[ad_1]
The Treasury has given Finance Minister Grant Robertson an early Christmas present in the form of optimistic economic outlook for the next four years, although a skyrocketing house price has forced the government to announce a housing package at beginning of the year.
The forecasts came in the form of HYEFU, the December Treasury forecasts. It’s a time when the Treasury can say how it thinks the economy will be in the next five years.
There is still a lot of financial pain. And inequality will only deepen as incomes, house prices, and the economy as a whole grow at different speeds.
Don’t expect a bargain in the housing market anytime soon; in fact, housing will only become more unaffordable if prices rise at twice the rate of wages.
READ MORE:
* Election 2020: The impact of Covid-19 for the economy and the Government in figures
* Grant Roberston and the budget of his life
* Budget 2020: a decade of economic pain, Robertson uses the balance to protect the economy
Before the elections, the Treasury was forecasting a brief drop in house prices. Having been proven right and truly wrong, unbridled growth in house prices is now expected over the next five years.
Next year prices are expected to grow four times faster than wages and five times faster than the economy as a whole, rising 8.5 percent.
House price growth will slow but will remain roughly twice the speed of wages and the economy as a whole over the next four years. The Treasury is targeting growth of more than 5% per year each year through 2025. The only exception is 2022, when it forecasts growth of 4.5%.
In response to those figures, Robertson said the government would announce new housing policies early next year, having received policy advice from the Reserve Bank and the Treasury.
Housing Minister Megan Woods may also be looking at ways to increase the housing supply.
By contrast, wages are expected to grow 2.3% next year and 2.2% the following year. Wages are only above 3 percent in 2025, growing at 3.3 percent.
Unemployment, which currently stands above 6 percent, does not return to its pre-pandemic level until 2025 and will remain above 6 percent until 2023.
ROBERT KITCHEN / Things
Prime Minister Jacinda Ardern listens to Finance Minister Grant Robertson during the new government’s first Question Time in the House of Representatives debate chamber in Parliament.
And the state machinery, creaking and groaning, will continue to pour out money. DHB deficits are expected to average $ 600 million a year, an optimistic measure with the Treasury warning that there is “a significant risk that DHB deficits could be larger.”
“The DHB sector is likely to face significant cost pressures in the future to maintain delivery of existing services,” Treasury said.
The economy as a whole will grow rapidly. The Treasury is targeting 1.5% growth next year, picking up to 2.5% in 2022, before moving forward with growth of 3.7% in 2023, 3.8% in 2024 and 3.2% in 2025.
The government’s own books are likely to look much better than feared in the latest set of Treasury forecasts, which were released just before the election. An improving economy means higher tax revenue and lower spending on things like profits.
The Treasury expects the Government to collect approximately $ 4 billion in taxes each year for the next four years than before the elections. He also expects his expenses to be $ 5.3 billion lower next year.
Large government deficits will remain. Next year there will be a deficit of $ 21.6 billion, falling to $ 7.5 billion in 2024. Those are large surpluses, but they are between $ 10 and $ b lower each year than the Treasury feared a few months ago.
A stronger economy, less indebtedness and lower deficits mean that the government will borrow much less than was initially feared.
The Crown’s net basic debt will rise to 52.6% of GDP in 2023 before falling to 46.9% of GDP in 2025.
However, this measurement accounts for the effects of the Reserve Bank’s unconventional monetary policy tools, essentially the bank’s decision to create money to inject into the economy by buying debt and financing banks.
If you moderate these unconventional tools by taking into account the fact that money creation creates an asset and a liability, the net debt of the central crown is even lower: it rises to just 44.8% in 2023 and falls to 45.5. %.
