New Zealand Forecasts Narrower Budget Deficit for 2025/26

New Zealand Forecasts Narrower Budget Deficit for 2025/26

The New Zealand government forecasts a budget deficit of NZ$15.06 billion for the fiscal year ending June 30, 2026, narrower than the NZ$16.93 billion deficit projected in December. The government now expects to reach a surplus in 2029/30.

Fiscal Tightening Amid Economic Challenges

Finance Minister Nicola Willis stated that the budget takes careful steps to support New Zealanders while strengthening the economy. However, little short-term relief is promised for those struggling with higher fuel prices and a weak economy. The government plans to boost capital spending in defense, schools, and hospitals while cutting public service costs.

Net debt is forecast to peak at 46.1% of GDP in 2027/28, down from the previous estimate of 46.9%. Since taking office in late 2023, the center-right government has pursued fiscal tightening to curb waste and rein in debt.

Economic Outlook and Risks

Treasury now sees GDP growth at 2.3% for the year ending June 30, 2027, down from 3.4%. Inflation is expected to be 4.0% in the current fiscal year before falling to 1.6% next year. The Middle East conflict is warned to be sapping momentum in the trade-reliant economy.