tax cuts from July 31.
Finance Minister Nicola Willis expressed confidence that there are still more savings to be found, while acknowledging the tough job ahead.
