Strong Government finances and a strong economy

Responsible decision-making and a strong economy will deliver a forecast $3.7 billion surplus in 2018/19, up from $3.1 billion forecast in the current year, says Finance Minister Grant Robertson. 

“The Treasury’s forecasts released today show that this Government is managing the books responsibly. This means we can inject much-needed investment into essential public services and pay down debt at a responsible rate,” says Grant Robertson.

“Budget 2018 sets out the first steps in our plan to transform the economy, our public services and how we work together to improve the lives of all New Zealanders.”

According to the Treasury forecasts presented in Budget 2018:

  • Economic growth is expected to average about 3 per cent per year over the next five years.
  • The unemployment rate is expected to drop to 4.1 per cent, which would be the lowest rate in 10 years.
  • Real wages are expected to grow each year, with average annual earnings rising to $71,000 by June 2022.
  • Inflation is expected to remain steady and stable at around 2 per cent.
  • The operating balance before gains and losses (OBEGAL) is expected to continue to improve, reaching a surplus of $7.3 billion (2.1 per cent of GDP) in 2021/22, from $3.1 billion (1.1 per cent of GDP) forecast for the current year to June 2018.
  • Net capital investment will total $41.8 billion in the years to 2021/22.
  • Net core Crown debt is forecast to fall to 19.1 per cent of GDP in 2021/22.

“Our plan will ensure productive, sustainable and inclusive growth. Our job as a responsible Government is to look 30 years ahead – not just three. We are planning for what New Zealanders will need,” says Grant Robertson.

“Growth is expected to peak at 3.6 per cent in the December 2019 quarter as the Government’s policies bolster the economy, residential and business investment picks up, and consumption growth remains solid.

“Responsible management of the Government finances, and a strong economy, have given us the room to increase the operating and capital allowances at Budget 2018 and continue to meet the Budget Responsibility Rules.

“For Budget 2018, the operating allowance has been increased from $2.6 billion at the December 2017 Budget Policy Statement to $2.8 billion, and the capital allowance has been increased from $3.4 billion to $3.8 billion. Allowances for future Budgets have also increased, and are included in the Fiscal Strategy Report.

“These allowances give us the ability to make the investments needed to rebuild our critical public services and build a stronger economy through initiatives like the R&D incentive, the Provincial Growth Fund and the Green Investment Fund.

“Budget 2018 begins the transformation that will deliver New Zealanders an improved quality of life and better living standards for decades to come,” says Grant Robertson.