New Zealand's Finance Minister Bill English said Tuesday that the government's goal of returning to budget surplus by 2014-15 will be "challenging."
He said the Budget 2012 will be a zero budget or close to zero, in terms of extra spending over the next four years. "We will do that because we need to get back to surplus so we're not continuing to increase debt."
Getting back to surplus will help create a buffer against future global shocks and, this will be important in easing headwinds for exporters and reducing the current account deficit, English said.
Meanwhile, releasing its conclusions after a regular mission to New Zealand, the International Monetary Fund said Monday that the country's relatively modest public debt gives the authorities some scope to delay their planned deficit reduction path in the event of a sharp deterioration in the economic outlook.
The Reserve Bank of New Zealand has the scope to lower interest rates and loosen monetary conditions to help buffer against near-term shocks, the IMF report said.
It also observed that the free-floating New Zealand dollar provides an additional cushion against external shocks, including disruptions to offshore funding and a negative terms of trade shock.
According to the lender, the pace of deficit reduction entails an improvement of about 5 percent of GDP in the structural balance over the next five years. This strikes the right balance between the need to limit public debt increases while containing any adverse impact on economic growth during the recovery, it said.
by RTT Staff Writer
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