Budget 2022: New budget rules unveiled by Finance Minister Grant Robertson

The second new fiscal rule announced by Robertson is a net debt ceiling.

“Under the old measure of net debt, the Treasury recommended that the ceiling be 50% of GDP. When we translate that into the new measure, to better compare it to other countries, that ceiling is 30 % of GDP,” Robertson mentioned.

“This is a limit rather than a target, and again it is flexible enough to provide a buffer against short-term shocks, while providing greater leeway for productive investment. .”

The International Monetary Fund forecasts net public debt to be 21.3% of GDP in 2023 before falling to 16.4% in 2027. By comparison, Australian government net debt is expected to reach 40.7% in 2023, peak at 41.3% in 2024 and drop. to 37.9% in 2027.

The next surplus is expected by 2024/25, Robertson said. This is a year later than expected by the Treasury in December. Once the surplus is achieved, the government will commit to keeping it within the range of zero to 2% of GDP over time.

“It means that as we enter the new normal, spending to run government services will not increase public debt,” Robertson said.

“There will be allowances for large shocks, and this is an average percentage to allow for additional investment in a particular year if needed.

“The surplus target will also be the main rule that controls our spending decisions and will require a careful and balanced approach.”

The finance minister said that as New Zealand transitions to a “new normal after the peak of COVID”, now is a good time “to resume a set of fiscal rules to carefully manage costs while planning for the ‘coming”.

“Just as the previous national government incurred six annual deficits and increased debt following the global financial crisis and the Canterbury earthquakes, we have done the same to protect New Zealanders from the effects of COVID-19.

“Add to the impact of the war in Ukraine and continued supply chain disruption due to ongoing COVID responses around the world, we are facing five years of shortfalls compared to National’s six. The first surplus since the 2018/19 campaign the year is scheduled for 2024/25.”

The 2022 budget will be tabled on May 19.

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