New Zealand Finance Minister Predicts Widening Government Deficit for 2024-25

WELLINGTON – New Zealand’s Finance Minister Nicola Willis warned on Thursday that the government’s deficit is expected to worsen in the coming fiscal year, citing a deteriorating economic outlook.

Speaking to the Employers and Manufacturing Association in Auckland ahead of the release of the government’s budget and fiscal forecasts on May 30, Willis acknowledged that efforts to reduce debt have become significantly more challenging due to unfavorable economic conditions.

“But in the words from a Florence + The Machine song I quoted recently, it is darkest before the dawn. The deficit is expected to be larger next year than it is this year, before starting to improve,” Willis stated.

In the government’s half-yearly economic update in December, the 2024-25 operating deficit, excluding gains and losses, was projected to be NZ$6.14 billion (US$3.75 billion), an improvement from the forecast deficit of NZ$9.32 billion for the year ending June 30. However, the economic situation has since worsened, with the country now experiencing a technical recession.

Willis indicated that the government would release details next week on how it plans to return to a budget surplus, along with operating allowances for future budgets. “These allowances represent the amount available in the next three budgets for discretionary spending and revenue initiatives,” she explained.

The minister’s remarks highlight the economic challenges New Zealand faces as it navigates through a period of fiscal instability. The upcoming budget and fiscal forecasts will be closely watched for the government’s strategies to manage the deficit and stimulate economic recovery.