NZD: Kiwi fiscal books shine, again - TDS

Research Team at TDS, notes that the New Zealand’s 2016/17 budget contained no surprises, with a solid economy and fiscal restraint generating budget surpluses now and in the future.

Key Quotes

“Even if there are future tax cuts and Treasury’s optimistic growth assumptions are shaved down, neither dent what is clearly a strong government balance sheet. New Zealand’s debt and deficit metrics are clearly NZGB and NZD–supportive in our view (and puts AAA/stable rated Australia to shame).

Highlights

The 2015/16 fiscal surplus of +$NZ668m is higher than that expected in December (+$NZ414m) and accounts for +0.3% of GDP. Higher revenue and lower expenses contributed to this result.

Subsequent fiscal surpluses expand from there, through to +$NZ6.7b (or +2.2% of GDP) by 2019/20 (impressive compared with reform-free-zone Australia). Net debt is expected to peak at a (lower) 25.6% of GDP next year, targeting 20.8% by mid-2018. While higher than Australia per se, the key difference is Australia has no appetite to impose reforms to lower its debt burden.”