New Zealand Seen Posting Bigger Budget Deficits, Borrowing More.

New Zealand's new government is expected to announce larger budget deficits and increased borrowing in its first budget, despite weaker revenue. Economists predict that the deficit for the year through June will be larger than previously forecasted, and shortfalls in the next three years will also widen. The government plans to increase bond issuance by up to NZ$15 billion over the next four years. The budget will focus on delivering key election promises, including tax cuts, but economists emphasize the need for a credible path back to surplus. The government aims to rein in debt by cutting spending and reversing initiatives from the previous administration. However, recessionary conditions have limited tax receipts. The tax package, which includes income tax threshold increases and additional tax credits, is expected to be relatively modest. The Reserve Bank will need to assess whether the tax cuts contribute to inflation. The government's plan to fund tax relief by allowing foreigners to buy expensive homes was abandoned, and it is unclear if this policy will be included in the budget. The economy was in recession in the second half of last year, and growth is projected to be minimal in the coming years. The government aims to reduce debt, which currently stands at 43% of GDP, to a range of 20-40% over time. However, economists do not expect debt to reach 40% of GDP in the next four years. [Extracted from the article]

Copyright of Bloomberg.com is the property of Bloomberg, L.P. and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)