The Government is going into deficit in election year but a massive $12 billion infrastructure spend on transport projects is on the horizon.
The Half Year Economic & Fiscal Update 2019 (HYEFU) has revealed financial results have been lower than forecast because of increased expenses and unanticipated low interest rates bringing lower returns for ACC.
The Government plans to boost the economy by injecting $12 billion into investments in transport, schools, regional development, district health boards (DHBs), and public estate decarbonisation.
"This package shows New Zealanders that this Government is serious about tackling the infrastructure deficit we were left with," Finance Minister Grant Robertson said.
Robertson said the reasons why the projects haven't been announced yet is because "we do need to make sure we get them right".
The money to pay for those projects will be borrowed from banks and international funds that will be paid back over time, as the economy is expected to pick up over the next few years.
Treasury had forecast a surplus next year but that's been revised right down to a deficit of $900 million as opposed to the $1.3 billion that was expected in Budget 2019.
"A small deficit in the current year is not surprising, given the impact global headwinds are having on confidence here," Robertson said.
He said the "global situation" - in particular the US-China trade war and Brexit - has seen interest rates fall around the world, including in New Zealand. But interest rates are at historically low levels, and Robertson says it's time to borrow.
The Government is so confident about the economy picking up that it's forecasting to run $12 billion worth of surpluses across four years to 2023/2024.
"The surpluses will help to fund day-to-day capital requirements each year," a Government statement says.
"These include fixing leaky hospitals, building new classrooms to cover population growth... and outing aside savings in the Super Fund for retirement costs."
The Finance Minister announced on Thursday plans to put $6.8 billion - out of an $8 billion investment into specific capital projects - into transport, with a significant portion for roads and rail.
Regional investment opportunities will get $300 million and DHBs will get the same amount for asset renewal, while $200 million will go towards public estate decarbonisation, Robertson said.
He said the $8 billion investment also covers the already announced $400 million investment in school infrastructure.
The Government's multi-year capital allowance has been increased by $4 billion taking it to $8.4 billion with the allocation of that money to be announced over coming Budgets.
Looking ahead to Budget 2020, the Government has revealed the priorities for it, with a focus on climate change, Maori and Pacific wellbeing, child welfare, health, and lifting the economy.
Robertson said the major investments will continue to be made in health, education, housing and social programmes to "address New Zealand's long-term challenges".
In October, the Government announced a massive surplus of $7.5 billion, largely due to one-off factors that were not likely to continue over time, such as $2 billion from the revaluation of rail assets.
How is the economy looking?
New Zealand is experiencing a "period of slower, but still solid, economic growth", the HYEFU results show - as household spending eases and global uncertainty weighs on investment.
This contributed to the economy growing at a slower rate of 2.4 percent in the year to June 2019, compared to 3.2 percent growth recorded in the year to June 2018.
It's predicted growth will continue to grow at a "slower pace" of 2.2 percent over the second half of 2019, therefore the forecast for GDP growth has been revised down.
The unemployment rate is expected to "remain steady" at around 4.2 percent, while wage growth is expected to increase.
As for net migration, it's expected to decrease over the next few years.
It's expected to fall from 50,000 people in the year ended September 2019 to 35,000 in June 2024.
