By Lucy Craymer
WELLINGTON, Sept 29 (Reuters) - New Zealand Prime Minister Christopher Luxon on Tuesday pointed to an improving fiscal position and a stronger-than-expected economy as evidence of his government's economic management credentials, seeking to build support ahead of a general election.
The government on Tuesday forecast a smaller budget deficit and lower debt than projected in its May Budget, while striking an upbeat tone on growth in an economic outlook closely watched by voters concerned
about living costs ahead of the November 7 election.
Treasury forecast an operating balance before gains and losses (OBEGAL) deficit of NZ$8.73 billion ($4.94 billion) in the fiscal year ending June 30, 2027, compared with a NZ$14.09 billion deficit forecast in May.
The government now expects to return to an OBEGAL surplus in 2028-29, a year earlier than the 2029-30 surplus projected in the May Budget.
Luxon said the economic and financial forecasts were good news and the result of hard work from his centre-right National Party-led government.
"You've had a National government and a National finance minister who's done an exceptionally good job of responsible economic management that has enabled us to get to this point," Luxon told a news conference. "Our challenge now is to make sure that we push on and we make these positive forecasts a reality."
Opposition parties were quick to highlight the economy's weakness over the past three years and the continuing pressure on household budgets from the rising cost of living, arguing that the improved forecasts had yet to translate into meaningful relief for many New Zealanders.
“Another term of a National government means higher unemployment, weaker economic growth, and more public services on the chopping block,” said Labour finance spokesperson Barbara Edmonds.
The economy is only gradually emerging from a prolonged downturn, with the update watched for signs that the recovery is broadening beyond the export sector as global geopolitical tensions and higher energy prices cloud the outlook.
With growth only just starting to improve, inflation back above 3% and unemployment at a decade high, the economy is shaping up as the central issue in November's election.
Recent polls show Labour narrowly ahead of National and on course to govern in a centre-left coalition, though the result remains too close to call.
The Treasury said inflation was expected to return to the government's 1% to 3% target band in the second quarter of 2027. It noted that annual GDP in the second quarter of 2027 would be sitting at 2.9%.
ANZ economists said in a note that Treasury’s economic forecasts remain on the rosy side with the eventual fiscal consolidation dependent on both that outlook coming to pass and future governments sticking to the signalled operating and capital allowances.
($1 = 1.7662 New Zealand dollars)
(Reporting by Lucy Craymer; Editing by Alasdair Pal, Muralikumar Anantharaman and Lincoln Feast.)
