NZ Budget: Spending up is hard to do – Westpac

In NZ, the new Government’s first Budget will be subject to a set of self-imposed fiscal responsibility rules, effectively ensuring that it won’t be a radical departure from recent Budgets, according to Michael Gordon, Senior Economist at Westpac.

Key Quotes

“Questions have been raised as to whether the Government will be able to meet its target of reducing net debt to 20% of GDP.”

“We think that the Government will hit this target, though perhaps not for the desired reasons.”

“Limited capacity in the construction sector means that capital spending is already falling short of what was planned.”

“Delayed spending also means delayed borrowing. Net debt has come in well below projections, only some of which can be put down to a stronger tax take.”

“Until the government finds a way around its capacity constraints, the net debt ratio is likely to continue tracking below forecasts.”