Annette Beacher, chief Asia-Pacific macro strategist at TD Securities, points out that New Zealand’s FinMin Grant Robertson has announced a string of fiscal surpluses, where revenue strength is more than funding upgraded spending plans.
“After the unexpected pop in the surplus to +$NZ5.5b (+1.9% of GDP) last year, this year’s was downgraded to +$NZ1.7b (+0.6%) due to the commencement of a substantial capital spending program. Further out, surpluses begin at +1.3% of GDP for 2019/20 through to +2.3% of GDP by 2022/23.”
“As a share of GDP expenses remain constrained at 28-29% of GDP, and net debt is projected to slide to 19% of GDP by 2021/22. It peaked at 25.5% in 2012/13.”
“New Zealand has achieved maximum sustainable employment and inflation and inflation expectations are well anchored at 2%. While we are of the view that this combination means the OCR does not need to remain on the floor at 1.75%, the RBNZ under Governor Adrian Orr is determined not to hike for the next two years. The ‘soft’ housing market has already triggered another round of looser LVR restrictions.”