New Zealand budget deficit widens as government expenses jump
NEW Zealand’s annual budget deficit widened more than forecast as high inflation increased the cost of government services and welfare support.
The deficit was NZ$12.9 billion (S$10.2 billion) in the year ended Jun 30, compared to the NZ$11.1 billion projected in the May budget, according to final financial statements issued by the Treasury Department on Thursday (Oct 10) in Wellington. The deficit grew from NZ$9.5 billion in 2023.
New Zealand’s new government, which took power late last year, is trying to tighten its belt by firing thousands of public servants, cancelling costly projects and reducing allowances for discretionary spending. Its efforts are being hampered by a weak economy, which is adding to costs and curbing growth in tax revenue.
“The books are not in great shape,” Finance Minister Nicola Willis said. “We need to tidy them up. We need to impose restraint.”
Willis is targeting a return to budget surplus in 2028 and wants to reduce net core crown debt to less than 40 per cent of gross domestic product. It was 42.5 per cent of GDP at Jun 30 and is not forecast to fall below 40 per cent over the next four years.
Total expenses in the year to June were NZ$180 billion, 2.5 per cent higher than forecast in the budget. Total revenue was NZ$167.4 billion.
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“Government spending has skyrocketed over the last six years and so has government debt,” Willis said. “The government is committed to driving more value from government spending, getting the books back in surplus and starting to bring down net debt.”
She said savings measures already announced by the new government reduced the potential deficit by NZ$1.1 billion.
According to the budget forecasts, the deficit will widen further to NZ$13.37 billion in the year to June 2025 before starting to narrow. The government will release its half-year economic and fiscal update, which includes fresh forecasts, on Dec 17.
“I can’t promise they will tell a happy story,” Willis said, adding the intention remains to achieve surplus by 2028. “We are confident we will do that.” BLOOMBERG
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