Budget 2023 to provide security in difficult global environment

Finance

Budget 2023 will continue the Government’s commitment to providing Kiwis with economic security through what will be a difficult year for the global economy facing both the challenge of inflation and a forecast economic slowdown.

The combination of a global economic downturn, high inflation here at home and around the world, and a geopolitical situation dominated by war, trade disputes and ongoing supply chains issues is about to test New Zealand’s strength and resilience.

“The Budget Policy Statement I have presented today confirms the Government will run a prudent fiscal policy and return spending to normal levels following the COVID emergency response. This position will support the direction of monetary policy to bring inflation down,” Grant Robertson said.

“We then need to face another challenge to support Kiwis through the shallow recession forecast for the latter part of 2023. Growth is projected to accelerate out the other side of that slowdown due to growing exports, lower inflation, and a bounce back in business investment.

“Budget 2023 will once again focus on New Zealanders overall wellbeing, focusing on achieving long term goals including the just transition to a low emissions economy and improving child wellbeing and mental health.

We will have four focus areas in Budget 2023. Our primary focus at next year’s Budget will be on supporting families and households experiencing cost of living pressures.

“Alongside that we will 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.

“We will continue our balanced approach in Budget 2023. We also need to ensure we are investing in getting the basics right - the strong public services that New Zealanders rely on in health, education, housing and infrastructure.

“Finally, even in tough times, we have to have an eye to the future. The government’s economic plan is driving towards creating higher wage jobs in a low emissions economy, while providing economic security. It is vital we invest now in the skills and innovation to get us there,” Grant Robertson said.

The Treasury is continuing to forecast the Government will return the books to surplus in 2024/25, marking five years of deficits following the onset of COVID, compared to the six years of deficits run by the previous Government after the Global Financial Crisis.

In the two years between now and the surplus, deficits are a combined $5.1 billion smaller than forecast back in May this year.

As a result of our careful fiscal management, real Government consumption is forecast to fall by 8.2 percent between September 2022 and December 2024.

The contraction follows the emergency economic response, with this measure of Government spending set to return to the same level as before COVID-19.

“Tough choices, however, will be required on the pathway back to surplus.

“Ministers have been directed to run a reprioritisation process ahead of Budget 2023 to create space for new initiatives within their existing budgets, outside of the cost pressures that will be funded from the $4.5 billion operating allowance, which is unchanged from Budget 2022.

“These choices we face at Budget 2023 won’t be easy. We know households across New Zealand will be making similar choices as we enter this global downturn and get inflation back down.

“By consolidating our position as the world heads into a potentially serious downturn, this Budget will support Kiwis through these times and create opportunities to boost our productivity and potential as we shift towards a high-wage, low-emissions economy that provides economic security in good times and bad,” Grant Robertson said.