The Treasury's opening of the Government's books ahead of the election reveals a better picture of the economy right now than had initially been expected.

Today's figures show that the year to June accounts confirm that tax revenue and debt were better than forecast.

However going forward the economic situation in some areas is worse than predicted, as New Zealand heads into a period of what Treasury secretary Caralee McLiesh called "profound uncertainty."

In fact, speaking at the unveiling of the Pre-Election Economic and Fiscal Update (Prefu) this morning, Finance Minister Grant Robertson warned that "uncertainty is the commodity that the world shares in abundance".


Despite this, unemployment estimates have been significantly revised downwards and pushed out almost two years, today's figures reveal.

Also, the near-term economic recovery had been stronger than The Treasury and many economists had predicted at the May Budget, Robertson said.

The Treasury had expected the jobless figure to reach almost 10 per cent this month, but today's numbers show that the highest level that unemployment is expected to reach is 7.8 per cent in March 2022.

"These are signs that the New Zealand economy is robust," Robertson said this afternoon.

Finance Minister Grant Robertson warned that
Finance Minister Grant Robertson warned that "uncertainty is the commodity that the world shares in abundance". Photo / Mark Mitchell

Unemployment tipped to remain higher for longer

But the data also shows that unemployment will remain higher for longer - which, according to Infometrics senior economist Brad Olsen, will make it harder for unemployed people to find jobs in the long term.

Bagrie Economics chief economist Cameron Bagrie pointed out that today's figures show the number of people projected to be on the Jobseeker and emergency benefit in 2024 is 246,000.

That compares to 180,000 in May's Budget and reflects a "slower recovery".

Today's numbers also reveal the Government's deficit this year is lower than expected; $23 billion in the red as opposed to the $28 billion revealed in May's Budget.


However that number is higher in the long term, hitting a $12 billion deficit in 2024 according to today's numbers – that figure was expected to be just under $5 billion in May.

Robertson said this was the "price we pay" for the unprecedented levels of Government spending, such as the wage subsidy scheme.

The Government's overall expected level of debt is up slightly, when compared with budget estimates.

NZ at 'pickle point'

Bagrie said the Prefu showed New Zealand is at a "pickle point".

"Spending restraint is not enough to materially lower debt and return to surplus," he said, adding that deficits are projected for 15 years.

"Either we need to get the economy stronger or taxes are going to be headed higher."


Covid-19 is still expected to take a significant toll on the economy, but that toll – according to The Treasury – is not as bad as expected.

Treasury officials had expected tomorrow's GDP figure to reveal a 23.5 per cent drop over the period from when New Zealand first went into lockdown.

But its updated numbers show it's now expecting that figure to be 16 per cent.

Although better than expected, it's still the biggest one-off drop in economic growth in New Zealand's history.

But in the long term the hit will be worse than had previously been expected – this is due to the fact the world economy is expected to do worse than had been expected.

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