ASB: Overall, the NZ Government books look healthy

ASB with comments on the New Zealand government Half-year Economic and Fiscal Update

Overall, the NZ Government books look healthy

Although the combo of low inflation and less tax revenue means their improvement is slower than previously forecast

However, in a sign of confidence, the Government is meeting the shortfall via increased borrowing

ASB on the implications (bolding mine):

• The market implications from the Half-Year Update are limited.
• Extra capital spending will at the margin add to domestic inflation pressures, but in an environment of very benign inflation.
• We still expect the broader inflation backdrop next year to prompt the RBNZ to cut the OCR to 2%.
• Bond issuance has been increased in future years, but we expect the market will readily absorb the added stock.