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Recovery forecast to continue at moderate pace

18 December 2012

Embargoed: not for publication before 12:30pm on 18 December 2012

Recovery forecast to continue at moderate pace

New Zealand’s economy continues to recover from the 2008/09 recession, according to data in the Half Year Economic and Fiscal Update (HYEFU) published today by the Treasury.

Secretary to the Treasury Gabriel Makhlouf says the Treasury is forecasting the pace of GDP growth to strengthen throughout 2013, increasing to 2.9% in the year to March 2014. However, he warned that growth will be uneven and variable across sectors and regions.

HYEFU snapshot – summary of forecasts

Dec 2012 HYEFU2011/12 Actual2012/13 Forecast2013/14 Forecast2014/15 Forecast2015/16 Forecast2016/17 Forecast
Real GDP growth 1.6%2.3%2.9%2.5%2.4%2.4%
CPI inflation1.6%1.5%1.9%2.2%2.2%2.2%
Core Crown tax revenue$55.1b$57.4b$61.9b$65.6b$68.9b$71.9b
Core Crown expenses$69.1b 33.2%of GDP $72.0b : 33.3%of GDP$71.8b : 31.4%of GDP$73.7b : 30.8%of GDP$75.6b : 30.3%of GDP$78.0b : 30.1%of GDP
Total Crown OBEGAL ($9.2b)($7.3b)($2.0b)$66m$1.4b$2.0b
Net core Crown debt $50.7b : 24.3% of GDP$60.0b : 27.8% of GDP$66.7b : 29.2% of GDP$70.7b : 29.5%of GDP$73.5b : 29.5% of GDP$75.9b : 29.3% of GDP
Net worth attributable to the Crown28.5% of GDP26.1% of GDP24.7% of GDP24.6% of GDP25.1% of GDP25.9% of GDP

Notes: Real GDP growth forecasts are stated using production measure and are annual
average percentage change for year to March
CPI inflation is annual percentage change for year to March
OBEGAL = Operating Balance Before Gains and Losses
Figures in brackets are a deficit

“The Canterbury rebuild, low borrowing costs, and ongoing demand and strong prices for New Zealand’s primary exports will all help support economic growth in the medium term,” Mr Makhlouf said.

“While we’re forecasting slower global growth than previously expected, New Zealand’s increasing trade links with China and other fast-growing Asian countries will partially offset some weakness elsewhere.

“The forecasts we’re publishing today are lower than our forecasts made at the time of the Budget in May. This period has seen other forecasting institutions such as the IMF, the OECD and the Reserve Bank revise down their forecasts in light of factors such as a weaker global recovery,” Mr Makhlouf said.

Tax revenue is forecast to grow at twice the rate of core Crown expenses as the New Zealand economy grows and as the Government continues to apply fiscal constraint.

“We’re forecasting a reduction in operating deficits over the next two years and a return to surplus in 2014/15,” Mr Makhlouf said.

“The return to surplus will see the Crown’s net worth start to recover, although net worth will remain below the levels that existed before the global financial crisis,” he said.

For further information:
Complete economic and fiscal forecasts are available on the Treasury website.


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