The pre-election projection has been released by Treasury. Radio NZ
Nicola Willis has been given a pre-election reprieve, with Treasury painting a brighter picture of the government’s finances in the short term.
But the update comes with a sting in the tail for voters, with the recovery largely driven by an increased tax take due to “higher and more persistent” inflation.
And longer-term risks remain.
Those longer term risks include
The economy was forecast to grow an average of 2.6 percent over the forecast period, while unemployment was picked to trend down from this year’s 5.6 percent peak to eventually reach 4.3 percent.
Treasury caveated all its numbers, noting “considerable uncertainty” and risks skewed towards weaker growth and higher inflation.
The main uncertainty in the near term was the “persistence of the oil price shock” arising from the Middle East conflict.
Officials also noted that oil prices and interest rate expectations have increased since their forecasts were finalised.
Which is why I’m not going to bother enumerating exactly why I think the numbers are probably bullshit.
Just consider this. In Budget Economic and Fiscal Update 2025 (BEFU 2025), the New Zealand Treasury projected the late-2026 economic levels to include an unemployment peak easing down and inflation stabilizing near the midpoint of the target band. They expected that:-
- Inflation (Consumers Price Index / CPI): Projected to ease down toward the Reserve Bank’s target midpoint of 2.0% by mid-to-late 2026.
- Unemployment Rate: Projected to peak around 5.4% in early 2025 before gradually declining over 2026 toward a medium-term target of 4.3%.
By the BEFU 2026 they were anticipating a inflation peak of 4.0% in mid-2026, staying higher for longer and Peak of 5.5% in mid-2026.
This latest Pre-election Economic and Fiscal Update (PREFU 2026) just has CPI inflation continuing higher and more persistent and somehow miraculously falling below 2% by the end of 2027. And they think that unemployment has now peaked at 5.6% towards the end of 2026.
Personally I can’t see any signs that young adult unemployment is diminishing, nor that the homeless numbers are falling – both of which I’d expect to see if the employment economy is actually improving. Nothing that I see says that unemployment is staring to fall. I’d say that on current policy settings it is more likely to rise.
I also can’t see that the main current reason for widespread world wide inflation will improve. Trump will still be in the White House in 2027 and he isn’t due to be un-elected until late 2028.
Diesel prices are still rising. Tariffs are still diminishing large markets. The bond markets are showing few signs of institutional confidence. We still have a rapidly ageing population with a generation of young adults experiencing the sustained mass unemployment at similar levels to those of the mid-1990s. Hardly the best training to become well employed taxpayers if National’s local recession ever ends. About the only thing that is going well is that we have some good prices on dairy – something that is likely to be temporary.
That inflation rather than economic growth is the key factor in Nicola Willis closer approach to budget surplus through fiscal drag is just a warning sign that the economy under National’s mismanagement that their promised future a few like Nicola Willis getting stoned in good scenery celebrating her surplus, based ona future of misery for most.
lprent I was thinking….but your photo reinforced : Its Willis smoke and mirror economics 2.0.
A few years back (seems and feels a lifetime ago !) when I first heard her burbling about Kids, DVD's and icecream...my impression was of someone not quite in sync…or even the right job !
I think that the Left wave Nov '26 will completely wash Willis and the rest away.
Psych….I have said for some time that this government has pissed off so many people that they have no hope on Nov 7. I think today's poll with the Greens at 16% says it all.
The CoC has been telling us the Greens have it all wrong.
Its like: which do you want first, the good news or the bad news?
It doesn't matter, they're both the same.
This is so close to what Willis would want as her preferred pre-election forecast that you have to be suspicious of its validity, especially as it seems to ignore the fact that fuel prices are still rising and we know that they will eventually filter through to rising prices for EVERYTHING.
The coalition altered the RB’s objectives by removing unemployment. It then replaced the existing RB head in what appeared to be a deal that gets Waikato a new medical school.
It’s just the set of numbers they’ve been looking for, funny that.
As they say "a recession is when the person next door gets laid off. a depression is when you get laid off".
Regardless of how economists slice and dice the economy and regardless of how eager they are to please their political masters/mistresses, that is how the average voter thinks.
Lprent, can you give your take on the growth rate for the Epstein class please? The Neo Keynesian economists on YouTube they have been putting it around 12% give or take a couple of points. The Marxists economists have it as a compounding rate these days.
I agree this is the stupid way to run an economy. To many are in a depression no matter how the spin doctors frame it. Take disabled, the funk amongst that community is at boiling point.
And the youth unemployment rate is, so fubar, we may get a revolution here as well as Russia.
Depends. It is always a case of risk against return. As in if you can afford to lose it, then you can take higher risks and have a prospect of much higher returns. That is how you get above 8-10% pa.
I tend to not look at real estate because it has been really risky in NZ since I was in my early 30s. Lucrative, but hard to manage the risk levels.
Mostly I've tended to invest in my skills first, and accruing capital second. The first has been very lucrative, the second a way of keeping ahead of inflation and mortgage rates.
We have had a quite few years where if you time it right, it wasn't hard to get 10+% pa over reasonable time frames with limited risk by straight investment and spread risk. You just had to be not too greedy, jump out after taking profits. Revert to have a lower return for a while getting a point or two above inflation. Reinvesting in higher risks around the time that markets started rebounding. Overall general growth when looking over reasonable time frames. I mostly have used managed funds adjusting the risk by the mix of the type of funds I hold money in.
Over this past year, the risks are higher, in a large part because of players running more intensive efforts to try to make market conditions. You don't need to look further than the Trump family fortunes to see that.
Just at present I'm in 'it is too risky for low returns mode'. So I'm doing conservative and looking at the market conditions for 2028.
Incidentally, this risk management approach is pretty much straight out of my MBA finance classes in 1985.
Sorry, was hoping to find a clip with just the picnic scene, but this was the shortest I could find. So, just watch the first bit until the film title – National Party caucus meeting…
I've used this analogy before.
A good quartermaster has an empty store but those that they serve have enough food, clothing and supplies
A finance minister and a government being proud of a surplus is obscene.
When we have record homelessness, mental health crisis, cost of living forcing people to choose between rent and food and chronic shortages in health.
Who is this to please accountants and bookkeepers?
Yes a forecast surplus of $4B in 2028-2029 is based on inflation and fiscal drag more than real growth.
The thing not covered is that this means the government knows it can afford pay equity – so any talk by them about future tax cuts, is based on using that money it has taken from women in pay settlements.
Nicola has changed her demeanor, I wonder why, perhaps after the election when she is hopefully out of a job she could enter into acting as she is very good at acting.
She waves her arms around a lot – she could play the windmill in "Don Quixote".
She’s the deflating hot-air bender of National.
Willis has parked her shrill voice and her arrogant delivery.
She has borrowed a quiet voice and a softer delivery.
Too little too late.
We have the best export conditions we've had in years, best reasons to shift savings out of housing and into productive business, and tonnes of upside in tourism and international students and high tech industries …
… yet here we are all National can focus on is how little they have spent to support New Zealanders.
National have hurt the poor and those they owed with welfare entitlements, and have damaged an entire young generation. They are cruel and disgusting.
Willis's fictional DREAMLAND FUTURE surplus is a joke, compared to the Ardern-Robertson 2018-19 ACTUAL surplus of $7.5 billion.
Hey.. forgive me I'm a right winger.. but I agree with your comment about high tech. If I was Fin Minister, I would find a few billion and fund 1,000 researchers and say "go out and find us some wonder drugs". A friend had a heart transplant and told me his anti-rejection drug RAPAMYCIN was a soil microbe found under a rock!! in Easter Island (Rapanui). We'd get 100s of 'failures' but imagine if we got one Ozempic.
We'll try not to hold it against you.
Research and Development is super tricky to get low risk results from. Governments aren't good with the latter. Speaking a developer, it is always disheartening to see them try. Which is why I won't work with most government development programs.
Consider that when I was at Waikato university way back in 1978-1981, that Ruakura agricultural research was doing a lot of experiments on operant conditioning on cows and many other animals. Effectively training them with a little prompting to change their behaviours so that it was convenient for farmers. It required long life batteries, tiny embedded computers. GPS and other location systems, and a lot of wireless communications to make it cheap and reliable enough to be effective.
This is effectively the base research that Halter and a number of other virtual fencing companies are now producing. It took about 40 years to go from the semi-pure research to something that was actually applicable to farming. Something that is winding up as being a multi-billion dollar export IP industry for NZ.
Consider the miraculously rejuvenating $400+ million dollar fund for ruminant fart/belch controls. That has been running in one form or another for more than 25 years with no results that are economic to use.
Most of the pharma drugs take similar periods to go from research to development, and outside of the military areas, are typically not done by governments. Mostly because of what National did at thr start of this term. They operated a new broom, killed organisation like Callaghan Innovation.
If we are doing so well, why does the NZ Dollar appear to have steadily lost value in comparison to the US dollar overt he last few years?
Could look at as we're doing well because the NZD is low, and slowly getting lower. Better returns for exporters on top of higher prices. And tourism does exceptionally well from a low NZD giving higher spending power from international visitors along with domestic customers being more likely to stay home as international travel gets more expensive. Down side is everything gets more expensive because nearly everything is imported.
Wouldn't put it past the current government to be quietly running a low dollar policy as like incognito said, "the farmer force is strong"
Exchange rate changes are simply not a direct statement on policy. The largest influences are likely the result of a trading imbalance like lots of dairy presently being sold overseas and the sellers of that wanting to be paid in $NZ. But could be all sorts of thing. If its consistent over years, and measured against $US, I would suggest its the other side of Trumps tariff policy.
Beware the word 'surplus'
National love that word. They try and throw it around as much as they can because there's votes in it.
Voters who don't pay attention hear it and think they must be good at managing the economy.
The left somehow, I don't know how, need to find a simple sound bite to trash it.
Nicola Willis is surplus to requirement, which is why she won’t make it into Parliament again on current polling.
I believe that the Treasury numbers are fake, tailoured towards getting the Coalition of Chaos reelected. Same applies to the ASA ruling about "no new taxes"