NZ Half-Year Economic and Fiscal Update: More spending, in time – ANZ

Analysts at Australia and New Zealand Banking Group (ANZ) express their take on New Zealand’s Mid-year Economic and Fiscal Update released earlier on Wednesday.

Key Quotes:

“As previously signalled, the Government intends to increase infrastructure spending over the next few years.

An extra $12 billion of infrastructure spending has been added to the fiscal outlook, and that will support growth over the medium term. However, given the delays typical with infrastructure spending, we doubt they’ll be able to implement this as quickly as they hope. We await further announcements regarding the specific projects to be funded. 

The NZD saw a modest rally following the release, justifying the markets bias on the currency from the week prior. The 10-year NZ Government bond yield however fell around 3.5bps as the promise of additional spending did not eventuate in a materially larger government bond issuance programme – as had been anticipated by markets following the announcement of additional spending.

Overall, the Treasury’s Half-Year Update forecasts show the Government’s books are expected to remain in good shape over the next five years. Underpinning this, the Treasury’s economic outlook remains a little more optimistic than our own, but the flexible debt target means that shouldn’t result in any tough decisions down the road – provided the target range isn’t pushed to its limits.”