Treasury says Brexit might crimp spending on 2017 Lions tour

The Treasury warned the impact of the Brexit on New Zealand will probably be negative, but the extent of that will depend on how long financial market volatility persists. Photo / Getty Images

The Treasury doesn't expect New Zealand's economy will be stressed by the UK public's decision to quit the European Union in the short-term, although visiting Britons during next year's Lions rugby tour may tighten their belts due to the weaker British pound.

The government's financial adviser anticipates the impact of last month's Brexit vote "to be limited in the short-term" as continued volatility in financial markets delays investment decisions, and as the slump in the pound makes New Zealand exports less attractive.

The medium- and longer-term impacts are less certain, though the Treasury expects services exports to the UK will be affected if the British economy slips into recession limiting wage growth, and with a weaker currency.

That, in turn, could affect the 2017 Lions tour "with lower spending and/or fewer visitors," Treasury said in its monthly economic indicators. The 2005 Lions tour generated an economic benefit of $135.2 million, of which $123.3 million came from the 20,000 foreign visitors.

"Overall, the impact of the UK's exit from the EU on the New Zealand economy is uncertain as this stage, but is not considered likely to be significant, at least in the short-term," Treasury said.

Over a longer horizon, the Treasury warned the impact of the Brexit on New Zealand will probably be negative, but the extent of that will depend on how long financial market volatility persists, and how the UK will settle on its new trading partner relationships.

Last week, Finance Minister Bill English said New Zealand was better placed than most countries to deal with any fall-out caused by the Brexit vote, with the government's finances stable, the economy growing and room for interest rates to move lower if necessary.

The Treasury today said the country was "in a relatively strong position to withstand any shock", while acknowledging that "any shock could still have a material impact on the New Zealand economy."