New Zealand's Treasury on Tuesday outlined rising unemployment, a slower improvement to the economy and a weaker balance sheet, as the government projected it would not be able to return to surplus within its five-year forecast period.
"The Half Year Economic and Fiscal Update released today shows the Crown's financial position has deteriorated over the past six years," said New Zealand Finance Minister Nicola Willis at the release of the half-yearly update, just over a year since the conservative government took office.
"What we have outlined today is changes in Treasury’s forecast assumptions that mean the hill we have to climb is steeper than it was a year ago," she said. "It is a tough job, but we are up for it."
Willis added the weaker economy reinforced the importance of the government's cost-saving measures.
Since being elected last October, the centre-right coalition government has faced a worsening economic situation with unemployment rising and government tax revenue lower than expected.
Treasury sees a 0.1% economic contraction in the third quarter but is forecasting growth for the fourth quarter and through 2025.
New Zealand on Tuesday forecast a budget deficit of NZ$17.31 billion ($10.02 billion) for the fiscal year ending June 30, 2025, wider than a deficit of NZ$13.37 billion forecast at its budget in May.
It no longer expects the government books to record a surplus in the five-year fiscal period ending June 2029. In May, it had expected a return to surplus in the year ending June 2028.
The government introduced a new measure on Tuesday for reporting its financial position that excludes that of the government-owned accident health provider. Under this measure, the government would return to surplus by the year ending June 2029.
Net debt, which excludes a government-owned wealth fund and advances such as student loans, was forecast to peak at 46.5% of gross domestic product in the year ended 2027, two years later than forecast in May.
The National Party of Prime Minister Christopher Luxon has pushed a number of austerity measures it says are aimed at bringing the books back into the black, including significant cuts to public servant numbers, as well as reduced budgets and little new spending for public services.
It did, however, introduce tax cuts from July 31.
"I am confident that there are still more savings to be found," Willis said.
($1 = 1.7271 New Zealand dollars)
