N.Z. Government boosts spending, cuts budget surplus forecasts

In presenting the governments mid-year budget, the New Zealand Finance Minister said that the economy has been impacted by Brexit and the US/China trade war. Consequently to the details of the budget below, NZD/USD has risen to a high of 0.6555.

Key notes

• Sees 2021/22 Obegal surplus/deficit nNZ$1.752 bln (budget NZ$+4.683 bln).
• Sees 2019/20 net debt 19.6 % of GDP (budget 20.4 pct).
• 2019/20 cash balance NZ$-5.154 bln (budget NZ$-4.191 bln).
• 2020/21 cash balance NZ$-7.973 bln (budget -4.252 bln).
• Sees 2019/20 GDP +2.3 pct (budget +3.2 pct).
• To maintain net debt within a range between 15% to 25% of GDP.
• Fin Min announces NZ$12 bln of new infrastructure spending.
• Says while domestic economy slowing it is still outperforming global peers.
• NZ sees 2020/21 Obegal surplus NZ$ 0.057 Bln (Budget NZ$+2.131 Bln). 

FX implications

• NZD/USD pops to 0.6555 after NZ government announces more infrastructure spending

"For the Kiwi dollar, the facts have changed rather quickly in the last couple of weeks, challenging our high conviction call of NZD weakness," analysts at TD Securities have said.

Little has changed from a top down perspective, however better data, a possible fiscal injection, and a more muted capital ask from the RBNZ have removed the catalysts we saw for near term weakness.