Net core Crown debt is tipped to hit more than 50 per cent of gross domestic product over the next five years as the government expects to pump more than $60 billion into mitigating Covid-19.

By way of comparison, net core Crown debt was 19 per cent in the year to June 2019.

"The core of Budget 2020 will boost critical public services, fund infrastructure, and provide the unprecedented investments needed for the second and third stages of our plan to face Covid-19: recover and rebuild," said Finance Minister Grant Robertson when presenting the budget.

Budget 2020 establishes a $50b "Covid-19 response and recovery fund," which builds on the initial $12.1b package.


Budget 2020: Live - What's in store and what we know so far
Budget 2020: Government unveils $50 billion Covid response, wage subsidy scheme extended
Budget 2020: Budget at a glance - the big Covid 19 package and how hard has it hit
Budget 2020: Government's Covid 19 wage subsidy scheme extended by 8 weeks, now up to $14b

However, the impact of Covid-19 on the books goes far beyond that $62.1b, the Treasury said.

In addition, "the Covid-19 shock will have a significant impact on the government's fiscal position through a reduction in tax revenues and increase benefit expenses," it said.

Red ink

The Treasury is now forecasting a deficit in the operating balance excluding gains and losses of $28.3b in the June 2020 year followed by a deficit of $29.6b in 2021.

That obegal had been forecast last December to be a deficit of $900 million in June 2020 and a surplus of $100 million the following year.

It now narrows to a deficit of $4.9b in the June 2024 year, or 1.3 per cent of GDP.

While couched in multiple caveats about uncertainty, the government's long-term projections do include a scenario that sees it officially returning to an obegal surplus in 2028.

Not only that but Robertson said it is possible the books are back in the black by June 2025.


Treasury projections show a deficit of just 0.7 per cent of GDP in 2024/25, moderating to 0.2 per cent in the year to 2026 and 0.1 per cent in the two following years, he noted.

Past experience

He pointed to the prior government's experience of six years of deficits and a small surplus in year seven after the global financial crisis and the Canterbury earthquakes.

"We are targeting a surplus in a similar period of time as we respond to a 1-in-100 year shock."

He also noted that historically low interest rates are playing in New Zealand's favour.

"We can currently lock in 10-year bonds at an annual rate of below 1 per cent. Importantly, interest costs will stay low at only 1.2 per cent of GDP when net debt peaks," he said.

As a percentage of GDP, net core crown debt will hit 30.2 per cent in the 2020 year and will continue to rise, peaking at 53.6 per cent in both June 2023 and June 2024. In nominal terms, the peak is $200.8b.


Residual cash deficits hit $32b this year followed by $43.3b in the year to June 2021.

Rising costs

The annual growth in core Crown expenses is expected to be 38.7 per cent of GDP this fiscal year, and to remain above 35 per cent until it eases to 33.7 per cent in June 2023 and 30.2 per cent the following year.

In nominal terms, the level of core Crown expenses peaks at just under $120b in June 2022, before starting to fall as the economy begins to recover.

On the other side of the ledger, by the June 2024 year it sees core Crown tax revenue at $102.1b versus $82.3b June 2020, also benefiting from the expected recovery.

Budget at a glance:

The big-ticket items of today's budget include:

• A $3.2 billion extension of the wage subsidy scheme
• A $1.2 billion railway package
• A $3 billion infrastructure investment package
• A $1.6 billion trades and training scheme
$bull; A $220 million expansion of the school lunches initiative
• A $400 million targeted tourism support fund
• A $830 million disability support package