A Challenging Global Economic Landscape
New Zealand Finance Minister Grant Robertson acknowledged the difficulties faced by the global economy, marked by a slowdown in growth and persistent high inflation.
He emphasized that New Zealand is not immune to these forces and also highlighted the impact of recent weather events in the North Island on affected communities, which will have consequences for the government’s financial position.
New Zealand’s Resilience and Positive Indicators
Despite the challenges, Minister Robertson expressed confidence in New Zealand’s preparedness to face them.
He pointed out that the country has a record number of people employed, with growing wages, easing inflation pressures, and a return of tourists, international students, and overseas workers filling job vacancies.
These factors contribute to the overall resilience of the New Zealand economy.
Government’s Financial Position
According to the latest financial figures, the Operating Balance before Gains and Losses (OBEGAL) for the eleven months ending May recorded a deficit of $6.5 billion.
This figure was $2.1 billion higher than the Budget 2023 forecast but $1 billion lower compared to the same period last year. Core Crown tax revenue was $2.2 billion below forecast due to lower corporate profits and investment returns.
Core Crown expenses, on the other hand, were $249 million below forecast. Net debt stood slightly above forecast at 18.9 percent of GDP.
Managing the Cooling Economy
Minister Robertson acknowledged the impact of the cooling economy on tax revenue, which came in lower than forecasted. He specifically mentioned that the decline in corporate tax revenue reflects lower-than-expected corporate profits for the 2022 year.
However, he reassured the public that the government has been prudent in managing its spending and that the current deficit is smaller compared to the same period last year.
Budget 2023 projects a 5 percent decline in real government consumption by early 2025, while New Zealand’s debt levels remain among the lowest globally.
Supporting Kiwis and Addressing Challenges
Despite the challenges, Minister Robertson emphasized the government’s commitment to protecting and supporting New Zealanders grappling with the rising cost of living.
He highlighted the importance of providing strong public services and fostering sustainable economic growth without exacerbating inflation.
Positive signs include historically low unemployment, high employment levels, a potential peak in inflation, and improving business confidence.
Impact of North Island Weather Events
Minister Robertson acknowledged the substantial impact of recent weather events in the North Island on the government’s finances.
The Treasury estimated that the asset damage resulting from floods and Cyclone is between $9 billion and $14.5 billion, with a significant portion falling under central or local government responsibilities, such as roads.
The government has already committed $2 billion in additional support, including a $1 billion flood and cyclone recovery package as part of Budget 2023.
Moreover, $6 billion has been allocated for a National Resilience Plan to focus on rebuilding and enhancing resilience in affected areas.
Responsible Financial Management
Minister Robertson emphasized the government’s responsible financial management, highlighting its ability to handle the impacts of extreme weather events and future challenges.
New Zealand’s debt levels, currently at 18.9 percent of GDP, are among the lowest in the OECD and well below the government’s debt ceiling of 30 percent.
The government aims to strike a balance between supporting the immediate needs of New Zealanders, investing in strong public services, and building a resilient infrastructure network while ensuring the long-term sustainability of the economy.
