NZ: Sharing the spoils in budget - ANZ

Analysts at ANZ explain that it is hard to have too many quibbles with the Government’s overall intent and strategy laid out in yesterday’s NZ Budget.

Key Quotes

“Earlier spending restraint, a decent starting point for the fiscal position, and solid growth projections provide the Government with options, and it is exercising some of those options (it is an election year after all). At the same time as extra funding for social initiatives, priority spending areas and infrastructure, and a modest tax cut, debt levels are projected to continue to be reduced. That’s an enviable mix. But if we were to nit-pick at all, it would be with the economic forecasts underpinning the numbers. They are certainly on the rosy side, with Treasury forecasting growth to accelerate towards 4% over 2019 and average over 3% over the next five years.”

“Nominal growth is forecast to average 5.1% per year. In both cases, that is well above the average growth rates achieved over the last five years and it comes at a time when the economy is now grappling with late-cycle constraints in the labour market and credit cycle. But we won’t split hairs. Even under our less optimistic growth assumptions, rising surpluses and falling debt levels are likely, leaving a still decent fiscal buffer to any future shocks.”