'Balanced books are now in sight,' Willis says, as forecast shows earlier return to surplus

Thursday, 28 May 2026

Finance Minister Nicola Willis announced that 'balanced books are now in sight' for New Zealand.

Updated economic forecasts show the Government is on track for an earlier return to a Budget surplus.

The announcement outlines a stronger fiscal outlook than previously projected by Treasury.

Treasury is forecasting the economy will grow by an average of 2.7% over the next four years, and the Government's books will return to a surplus a year earlier than expected, in 2028/29.

The improving economic forecast was revealed in Budget 2026, with Finance Minister Nicola Willis saying these new numbers reflected the Government's 'careful management of the public finances'.

'Balanced books are now in sight,' Willis said on Thursday.

Annual average growth in the year to June 2026 was forecast by Treasury to be 1.2%, accelerating to 2.3% by June 2027, and 3.2% by June 2028.

'That growth will be accompanied by new jobs and higher wages,' Willis said.

'Over the next four years, Treasury is forecasting employment to grow by 220,000 and wage growth to average 3.1%.'

Unemployment was forecast to fall from 5.5% to 4.3%, and wages were expected to rise faster than inflation, the Budget economic and fiscal update said.

“Returning to surplus and reducing debt means more of taxpayers’ money can go towards the frontline services and infrastructure New Zealanders rely on, rather than servicing ever-growing interest costs,' Willis said.

“Debt servicing costs are currently more than $9 billion a year. Reducing the country’s debt burden means more taxpayers’ money can go towards the frontline services and infrastructure New Zealanders rely on, rather than ever-growing interest costs.'

Willis said this was a win for all New Zealanders.

'I know it is their future selves who would pay for that, it's my responsibility to be prudent now to pay for New Zealand's future.'

The government's operating balance before gains and losses excluding ACC (OBEGALx) has been in deficit since 2019/20.

“The $2.6 billion OBEGALx surplus forecast in 2028/29 would be the first surplus in a decade, and is a big improvement on the $900 million deficit forecast in December’s half year update,' Willis said.

“Treasury also expects net core Crown debt to start reducing as a percentage of GDP in 2028/29, with this turning point occurring a year earlier than previously forecast.

“This improvement in the country’s books is reflected in the Government’s borrowing programme.

'New Zealand Debt Management has lowered its forecast issuance of government bonds by $6b over the next four years, the first downward revision to the bond programme since 2021.That is $6b New Zealand will not have to borrow, and not have to pay interest on,' Willis said.

“Treasury’s central forecast assumes the impact of the fuel crisis will be temporary, based on market pricing. While global uncertainty remains, even Treasury’s downside scenario shows OBEGALx returning to surplus in 2028/29.'

The changing shape of the books meant the peak in net core Crown debt to Gross Domestic Product was 0.8% lower, at 46.1% in 2028/29.

'You can't let it get over 50% or you can find yourself in a debt spiral,' Willis said, referring to comments made by credit rating agencies.

For now the goal was to 'get it under 40% of GDP', but Willis signaled this Government 'is aiming for 30%'.

'Those who would delay debt repayments are taking a big risk,' she said.