New Zealand (NZ) Finance Minister Nicola Willis presented the government’s annual Budget report for 2024, with key highlights enlisted below.
NZ sees 2023/24 operating balance before gains, losses NZ$-11.07 bln (HYEFU NZ$-9.32 bln).
NZ sees 2024/25 GDP 1.7% (HYEFU 1.5%).
NZ government forecasts return to obegal surplus in 2027/28 (HYEFU 2026/27).
NZ sees 2023/24 net debt 43.1% of GDP (HYEFU 43.5%).
NZ unemployment rate seen at 5.2% in 2024/25 (hyefu 5.2%).
Determined to return obegal to surplus in 2027-28.
Tax relief fully funded from savings, revenue initiatives.
NZ treasury sees NZ GDP contracting in H1 2024, growth in H2 2024.
NZ treasury sees inflation falling to below 3% in Q3 2024, to 2% around 2026.
Separately, New Zelanad’s Debt Management Office (DMO) said that the 2024/25 gross bond issuance increases to NZ$38 bln from NZ$36 bln in half-year update.
The NZ DMO planned gross bond issuance for four years to June 2028 now totals NZ$126 bln up from NZ$114 bln in half year update.
Market reaction
New Zealand Dollar paid little heed to the Budget release, with NZD/USD lurking flat near 0.6100 at the press time.
New Zealand Dollar FAQs
The New Zealand Dollar (NZD), also known as the Kiwi, is a well-known traded currency among investors. Its value is broadly determined by the health of the New Zealand economy and the country’s central bank policy. Still, there are some unique particularities that also can make NZD move. The performance of the Chinese economy tends to move the Kiwi because China is New Zealand’s biggest trading partner. Bad news for the Chinese economy likely means less New Zealand exports to the country, hitting the economy and thus its currency. Another factor moving NZD is dairy prices as the dairy industry is New Zealand’s main export. High dairy prices boost export income, contributing positively to the economy and thus to the NZD.
The Reserve Bank of New Zealand (RBNZ) aims to achieve and maintain an inflation rate between 1% and 3% over the medium term, with a focus to keep it near the 2% mid-point. To this end, the bank sets an appropriate level of interest rates. When inflation is too high, the RBNZ will increase interest rates to cool the economy, but the move will also make bond yields higher, increasing investors’ appeal to invest in the country and thus boosting NZD. On the contrary, lower interest rates tend to weaken NZD. The so-called rate differential, or how rates in New Zealand are or are expected to be compared to the ones set by the US Federal Reserve, can also play a key role in moving the NZD/USD pair.
Macroeconomic data releases in New Zealand are key to assess the state of the economy and can impact the New Zealand Dollar’s (NZD) valuation. A strong economy, based on high economic growth, low unemployment and high confidence is good for NZD. High economic growth attracts foreign investment and may encourage the Reserve Bank of New Zealand to increase interest rates, if this economic strength comes together with elevated inflation. Conversely, if economic data is weak, NZD is likely to depreciate.
The New Zealand Dollar (NZD) tends to strengthen during risk-on periods, or when investors perceive that broader market risks are low and are optimistic about growth. This tends to lead to a more favorable outlook for commodities and so-called ‘commodity currencies’ such as the Kiwi. Conversely, NZD tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.
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