NZ budget deficits to widen as global growth stalls
Dec. 5 – New Zealand’s budget deficits will probably widen next year as the global economic slump slows tax revenue and
the government brings forward spending on infrastructure.
“2009 is going to be a challenging year for everyone, including the government – our books are going to get worse
before they get better,” Finance Minister Bill English said in a statement.
Treasury figures today show the government’s operating balance slumped to a NZ$3.5 billion deficit, NZ$5 billion worse
than forecast, reflecting losses on investment in state funds such as the NZ Superannuation Fund. The deficit in the
four months ended Oct. 31 resulted from unrealized investment losses as a result of “continuing turmoil in global
financial markets,” Treasury deputy secretary Peter Bushnell said.
Central bank Governor Alan Bollard yesterday cut the official cash rate by a record 150 basis points to 5% and said the
domestic economy may revive somewhat in 2009. English today reiterated National’s policies to increase infrastructure
spending via a 20-year plan, cut taxes, reform the Resource Management Act and increase the portion of NZ Super Fund
invested locally to 40% over time.
The government plans to add A$8.6 billion in new capital projects in the next six years, English said.
Stock markets worldwide have slumped in the past three months amid increasing evidence of a prolonged global recession.
The super fund had a larger-than-expected NZ$3.5 billion loss on its investment portfolio. ACC’s loss was NZ$600 million
and EQC’s was NZ$200 million.
The Government Superannuation Fund and ACC also had losses of NZ$1 billion and NZ$400 million respectively after their
long-term liabilities were revalued.
The government’s cash deficit was NZ$900 million lower than expected at $3.7 billion, reflecting in transferring the
NZ$700 million from the previous government's Fast Forward fund and higher-than-expected petroleum mining royalties.
ENDS