NZ Budget: Fiscal outperformance allows a looser stance – HSBC

Daniel Smith, Economist at HSBC, explains that New Zealand’s strong economy and rapid population growth – along with many years of fiscal restraint – have propelled the government budget into surplus (since 2014/15), in stark contrast to most other advanced economies.

Key Quotes

“This has allowed the government to loosen the purse strings in this year’s budget, ahead of the election on 23 September. Spending on public services and infrastructure have been bolstered while rising tax revenues have also given the government room to cut taxes by NZD2bn-a-year by lifting the bottom two income tax thresholds – all while still maintaining steady fiscal surpluses and a downward path in net debt.”

“Overall, these changes to fiscal policy should support growth and, in particular, the boost to infrastructure spending may help reduce some of the bottlenecks that have emerged as population growth has soared.”