Govt books solid as global situation worsens

  • Hon Grant Robertson

The Crown accounts are in a solid position thanks to the Government’s careful financial management through a deteriorating global environment.

For the four months to the end of October, the Operating Balance before Gains and Losses (OBEGAL) recorded a deficit of $2.8 billion, $274 million lower than forecast at Budget 2022 in May and $5 billion lower than for the same period a year ago. Tax revenue also came in slightly below expectations.

“The economy is continuing to show its resilience even as global economic storm clouds gather. The sobering reality is global growth is slowing and New Zealand will not escape its impact, with forecasts of a shallow recession next year,” Grant Robertson said.

“Government actions to grow the economy and support Kiwis means New Zealand is well-positioned to face these global challenges with a solid balance sheet, near record low unemployment, more people in paid work and wages increasing.

“We know that Kiwis are finding it tough as they face cost of living pressures and rising interest rates. The Government is doing its bit to soften the impact, including through the recently announced childcare package.

“New forecasts out today show food and fibre export revenue are projected to reach new record highs of $55 billion in the coming year, in part a result of the six new trade agreements and upgrades the Government has secured since 2017. In addition to growing our exports, tourists are returning in greater numbers which will all go some way to help protect New Zealanders from the sharp edges of the global downturn.

“The deteriorating global situation will flow through to the Government’s books. The Treasury’s Half year Fiscal and Economic Update on 14 December will provide more detail on its likely impact on New Zealand, but the direction of travel is clear.

“It is important that we continue to carefully and responsibly manage our finances. Government spending as a percentage of GDP is expected to fall over the forecast period and contribute less each year to overall domestic demand. Tough choices, however, will be required on the pathway back to surplus.”

Core Crown tax revenue was $62 million below forecast at $36.2 billion, due to lower-than-expected GST returns and lower Fuel Excise Duties and Road Users Charges, which were cut to support New Zealanders with cost of living pressures.

Core Crown expenses were $515 million above forecast at $41.8 billion, due to higher interest costs and health expenses, including the timing of vaccine charges that occurred during this period.

Net debt stood at 19.5 percent of GDP, which was above forecast mainly due to market conditions affecting the New Zealand Super Fund’s financial portfolio. Using the old measure, net core Crown debt was below forecast at 39.4 percent of GDP compared with projections of 40.4 percent of GDP.

“Our debt levels are among the lowest in the OECD and well below the Government’s debt ceiling of 30 percent, ensuring we are well positioned to weather further economic shocks,” Grant Robertson said.

“In these highly uncertain global economic times, we continue to take a balanced approach that has worked for New Zealand. We remain focused on prioritising our spending without adding to inflation pressures and returning to surplus in 2024/25, which would be a year earlier than the National Government did after the Global Financial Crisis.”

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