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Budget Shows Stronger Than Expected Economic Recovery

· Economic growth expected to rise from 2.9 percent this
year to 4.4 percent in 2023.

· Projected 221,000 more
people to be in employment over the forecast period, with
unemployment set to decrease to 4.2 percent.

·
Deficit to fall from 5.3 percent of Gross Domestic Product
(GDP) in 2022 to 0.6 percent by the end of the forecast
period in 2025, with a return to surplus projected in
2027.

· Net core Crown debt now forecast to peak
below 50 percent of GDP due to careful economic
management.

The Government’s response to COVID-19
and strong economic management has placed New Zealand on a
firmer footing to accelerate the recovery and address
longstanding social and infrastructure
deficits.

“The economy has performed better than
expected, thanks to the efforts of businesses, workers and
the Government’s decisi­ve and bold action through highly
uncertain times,” Grant Robertson said.

“The
economy is expected to strengthen from the second half of
this year, with growth peaking at 4.4 percent in June 2023.
Unemployment is forecast to decline to 4.2 percent at the
end of the forecast period.

“The improved labour
market outlook and strength in economic activity suggest
that the longterm effects of the pandemic will not be as
severe as previously thought.”

The strong recovery
is reflected in the Government’s financial accounts, which
continue to track better than expected. The deficit over the
forecast period peaks at 5.3 percent of GDP in June 2022
before declining to 0.6 percent of GDP by June 2025. Net
core Crown debt will peak at 48 percent of GDP in 2023,
before reducing to 43.6 percent of GDP at the end of the
forecast period.

“This is still a COVID Budget, with
economic support and stimulus,” Grant Robertson
said.

“New Zealand’s strong health response means
we have weathered the 1-in-100-year COVID economic shock
better than most. However, we will continue to face ongoing
uncertainty for some time, and Budget 2021 takes a balanced
approach to investing in areas and people where it is needed
most, alongside careful fiscal management to pay down
debt.”

The operating allowance for this Budget is
$3.8 billion per year, with capital allowances for Budget
2021 to 2024 increasing to $12 billion. This increase is
possible because the economy has performed better. Operating
allowances for future Budgets have been set at $2.7 billion
per year as the immediate need for stimulus
declines.

“The Government will continue to invest in
New Zealand’s future and advance our three priorities of
keeping New Zealanders safe, accelerating the recovery and
dealing with longstanding issues of climate change, child
wellbeing and affordable housing,” Grant Robertson
said.

“We are investing in reducing social
inequalities and making a material difference to the daily
lives of the more vulnerable among us. Our recently
announced housing package will assist first home buyers and
boost the supply of new homes. We will continue to invest in
the country’s infrastructure, such as roads, hospitals and
schools.

“We can’t meet all our long-term
commitments in one Budget. This is part of a package that
will address our priorities and build the sort of society
that New Zealanders want,” Grant Robertson
said.

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