Budget 2.0 – Delivering for New Zealanders

Finance Minister Steven Joyce’s budget debut is all about “Delivering for New Zealanders”.

Joyce is taking advantage of strong economic and fiscal conditions. Budget 2017:

• Lifts family incomes, by way of tax cuts, changes to working for families and a boost to the accommodation supplement
• Improves resilience against future economic shocks and natural disasters
• Invests in public services
• Invests in a growing economy
• Invests in infrastructure

Joyce says “we have a strong and growing economy built on a strong economic plan.” Has he delivered?

The economic and fiscal outlook is positive, supported by exports, tourism, construction activity, high inbound migration and low interest rates. Annual economic growth is forecast to grow by around 3 percent over each of the next four years.

Annual Change in Real GDP

Real GDP growth per capita is less rosy, forecast at 0.9 percent for 2017, rising to 1.4 percent in 2018. That’s OK by New Zealand standards but it has been higher in the past – in 2013, 2012 and 2007 for example.

Even so, the Government is well placed to rebuild our fiscal resilience. It remains on track to meet its net debt to GDP target of around 20 percent by 2020 and now aims to reduce net debt to between 10 and 15 percent of GDP by 2025.

Net Debt to GDP over time

New Zealand always benchmarks ourselves against Australia. Read our head-to-head comparison here.

Overall, Joyce’s first budget is a balanced affair. He’s billed it as “sticking to the plan” and, with public services, debt, tax and infrastructure all tackled, he’s done just that.

Aaron Quintal, aaron.quintal@nz.ey.com, +64 9 348 8001

David Snell, david.snell@nz.ey.com, +64 21 845 361