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New Zealand won't be seeing a single Government surplus until beyond the mid-2030s as the country experiences the full economic toll of the Covid-19 pandemic.

And although the peak is lower than anticipated, unemployment is now expected to be higher for longer, forcing tens of thousands more people into the dole queue.

This is according to the Pre-election Economic and Fiscal Update (Prefu) – the legally mandated opening up of the Government's books before an election.

The numbers come ahead of today's GDP figures, which are widely expected to show New Zealand has officially entered a recession.

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Finance Minister Grant Robertson put on a brave face at yesterday's Prefu briefing, telling reporters the numbers were not as bad as had been expected in May's Budget.

He said Prefu showed "that the New Zealand economy is robust".

But his optimistic take on what was the most dire set of Prefu numbers in memory was quickly criticised by National.

Party leader Judith Collins accused Robertson of "sugar-coating" the figures which she said were actually "catastrophic".

She honed in on Treasury's expectation that there would be at least 15 years of government deficits - Treasury's forecasts only run until 2034 and every year until then, there is a deficit.

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"He [Robertson] has taken a rose-tinted glasses view at a dreadful picture that cannot be described as anything other than catastrophic."

Even Robertson's coalition partner, NZ First leader Winston Peters, was sounding the alarm, saying Treasury's numbers were a "wake-up call for New Zealanders".

The clear reason for this sea of red was due to the extraordinary impact Covid-19 has had on New Zealand's economy.

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That hit, Robertson said, would have been significantly more damaging if the Government didn't go "hard and early" by locking down the country, and by spending and earmarking $50 billion for the Covid-19 recovery.

This huge spend-up, which included initiatives such as the wage subsidy scheme, appears to have stemmed the flow of job losses in the short term.

Finance Minister Grant Robertson arriving for the unveiling of the Pre-election Economic and Fiscal Update at Treasury in Wellington yesterday. Photo / Mark Mitchell
Finance Minister Grant Robertson arriving for the unveiling of the Pre-election Economic and Fiscal Update at Treasury in Wellington yesterday. Photo / Mark Mitchell

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

After that, however, the jobless rate is expected to remain higher than had initially been expected for longer.

According to Treasury's data, this will mean 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.

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And as the jobless numbers continue to rise and wage growth continues to remain relatively stagnant, Treasury expects house prices to climb.

Although house prices are expected to fall 4.4 percentage points next year, they are expected to rise sharply over the three years after that.

Asked about this, Robertson said there was a "great deal of uncertainty" in regards to house price inflation.

He suggested the growth was due to the Reserve Bank keeping interest rates low – low-interest rates encourage people to take out mortgages, which increases demand and, in effect, prices.

Robertson was also at pains to point out the Government had a "balanced" approach to its books.

He said his Government would not make any spending cuts to core public services, such as health.

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But Bagrie Economics chief economist Cameron Bagrie said the Prefu showed New Zealand is at a "pickle point".

National leader Judith Collins and finance Spokesman Paul Goldsmith arriving for their media conference at Parliament. Photo / Mark Mitchell
National leader Judith Collins and finance Spokesman Paul Goldsmith arriving for their media conference at Parliament. Photo / Mark Mitchell

"Spending restraint is not enough to materially lower debt and return to surplus," he said.

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

National was waiting until Prefu to put out its tax and economic policy, which it would reveal later this week.

But that didn't stop Robertson going on the offensive yesterday.

"It seems to me that the National Party is caught in a Bermuda Triangle style situation where they want to increase spending, reduce revenue and dramatically reduce debt.

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"You can't do all of those things at once – I think their plan is lost somewhere in that triangle."

Although Collins would not give any details away ahead of National's policy announcement, she did say her party's plan leans heavily on growing the economy.

Meanwhile, Statistics New Zealand will today unveil the highly anticipated GDP growth figures which cover the period New Zealand was in lockdown.

Yesterday, Treasury revised its growth estimates and revealed it expected a quarter-on-quarter economic contraction of 16 per cent – that's down from previous predictions of 23.5 per cent.

Despite the rosier outlook, the economic contraction is highly likely to be the worst single quarterly dip in New Zealand's history.

Robertson said New Zealand will today officially enter a recession – likely the worst in a number of decades.

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Collins said yesterday she expected it to be "long and deep".