Venkat Raman
Auckland, December 15, 2022
Although Year 2023 is predicted to be a tough year with the global economy likely to suffer inflationary pressures and economic slowdown, New Zealanders can expect economic security, Deputy Prime Minister and Finance Minister Grant Robertson has said.
His assurance came as the Treasury produced its Budget 2023 forecasts and the Finance Minister’s traditional end-of-the-year Budget Policy Statement.
He said that a combination of the global economic downturn, high inflation at home and around the world, and a geopolitical situation dominated by war, trade disputes and ongoing supply chains issues will test New Zealand’s strength and resilience.
Prudent fiscal policy
“The Budget Policy Statement confirms that the government will run a prudent fiscal policy and return spending to normal levels following the Covid emergency response. This position will support the direction of monetary policy to bring inflation down. We then need to face another challenge to support Kiwis through the shallow recession forecast for the latter part of 2023,” Mr Robertson said, added that growth is likely to accelerate on the other side of that slowdown due to growing exports, lower inflation, and a bounce back in business investment.
Budget 2023 will once again focus on New Zealanders’ overall wellbeing, achieving long-term goals including the just transition to a low emissions economy and improving child wellbeing and mental health, he said and added that Budget 2023 will focus on four areas.
“Supporting families and households experiencing the cost of living pressures will be a priority. Alongside that, we will continue to manage our finances carefully and responsibly. Government spending as a percentage of GDP is expected to fall over the forecast period and contribute less each year to overall domestic demand,” he said.
Stating that the four basic areas will be Health, Education, Housing and Infrastructure, Mr Roberton promised that the government will continue its balanced approach in Budget 2023, ensuring that investments are strong in these public services areas.
Futuristic Economic Plan
“Even in tough times, we have to have an eye on the future. The government’s economic plan is driving towards creating higher wage jobs in a low emissions economy while providing economic security. It is vital we invest now in the skills and innovation to get us there,” he said.
The Treasury is continuing to forecast that the government will return the books to surplus in 2024-2025, marking five years of deficits following the onset of Covid, compared to the six years of deficits run by the previous government after the Global Financial Crisis.
Mr Robertson said that in the two years between now and the surplus, deficits are a combined $5.1 billion smaller than forecast back in May this year.
“As a result of our careful fiscal management, real government consumption is forecast to fall by 8.2% between September 2022 and December 2024. The contraction follows the emergency economic response, with this measure of government spending set to return to the same level as before the Covid-19 pandemic,” he said.
Mr Robertson warned that tough choices will be needed on the pathway back to surplus.
“Ministers have been directed to run a reprioritisation process ahead of Budget 2023 to create space for new initiatives within their existing budgets, outside of the cost pressures that will be funded from the $4.5 billion operating allowance, which is unchanged from Budget 2022. These choices that we face in Budget 2023 will not be easy. We know that households across New Zealand will be making similar choices as we enter this global downturn and get inflation back down,” Robertson said.
He said that by consolidating our position as the world heads into a potentially serious downturn, Budget 2023 will support Kiwis through these times and create opportunities to boost our productivity and potential as we shift towards a high-wage, low-emissions economy that provides economic security in good times and bad.
