“It still made for poor reading. The increase in Government borrowing means the period before the official cash rate starts falling has been extended – from the middle of next year to the third quarter. It means higher interest rates for longer,” said Sullivan.
Treasury is forecasting the economy will grow 2.6 per cent on average over the next four years. By 2027, the economy will be $4 billion larger than Treasury’s previous set of forecasts from May, and gross domestic product per capita will be roughly the same.
Annual wage growth is forecast to average 4.8 per cent over the next four years compared to inflation of just over 2 per cent, meaning working New Zealanders will be better off in real terms.
This year’s deficit is now expected to be $10b, up from $6.9b forecast in the latest budget. Next year’s deficit is expected to be $11.4b, up from the $7.6b forecast.
Over the June 2024-27 forecast period, the government bond issuance is expected to increase to $129b, from $120b in the last budget.
ANZ Research said Treasury downgraded the fiscal outlook largely as expected, but the economic outlook has had a small upgrade, which is a surprise.
The pre-election update forecasts leave the door open to more downgrades to the books further down the track. It’s likely that risks will materialise before the books are back in surplus. The current forecast return to surplus (2026-27) has a “best-case scenario” look about it.
ANZ said the surplus would end seven consecutive years in deficit following Covid and Cyclone Gabrielle – one more year in deficit than followed the global financial crisis and Canterbury earthquakes.
On the market, Skellerup Holdings had a strong bounce, rising 20c or 4.44 per cent to $4.70; Fisher and Paykel Healthcare was up 31c to $21.55; Ebos Group recovered 39c to $35.20; Mercury Energy collected 6c to $6.22; a2 Milk gained 8c or 1.781 per cent to $4.77; and Fonterra Shareholders’ Fund increased 5c to $3.32.
Pacific Edge was up another 0.008c or 8.16 per cent to 10.6c; Gentrack added 12c or 2.83 per cent to $4.36; Turners Automotive improved 7c or 2 per cent to $3.57; NZME gained 3c or 3.26 per cent to 95c; and Move Logistics increased 3c or 4.48 per cent to 70c.
Retailer Michael Hill was up 2c or 2.11 per cent to 97c, and The Warehouse was down 4c or 2.31 per cent to $1.69.
In the property sector, Stride declined 3c or 2.27 per cent to $1.29, and Precinct was down 2c or 1.73 per cent to $1.135.
Contact Energy gave up all the gain from the day before, falling 30c or 3.57 per cent to $8.10; Manawa Energy declined 8c or 1.81 per cent to $4.33; Vulcan Steel shed 37c or 3.89 per cent to $9.13; Seeka decreased 5c or 2.17 per cent to $2.25; and Eroad was down 5c or 6.25 per cent to 75c.
Other decliners were Infratil down 8c to $10.22; Comvita shedding 7c or 2.17 per cent to $3.16; Rakon decreasing 2c or 2.67 per cent to 73c; ikeGPS down 2c or 2.9 per cent to 67c; and Serko down 7c or 1.79 per cent to $3.85.
Air New Zealand, down 0.005c to 75c, told the market its schedule may be impacted from January because of a reduction in Pratt & Whitney jet engine availability.
Pratt & Whitney disclosed a condition affecting the maintenance plan for the global geared turbo-fan jet engine fleet and 600 to 700 engines will be impacted over the next three years. A revised maintenance plan will be completed within two months.
Currently, Air NZ has 16 A320/321NEO aircraft in its fleet of 106 aircraft, servicing Australia and the Pacific Island markets and, to a much lesser extent, domestic New Zealand.
Sullivan said with 16 of Air NZ’s aircraft out for a period, there could be significant disruption. “The maintenance programme can create logistical issues. It’s not like changing oil, it’s complicated and expensive and you have to wait your turn.”
Used car dealer 2 Cheap Cars was up 3c or 4.92 per cent to 64c. The New Zealand Shareholders’ Association is backing a proposed deal that will see David Sena buy 30 per cent of the shares in 2 Cheap Cars from Eugene Williams, taking his holding to about 76 per cent.
