New Zealand isn’t out of the recessionary woods just yet, Finance Minister Grant Robertson has admitted a day after trumpeting Treasury’s budget forecasts.
Mr Robertson unveiled his sixth budget on Thursday, with cyclone and flooding rebuilds contributing to NZ posting a fourth year in the red with a $NZ7 billion ($A6.6 billion) deficit.
Mr Robertson found room for multi-billion-dollar public housing and infrastructure spending alongside a handful of popular cost-of-living measures.
The government will fund a childcare rebate for two-year-olds, abolish the $5 pharmacy co-payment to make most scripts free, and reduce public transport fares for those under-25.
“I am pleased with what we’re hearing, particularly to those targeted cost of living initiatives,” Mr Robertson told AAP.
“For a lot of people, the $5 prescription charge has been a barrier to them getting the health care that they need, and it puts pressure on other bits of the health system, so we’re getting very positive reaction to that.”
Prime Minister Chris Hipkins labelled the budget a “no frills” affair, suited for the times ahead of the October 14 election.
The commentariat was largely positive at the balancing act Mr Robertson has performed between spending where it’s needed, and not fuelling inflation.
NZ Herald political editor Claire Trevett said there were no tax cuts or lollies, surmising that “budget 2023 was not an election-winner for Chris Hipkins but nor is it an election-loser”.
Alongside the deteriorating government books, there was better news in the economic forecasts.
The New Zealand economy contracted by 0.6 per cent in the last quarter of 2022 and was set for recession with a series of small contractions through 2023.
Treasury has now reversed those predictions, forecasting shallow growth in all four quarters of the calendar year, in part due to cyclone recovery spending.
“Tourism also came back much more strongly in the March quarter than had been expected and also the immigration picked up more strongly in that quarter,” Mr Robertson said.
The minister admitted he could have egg on his face next month when Stats NZ reveals Q1 data, which will confirm whether New Zealand has posted a recession.
“Absolutely. There are risks to that forecast,” he said.
“It is Treasury’s independent forecast and we’ll see where it lands.
“Undoubtedly, other elements of the impact of the cyclone might actually have the (downside) effect.
“If it does happen, New Zealand is going to experience a short, shallow recession as opposed to a deep and prolonged one.
“But I certainly hope we don’t experience that, and the forecast from Treasury is that we won’t.”
New Zealand’s economy is certainly sluggish, struggling as the central bank (RBNZ) lifts the cash rate due to high inflation.
The RBNZ is due to meet on Wednesday to discuss whether to lift the rate beyond its current 5.25 per cent.
Australian Associated Press