New Zealand’s government forecasts a larger budget deficit but better-than-predicted economic conditions in the coming year as is updates forecasts ahead of next month’s election.

For the year ending 30th June 2024, the government forecast a budget deficit of NZ$11.4 billion ($6.7 billion), surpassing the NZ$7.6 billion deficit forecast in May.

It now predicts returning to surplus by 2026/27, a year later than originally planned, Reuters reports.

According to a statement by Finance Minister Grant Robertson, the global economy has weakened since May, which is having a direct effect on New Zealand’s economy, whilst tax revenue is also in decline.

As New Zealanders head to the polls, the economy is becoming the key issue, with the country in a technical recession and inflation at 30-year highs. 

The government was required to publish revised fiscal forecasts before the general election on 14th October.

The economy, which contracted in Q4 last year and Q1 this year, is performing better than expected and is forecast to stay in positive territory over the next year, as per the Treasury’s economic and fiscal update.

“The economy is holding its own in an uncertain global environment. Our economic plan to support New Zealanders dealing with the cost of living while investing in building a stronger, more resilient and inclusive economy is working,” the finance minister stated.

Back in May, the government unveiled heavy infrastructure spending, with a focus on the health system and new schools. Yet centre-right parties criticised the move and a planned delay in reverting to surplus.

“Treasury’s latest forecasts show the economy isn’t working for Kiwis,” said National Party leader Christopher Luxon.

Inflation is not forecast to return to the government target’s range of between 1% and 3% until late next year, says the Treasury’s update. In Q2 2023, consumer prices were up 6.0% compared to the year before.