NZ Budget Release - NZD little changed

Thursday, 25 May 2017, 2:48 pm
Press Release: HiFX

The NZ Budget for 2017 has just been released.

The key budgetary points are:
NZ Govt forecasts average GDP growth of 3.1% over next five years
NZ Govt forecasts GDP peak of 3.8% in 2019
NZ Govt forecasts unemployment rate drop to 4.3% by 2020
NZ Govt forecasts NZ$2.9b operating surplus in 2017/18
NZ Govt forecasts NZ$4.1b operating surplus in 2018/19
NZ Govt forecasts NZ$6.1b operating surplus in 2019/20
NZ Govt forecasts NZ$7.2b operating surplus in 2020/21
NZ Govt new capital spending NZ$4b in 2017 budget
NZ Govt forecasts net debt 19.3% of GDP by 2020/21 from 24.4% in June year 2016
NZ Govt forecasts CPI inflation 1.6% year to June 2018
NZ Govt forecasts CPI inflation 2.1% year to June 2019
NZ Govt forecasts CPI inflation 2.2% year to June 2020
NZ Govt forecasts CPI inflation 2.1% year to June 2021
NZ Govt forecasts GDP growth of 3.5% June year 2018
NZ Govt forecasts GDP growth of 3.8% June year 2019
NZ Govt forecasts GDP growth of 2.9% June year 2020
NZ Govt forecasts GDP growth of 2.4% June year 2021
NZ Govt forecasts GDP per capita 1.4% June year 2018; 1.8% 2019; 1.3% 2020; 1.1% 2021
Total capital investment in next four years NZ$32.5b
NZ Govt to raise two lowest tax thresholds from April 2018
NZ Govt to spend NZ$134m on trade agenda
NZ Govt to spend extra NZ$7b on public services
NZ medium term economic outlook positive
One of biggest risks is more isolationist economic policies being pushed in some parts of the world
Increased operating surpluses to be spent on new capital investments
New spending includes NZ$7 b over 4 yrs in public services, NZ$11 b on infrastructure
To raise income tax thresholds from $14,000 to $22,000 and from $48,000 to $52,000. This is part of a 6.5 b family package.
Increases in Family Tax Credit
Accommodation Benefit increases weekly payment for students by $20 in Auckland, Wellington, Christchurch but less in other centres.
Maximum Accommodation Supplement for 2-person household will increase between $25-$75 per week, and between $40 and $60 a week for larger families.
The inflation forecasts remain low. In fact, CPI for 2018 is forecast to be 1.6% (from 2.0% forecast in the 2016 budget).

The NZD is little changed immediate response to the budget release.

Current indicative rates are:

NZD-USD 0.7025 / 0.7050
NZD-AUD 0.9370 / 0.9395
NZD-EUR 0.6255 / 0.6280
NZD-GBP 0.5410 / 0.5435
NZD-JPY 78.40 / 78.65

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