Treasury gives Willis pre-election boost as surplus forecast improves
New Zealand's Treasury has released an updated economic forecast showing a smaller-than-expected deficit and a clearer path to a budget surplus. While the government views this as a positive sign of economic resilience, critics note the improvement is largely driven by higher tax revenue from persistent inflation.
Why it matters
Economic forecasts significantly influence government policy decisions and voter sentiment regarding fiscal management and cost-of-living pressures.
Nicola Willis has been given a pre-election reprieve, with Treasury painting a brighter picture of the government's finances in the short term.
But the update comes with a sting in the tail for voters, with the recovery largely driven by an increased tax take due to "higher and more persistent" inflation.
The Pre-election Economic and Fiscal Update (Prefu) - released on Tuesday - forecast a deficit of $6.8 billion in 2026/27, down from the May Budget's $11.4 billion prediction.
Officials expected that to narrow to just $0.8b the next year - what Willis described as "within a hair's breadth of a surplus".
The books were still picked to return to surplus in 2028/29, in line with National's election pledge. And it's a larger-than-expected surplus too - $4b, compared to the Budget prediction of $2.6b.
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