The Treasury has lowered its forecast for economic growth for 2013, citing volatile and more expensive global credit markets and the likely impact on commodity prices of a weaker global economy.
New Zealand's real gross domestic product growth is forecast at about 3 percent in the 12 months ending March 31, 2012, down about 50 basis points from its estimate in the Pre-election Economic and Fiscal Update. The Treasury's latest forecasts are in the department's briefing to the incoming Finance Minister, released today.
"Although New Zealand has so far avoided a severe economic shock, growth has been weak for some time and our large fiscal deficit and high external indebtedness continue to expose the economy to risks," Gabriel Makhlouf, secretary to the Treasury, said in the report, which was finalised on Nov. 25.
Among changes since the PREFU were an intensification of Europe's sovereign debt crisis, which had led to heightened financial market volatility and risk aversion.
The Treasury recommends a "wide and ambitious programme of policy reform" that would return the Crown to an operating surplus by 2014/15 and reduce net debt, excluding the NZ Superannuation Fund, to no more than 20 percent of GDP by 2020.