Goldilocks economic growth gives the government options
Economist Cameron Bagrie says the government's books are in “world-class shape and the Treasury's forecast that the economy will average 3% growth over the next five years is “reasonable.”
Finance Minister Grant Robertson says the projected growth will allow the government to spend $24 billion more than the previous government over the next four years.
Mr Bagrie says that, although the economy is due for a correction, there is nothing obvious on the horizon to cause one.
“Those numbers are reasonable, given economic development,” he says.
But there's always what he calls the “dreaded 10-year curse.
"If you look statistically, New Zealand is due a bit of a correction. Does that mean something's around the corner? The answer is we don't know.”
The Treasury is assuming the economy is going to grow in line with trend potential growth, which is reasonable, Mr Bagrie says.
“Of course, we need to start planning for that rainy day, which I think the government's done by being pretty strict in regard to sticking to its debt target and making sure we've got a bit of a buffer in regard to projected rising surpluses.”
The budget forecasts a surplus of more than $3 billion this year, rising to $3.7b next year and reaching about $7.3b by 2022.
As for the additional spending, “that's the luxury we've got. The fiscal accounts are in pretty good shape and when the fiscal accounts are in good shape, it gives you options, it gives you flexibility,” Mr Bagrie says.
“They're trying to stick to an appropriate balance between hitting their fiscal responsibility rules, making sure we do provide those financial buffers, but also making sure we're increasing priority spending.”