If last year’s NZ Budget was the “wellbeing budget,” I guess the 2020 budget should be coined something like the “Covid response & recovery budget.”

The key highlight is net debt is forecast to surge to 53.6% of GDP by 2023 – big increase from the previous 20% target, but is indicative of the massive amount of damage to the economy from the covid-19 virus and subsequent response.

The key budgetary points are:

• 2020 Operating surplus before gains, losses (OBEGAL) NZ$-28.293billion, (half year economic fiscal update (HYEFU) NZ$-0.943 billion)
• 2020/21 OBEGAL deficit NZ$-29.599 billion (HYEFU NZ$+0.057 bln)
• 2021/22 OBEGAL deficit NZ$-27.199 billion (HYEFU NZ$+1.752 bln)
• 2020 Net Debt 30.2% of GBP (HYEFU 19.6%)
• 2020 Cash Balance NZ$-32.031 billion (HYEFU NZ$5.154 bln)
• 2020/21 Cash Balance NZ$-43.313 billion (HYEFU NZ$7.973 bln)
• Economy to contract by 4.6% in 2020 (ie -4.6% GDP)
• 2022/23 OBEGAL deficit NZ$-16.454 billion (HYEFU NZ$4.061 bln)
• NZ$50 billion Covid-19 response and recovery fund
• NZ$4 billion business support package; including targeted NZ$3.2 billion wage subsidy extension
• NZ Finance Minister says OBEGAL deficits will average 9.3% of GDP, or NZ$28 bln, from 2020 to 2022
• NZ Finance Minister says deficit seen reducing to 1.4% of GDP by 2024
• Govt plans to issue NZ$165 billion of bonds in 4 years to Jun 2024
• Sees unemployment rate peaking at 9.8%
• Forecasts 5.7% unemployment in FY ending June 2022
• Sees economy returning to growth by June 2022
• Government plans 8,000 extra new homes under Public Housing Program
• Housing Agency to borrow an extra NZ$4 billion over 4-5 years
• Budget surplus possible by FY June 2025
• Raise infrastructure spending by NZ$3 billion to NZ$15 billion
• Plans to issue NZ$60 billion in government bonds in 2020-21 year.

Debt rating agency S&P

said the budget indicated a significant hit to the finances from the impact of Covid-19, but they

expect the economy to recover faster than the budget assumes

. It expects improvement after fiscal 2021.

The NZD is marginally higher in immediate response.

Current indicative levels are:

NZD-USD 0.5970 / 0.5995

NZD-AUD 0.9290 / 0.9315

NZD-EUR 0.5520 / 0.5545

NZD-GBP 0.4885 / 0.4910

NZD-JPY 63.85 / 64.10

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