VIEW: ASB Expects Sensible Budget But Maybe Not Enough To Stop RBNZ

ASB is expecting a “no frills” budget to be delivered by the government tomorrow focussing on key priorities but questions whether it will be enough to prevent further RBNZ rate hikes or improve the large current account deficit. It warned the government that a reckless budget would be met with even higher rates.

• ASB is projecting a “marginally weaker profiles for budget balances, and modest upward tweaks to Crown debt and bond issuance reflecting downgrades to Treasury forecasts for economic activity and the costs of cyclone damage.”
• “The $4bn in reprioritisation of spending and spending cuts in some areas should cap lifts in overall operational and capital allowances and see government spending decline as a share of GDP.”
• ASB is forecasting FY23 & FY24 total Crown OBEGAL at -$3.0bn, FY25 -$1bn and FY26 +$3.0bn. The return to forecast is likely to be a year or two later than expected earlier but the fiscal rules should continue to be “comfortably met”.
• “The gross bond tender is expected to be around $10bn higher out to 2026/27.”