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.
"There is no room for significant loosening of the purse strings," English told reporters.
"Our first responsibility is to keep the books in surplus and reduce net debt."
The Treasury cut the budget surplus forecast for each year through to 2018 by NZ$500 million, and said it expected the net debt to peak slightly higher this year at 26.8 percent of gross domestic product from the budget's forecast of 26.4 percent.