New Zealand’s budget deficit shrinks sharply on economic rebound

FILE PHOTO: Residential houses are seen in Wellington, New Zealand
FILE PHOTO: Residential houses are seen in Wellington, New Zealand, July 1, 2017. REUTERS/David Gray/File Photo

October 12, 2021

SYDNEY (Reuters) – New Zealand’s government on Tuesday reported a marked improvement in its finances thanks to a surprisingly brisk recovery for its economy, though a fresh coronavirus outbreak has since clouded the outlook somewhat.

The New Zealand Treasury said it had a budget deficit of NZ$4.6 billion ($3.2 billion) in the year to end June 2021, compared with a shortfall of NZ$15.1 billion forecast just a few months ago in May.

Revenue was higher and expenditure lower than forecasted as economic activity rebounded strongly and unemployment fell much more quickly than expected.

That allowed the government to borrow less than planned so that net core debt amounted to 30% of gross domestic product, instead of the 34% originally forecast in the 2020/21 budget.

Minister of Finance Grant Robertson said the current year would be impacted by the recent outbreak of the Delta variant that has forced a lockdown of the country’s largest city, Auckland.

“However, the 2020/21 Crown accounts on the back of a solid result in 2019/20 put New Zealand in a strong position to support social and economic recovery and development,” he said in a statement.

($1 = 1.4438 New Zealand dollars)

(Reporting by Wayne Cole; Editing by Edwina Gibbs)