Treasury forecasts

Bill English will have a sound financial foundation to build his government on.  The latest Treasury forecasts were released today (by English).

  • Economic growth – 3% average over the next five years
  • Unemployment to drop to 4.3% by 2020/21
  • 150,000 jobs to be created
  • Average wage to increase by $7,500 to $66,000

Treasury forecasts solid growth, stable finances

Treasury’s latest forecasts show the Government’s programme of responsible economic and fiscal management is delivering benefits for New Zealanders, Finance Minister Bill English says.

“Economic growth is expected to average around 3 per cent over the next five years – considerably stronger than forecast in Budget 2016 – supporting more jobs, falling unemployment and higher incomes,” Mr English says.

“The more positive outlook for the economy is driven by high levels of construction activity, exports (particularly tourism), a growing population and low interest rates.”

The 2016 Half Year Economic and Fiscal Update forecasts unemployment to  drop to 4.3 per cent by 2020/21. Over the same period Treasury expects another 150,000 jobs to be created and the average wage to increase by $7,500 to $66,000.

“While the recent Kaikoura earthquakes have had a major impact on affected families and businesses, they are not expected to disrupt the overall momentum of the economy,” Mr English says.

“However, the earthquakes do highlight the importance of paying off debt in the good times so that the Government can support New Zealand communities in challenging times.”

Treasury estimates the total fiscal cost of the earthquakes will be about $2 billion to $3 billion, some of which will be funded by insurance proceeds or existing funds. Net costs of $1 billion have been included in this year’s forecasts.

The operating balance before gains and losses (OBEGAL) is forecast to be $473 million in surplus this year, rising to $8.5 billion over the forecast period.

The Half Year Update shows net debt peaked as a proportion of GDP in 2015/16 – a year earlier than previously expected – and is expected to fall to 18.8 per cent of GDP by 2020/21.

Mr English says the accompanying Budget Policy Statement confirms the operating allowance will remain at $1.5 billion for each of the next four Budgets.

The capital allowance for Budget 2016 has been increased from $900 million to $3 billion in Budget 2017 and to $2 billion in future Budgets to provide for a number of high quality infrastructure and investment projects.

Contributions to the NZ Super Fund are forecast to restart in 2020/21 once net debt falls below 20 per cent of GDP.

The Half Year Economic and Fiscal Update and Budget Policy Statement can be found hereand here.

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4 Comments

  1. Blazer

     /  8th December 2016

    We know the NATZ have nothing but contempt for Treasury forecasts….Key himself explained that very recently

  2. Alan Wilkinson

     /  8th December 2016

    Hindcasts are much more accurate for sure and even those aren’t too great. Which is good. The less politicians think they know the less they will be inclined to stuff up.

  3. Damn those numbers aren’t good for National, people will get complacent and vote for the spendthrift Labour Party to throw the nice surpluses up in the air to be wasted…. doubtless that will be address by the financial geniuses of Labour by raising taxes on rich pricks like Flicker….

    But I forgot…. Grant and Andy are unhappy about NZ Government debt levels in nominal terms and they don’t think the measure of NZ govt Debt to GDP is the right measure… so we can look forward to tight budgets with no new spending under a fiscally prudent Labour stewardship as they pay down debt aggressively to the levels last seen during the boom times of the early 2000’s as the great work restructuring our economy by National Government of Bolger bore fruit…