Strong Government books leave New Zealand well placed amid global challenges

  • Deficit half of forecast at $9.7 billion; Deficits as a percentage of GDP running better than during GFC
  • Net debt at 17.2 percent of GDP lower than Australia, UK, US and Canada.
  • Core expenses $2.8 billion lower than forecast. Increased expenditure during year due to COVID-related expenses through unprecedented Delta and Omicron outbreaks
  • Strong result allows for ongoing investment in core services like health, education and housing to occur amid worsening global economic challenges

The Government has delivered a set of books that are among the strongest in the world, ending the 2021/2022 fiscal year in a stronger position than forecast and ensuring New Zealand is well placed to respond to an increasingly volatile global economy.

For the year to the end of June 2022, the Operating Balance before Gains and Losses (OBEGAL) recorded a deficit of $9.7 billion, roughly half of what was forecast just months ago at Budget 2022.

“We’ve delivered Government books that not only compare favourably with the comparable stage during the Global Financial Crisis, but across the key economic measures of growth, unemployment and Government debt we’re in a better or similar position to the likes of Australia, the US, UK and Canada,” Grant Robertson said. 

“On the measures that matter the Government has steered the New Zealand economy and Government books through the 1-in-100 year economic shock of the pandemic favourably compared to the GFC – our economy has bounced back quicker, unemployment is lower, and the increase in debt compared to the size of the economy is comparable.

“Our Wellbeing Approach has also seen significant reductions in child poverty through this economic shock. We are building more houses than ever on a yearly basis and we have invested heavily in skills and training, with apprenticeships more than 50 percent higher than when we took office.

“The result confirms that our strong health response during the Delta and Omicron outbreaks has also led to one of the best economic responses in the world.

“In a volatile global environment it’s critical the fundamentals of the economy are strong, and they are. Our economic and fiscal position means we are well positioned to address ongoing challenges while continuing to make investments in the critical services New Zealanders need.

“The Government’s strong finances allow us to focus on investing in what matters most to New Zealanders: growing wages and cost of living support, hospitals, schools, housing, and addressing climate change. The best investment in our economy is investing in our people.

“However, the global environment is challenging and will continue to put significant pressure on the Government books, so we will keep running a tight ship in order to achieve a return to the surpluses our Government posted pre-COVID.

“The end of the 2021/22 financial year marks the closing of the COVID Response and Recovery Fund and the end of emergency spending. As I have already indicated over the coming year with COVID cost pressures reduced we will look to cut our cloth and carefully target our spending as we have done over successive budgets to meet our priority investments.

“Careful and balanced management will keep us on the pathway back to surplus. There is simply no room for unaffordable and untargeted tax cuts to those who need them the least. As we have seen, tax cuts with no plan for how to pay for them are economically reckless.

“We have every reason to be feeling positive. Our borders are open, COVID restrictions are largely gone, and we are in a position to lock in the gains of near-record low unemployment, rising incomes and a larger economy than before COVID. We’re set to accelerate our progress this summer as tourists and international students return, and working holidaymakers and skilled migrants fill workforce gaps.

“Despite the challenges the world throws at us, New Zealanders can be optimistic about our future. Our economy is doing better than predicted and with restrictions lifted we can seize the opportunities created by the Government’s strong COVID and fiscal management,” Grant Robertson said.

Key results

Core Crown revenue was 4.1 percent ahead of forecast at $117.5 billion, as the strong economic recovery boosted business results and led to more people in work, which contributed to higher tax revenue.

Core Crown expenses were 2.2 percent below forecast at $125.6 billion, as our successful COVID response to the Delta and Omicron outbreaks meant allocated pandemic-related spending was not required in full. Some of these expenses, like ongoing investment in protections such as therapeutics and vaccines, will shift into the current fiscal year.

Net debt ended the year at 17.2 percent of GDP, in line with Budget 2022 forecasts. This is one of the lowest levels in the OECD and well below the Government’s debt ceiling of 30 percent, ensuring we are well positioned to weather further economic shocks.

On a comparative measure produced by the IMF, our debt position as a percentage of GDP is roughly half the level of Australia, a quarter of the UK, and a fifth of the US.

Key fiscal indicators – 30 June 2022
  % GDP $ billion
  Actual Forecast Budget 22 Actual Forecast Budget 22
OBEGAL -2.7% -5.2% -9.7 -19.0
Core Crown tax revenue 30.2% 28.6% 108.5 103.8
Core Crown expenses 35.0% 35.4% 125.6 128.4
  excluding significant Covid expenses 30.9%   110.0  
Net debt 17.2% 16.9% 61.9 61.2
Net core Crown debt 35.9% 36.9% 128.9 133.6