New Zealand FinMin Says Economy To Grow at Slower Pace

New Zealand will post smaller than expected budget surpluses over the coming four years as the economy grows more slowly and the tax take shrinks,Finance Minister Bill English said on Tuesday, triggering a slide in the kiwi dollar.

English said a surplus of NZ$297 million ($251.26 million) was now expected for the year to June 2015 compared with NZ$372 million forecast in the budget delivered in May.

Future surplus forecasts were also reduced by NZ$500 million a year in each of the next four years, while the government net debt level was expected to peak at a slightly higher level this year, with a slower rate of reduction in future years.

The news brought the New Zealand dollar to its lowest level in nearly a week against the U.S. dollar, falling to as low as $0.8440, from around $0.8460.

The economy was being driven by strong construction, migration, and high terms of trade, English said. However, the momentum has slowed, and growth was expected to be softer as commodity prices ease and higher interest impact on activity.

The updated forecasts were in the pre-election economic and fiscal update (PREFU) required by law before the three yearly general election.

The finance minister said the center-right government would not jeopardize the return to budget surpluses after six years of deficits nor put pressure on interest rates by opening its coffers too wide.

via CNBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza