The Treasury expects the economy to grow on average nearly 3% a year to March 2016.
The prediction comes in its pre-election economic and fiscal update, which also sees the unemployment rate dropping to 4.7% by 2016 and the government’s books returning to surplus in the year ending 30 June 2015.
The Treasury warns, however, that its forecast is dependent on European governments dealing with the Eurozone debt crisis and stabilising financial markets. Should that not happen, The Treasury includes another scenario in which there is a 20% chance the New Zealand economy could worsen, with economic activity $35 billion lower over the forecast period. Should that happen, it says, the Government’s books would remain in deficit in 2015 and 2016.
Regardless of which party wins the election on November 26th it will need to give top priority to returning to surplus by 2014-15. Reorganising the public sector to deliver better services through shared service arrangements and improved accessability to services by consumers are all likely to be on the agenda. Reducing costs in floor space rentals, cuts in fixed line telecommunications spending, and combining agencies to take advantage of scale economies where possible are all potential areas for scrutiny.