VIEW: ANZ Thinks Budget Will Still Be Too “Frilly” For RBNZ

ANZ expect the budget to add stimulus to an “already capacity-constrained economy,” which is likely to be a problem for the RBNZ. It will respond to any increase in inflation from larger deficits, thus putting further pressure on the economy.

• “New Zealand’s record-wide current account deficit, a near record-low unemployment rate, and CPI inflation near a multi-decade high are all good reasons to consolidate the fiscal position faster than otherwise, but it’s not clear that Budget 2023 will deliver that … Sovereign credit rating agencies and NZ Inc’s external creditors more generally appear to be watching closely.”
• “A weaker starting point for tax and a possible downgrade to the economic outlook suggest the fiscal outlook will be weaker. Cyclone spending net of any reprioritisations will also weigh on the Government’s books. We think it’s likely that the first post-pandemic OBEGAL surplus will be delayed by another year to 2025/26.”
• “Increased spending (net of reprioritisations) and a weaker tax take will also put additional pressure on NZDM funding requirements. Kāinga Ora maturities after 2023 and any increase in Kāinga Ora spending may also add to the funding requirement.”