Government’s return to surplus pushed back another year to 2030
Tuesday, 16 December 2025
The Treasury is forecasting the Government won’t get its books back into balance until 2030 — a year later than it had predicted in the Budget — due to the delayed economic recovery.
Its Half Year Economic and Fiscal Update published today also expects net core Crown debt will peak slightly higher than it had previously predicted at 46.9% of GDP or $236 billion in the year to June 2028, rather than at 46% of GDP or $230b.
Finance Minister Nicola Willis said people shouldn’t get “too wound up” by what she described as modest changes.
“It is the path back to surplus that counts.”
Read more:
RBNZ governor’s unscheduled message had impact only ‘at the margins’
The 0.9% drop in GDP may not have happened, but the lack of growth is evident
RBNZ delivers 0.25% interest rate cut, but it looks like the last
She confirmed the Government would only allow $2.4b for extra operational spending in each of the next four Budgets.
But in an apparent dress rehearsal for a possible debate with her new-found nemesis former finance minister Ruth Richardson on fiscal policy, she said the Government “won’t overreact to forecast changes”.
“Some would go much harder. The Taxpayers’ Union, for example, want to abolish all Working for Families tax credits. This would take money away from 330,000 Kiwi families who overnight would lose an average of around $180 a week.
“It would create a level of human misery that I, for one, am not prepared to tolerate.”
Taxpayers’ Union spokesperson James Ross said that when Willis was appointed Finance Minister in December 2023, “a surplus was only 3½ years away in 2027”.
“Now it’ll take 6½ years instead. There’s only so far we can keep kicking the can down the road.”
Treasury secretary Iain Rennie said that compared to when it published its last forecasts in the May Budget, “we have clearly had a significant slowdown in growth in the middle of the year”.
It now forecasts a deficit of $945m in the year to June 2029, instead of a previously touted wafer-thin $214m surplus.
The so-called “Obegalx” deficit forecast excludes losses from ACC. With those included, the Treasury is forecasting an operating (Obegal) deficit throughout the 4½-year forecast period — albeit a tiny one of $60m in the June 2030 year.
Debt, as a proportion of GDP, has climbed from 18.6% in 2019, pre-Covid, and the Treasury has advised it should not exceed 50% of GDP in normal times to leave headroom for extra borrowing in the event of major natural or economic disasters.
In another negative turn, the Treasury is forecasting the Government will need to issue $129 billion of bonds (debt) in the four years to June 2029, $3b more than it had forecast at the Budget.
It will reduce other short-term borrowings by $5b, but only because it has decided it needs to keep less cash on hand, in reserve, in the form of a “liquidity buffer” for unexpected events.
Rennie said the deterioration in the fiscal outlook was due to the economic recovery taking longer to kick-in, which has a knock-on effect on tax revenues, but — backing Willis’ take — described the changes as “pretty small” in the context of past revisions.
In one silver-lining, Rennie said its forecasts were finalised on October 28, when it was forecasting GDP growth of 0.4% in the three months to the end of September.
It now expects Stats NZ will report economic growth of “just under 1% for the quarter” when it publishes the third quarter figures on Thursday, which would have had a positive knock-on effect on its predictions.
“The broad economic story remains the same in that we expect a cyclical economic recovery over the next few years. The economy is emerging from a deep downturn,” he said.
Willis seized on the expected quarterly GDP upgrade as a reason for more cheer.
“There are very strong indications now we are running ahead of schedule.”
2026 would be better than 2025, she said.