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VIEW: ANZ Sees Tax & Spending Cuts As Neutral

NEW ZEALAND
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NZ’s new government elected last October will present its first budget on Thursday May 30. Treasurer Willis said on Monday that her department has found a large number of areas where spending can be cut so it can implement its election promise of tax cuts. ANZ expects that the net impact will be broadly neutral.

  • The economic environment was downwardly revised in the budget policy statemetn, thus pushing out the first surplus.
  • ANZ notes that the Treasurer is going to have to provide “a credible path back to surplus needs to be signalled and the Government needs to stick to it. That implies the Government will probably need to get better at doing more with less and reprioritising from within existing baselines.”
  • “On our back-of-the-envelope, a forecast OBEGAL surplus for the 2027/28 fiscal year is achievable despite the weaker economy, but will require lower operating allowances than signalled in the Half-Year Update beyond Budget 2024.”
  • “Net core Crown debt is expected to remain on a clear trajectory to 40% of GDP, but may not hit that milestone over the Treasury’s forecast horizon given the outlook for a smaller nominal economy and more debt.”
  • “Speaking of debt, we expect NZDM to lift their bond issuance guidance by $10bn over the forecast horizon” to $162bn with each fiscal year up $2bn.
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NZ’s new government elected last October will present its first budget on Thursday May 30. Treasurer Willis said on Monday that her department has found a large number of areas where spending can be cut so it can implement its election promise of tax cuts. ANZ expects that the net impact will be broadly neutral.

  • The economic environment was downwardly revised in the budget policy statemetn, thus pushing out the first surplus.
  • ANZ notes that the Treasurer is going to have to provide “a credible path back to surplus needs to be signalled and the Government needs to stick to it. That implies the Government will probably need to get better at doing more with less and reprioritising from within existing baselines.”
  • “On our back-of-the-envelope, a forecast OBEGAL surplus for the 2027/28 fiscal year is achievable despite the weaker economy, but will require lower operating allowances than signalled in the Half-Year Update beyond Budget 2024.”
  • “Net core Crown debt is expected to remain on a clear trajectory to 40% of GDP, but may not hit that milestone over the Treasury’s forecast horizon given the outlook for a smaller nominal economy and more debt.”
  • “Speaking of debt, we expect NZDM to lift their bond issuance guidance by $10bn over the forecast horizon” to $162bn with each fiscal year up $2bn.