NZ govt shows highest surplus since 2008

8:46 AM 8 October 2019

Summary:

  • NZ government shows a higher than forecast budget surplus in the 2019 fiscal year ended in June
  • A higher surplus signals the country has room to loosen the purse strings to avoid a deeper economic downturn
  • NZ dollar trades higher in the aftermath of the release

The New Zealand’s government showed on Tuesday that its budget surplus widened in the 2019 fiscal year 2 billion NZD to 7.5 billion NZD, the highest nominal value since the great financial crisis in 2008. This figure also beat assumptions presented in May suggesting a surplus being 4 billion NZD lower. In turn, compared to the same period last year the surplus was higher by 2 billion NZD. On top of that, the government showed its net debt falling to 19.2% of GDP, down from 19.9% a year ago. The data shows that the NZ economy has quite a lot of fiscal space to loosen the purse strings in order to repel a possible economic downturn.

Therefore, one may note that the country has also entered a group of countries holding such space like Germany, the Netherlands or South Korea. That could be an important aspect for a small economy like New Zealand being strongly dependent on what happens abroad, especially in China. As presented in the graph below, at the end of the past year, the country had a 0.1% of GDP surplus in the general government account allowing also for other state units. 

The NZ economy is continuing to build its fiscal buffer to help itself avoid any economic downturn. Source: Bloomberg

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