In a moment of solace for Finance Minister Grant Robertson, today’s unveiling of Treasury’s economic health check, the Pre-Election Economic and Fiscal Update (Prefu), countered the direst predictions. While a recession isn’t on the cards, a surplus is expected by 2027 despite whispers of financial doom.
Indeed, over the next four years, we can expect the economy to expand by an average of 2.6 per cent, and by 2027, it will be $4 billion larger than Treasury’s last forecast from May. Thanks in part to the Government’s spending reductions of $4b announced in August, the forecast OBEGAL surplus is delayed only by a year, from 2026 to 2027. Furthermore, the anticipated surplus will be $2.1b, a far cry from disastrous estimations.
The economic prognosis brought forth by Minister Robertson contained uplifting news for working New Zealanders. With wage growth forecast to average 4.8 per cent over the next four years compared to CPI inflation hovering just over 2 per cent, the purchasing power of the nation’s earners is set to rebound after years of inflation shadowing wage growth. Minister Robertson expressed optimism saying the “economy is turning a corner” and outlined the sturdy foundation in place to face upcoming challenges.
Further lifting the spirits of the Labour, Green, and Te Pāti Māori political bloc was the release of Prefu, eagerly awaited by them for weeks to steer their fiscal and economic strategies. However, their chances to form the government following the election still languished at a mere one in twenty (5.4 per cent), according to the Herald’s poll of polls. Should elections happen this very weekend, these odds would shrink to a paltry one per cent.
On the healthcare front, fresh developments emerged today at the Canterbury Cancer Centre in Christchurch, opened by Prime Minister Chris Hipkins and Minister of Health Dr Ayesha Verrall. A $6.5 million contribution by the Government in 2020 as a shovel-ready project post-Covid made this centre a reality. With 50 rooms for the patients and families of South Island, this institution represents a haven for organisations providing cancer services to collaborate.
In the face of contrasting polls and economic forecasts, Finance spokesperson Nicola Willis expressed her concerns over the apparent grim economic picture and the Government’s fiscal health. “Labour has left the cupboard bare,” Willis claimed, citing an update revealing a $23b increase in government spending than what was anticipated in the 2020 pre-election update. Despite the cloudy forecast, Willis remained steadfast in her commitment to tax relief and economical spending.
In a contrasting note, Labour leader Chris Hipkins noted that Prefu showcased an economy on the mend and New Zealand making headway on the war against inflation. While acknowledging that results from a recent poll fell on his shoulders as Labour leader, Hipkins highlighted Labour’s willingness for change and commitment to addressing inflation.
While the Prefu’s unveiling announced much-needed relief to economic gloom, road to recovery is far from smooth with wider deficits burdening the short term. This financial year is expected to witness a deficit of $10b, an upshot from the $6.9b forecasted at the 2023 budget. Next year will see an anticipated deficit of $11.4b, an upward revision from $7.6b.
These forecasts, though seeming optimistic, pave the way for a decade of relative austerity, projects a resurgent housing market and surged migration levels. Such an outlook spells out challenges for both political parties attempting to manage economic growth and government services, but it ignites hope in a nation that is gradually steering clear of economic turbulence.
