Forecasts show solid economic fundamentals

The New Zealand economy will continue its momentum over the next few years, underpinned by investment, productivity and wage growth, Finance Minister Grant Robertson says.

“The Treasury’s Half Year Economic and Fiscal Update (HYEFU) released today shows that the economy is healthy and the Coalition Government is managing the books carefully in accordance with the Budget Responsibility Rules. We’re running surpluses, controlling expenses and keeping on top of debt,” Grant Robertson said.

“This is important given the warnings of growing risks around the volatility of the international growth outlook, which could feed through to the New Zealand economy.”

Economic outlook

“The forecasts released today show the Coalition Government’s plan to help transition the economy to more productive, sustainable and inclusive growth is working,” Grant Robertson said. They show:

  • Positive labour productivity growth after five years of negative growth
  • Wages forecast to increase by over 3.3% per year across the forecast period
  • Business and residential investment growth around 4% per year
  • Export growth around 3% per year, and the terms-of-trade remaining strong
  • Unemployment to stay low around 4% as businesses continue to hire

“These factors will drive GDP growth of about 3% per year over the next couple of years, according to the HYEFU forecasts. This represents strong growth at a time when the economy is running at capacity, and is in line with other forecasters. Over the next three years, the New Zealand economy is forecast to grow stronger than Australia.

“Growth is expected to revert to trend in the out-years, as is normal in the Treasury’s forecasts. This is largely due to its net migration forecast dropping back to the long-run average of 25,000 by the end of the forecast period.”

Fiscal outlook

“The HYEFU forecasts show continued careful management of the Government’s books on behalf of all New Zealanders, and that the Budget Responsibility Rules are being met,” Grant Robertson said. They show:

  • The OBEGAL surplus is forecast to rise from $1.7 billion in 2018/19*, to $8.4 billion in 2022/23
  • Core Crown expenses are forecast to drop from 29.5% of GDP in 2018/19 to 28.3% of GDP in 2022/23
  • Net debt is forecast to be 19.0% of GDP in 2021/22 (the year in which the 20% target has to be reached).

“Our careful management of the Government’s books gives us the ability to make important investments in public services for all New Zealanders. We’re also continuing our plan to invest a net $42 billion in capital and infrastructure over the next five years, which is before further Budget decisions are made.”