Wellbeing Budget 2022

A Secure Future

OBEGAL is on track to return to surplus by 2024/25 …

The Treasury's Budget Update forecasts the OBEGAL deficit to be 5.2 percent of GDP in 2021/22 before improving and then returning to a surplus of 0.6 percent of GDP in 2024/25 (Figure 9). The return to surplus is a year later than forecast in the Half Year Update owing to the changing economic environment. However, the fiscal position still represents a significant improvement on Budget 2021 forecasts, when an OBEGAL surplus was not projected until 2026/27. This reflects New Zealand's strong economic performance throughout the pandemic.

The return to OBEGAL surplus track provides another contrast between the COVID-19 recovery and the GFC recovery. While the GFC was a smaller economic shock compared to COVID-19, the Government at the time ran six annual OBEGAL deficits averaging 3.6 percent of GDP. In response to the larger COVID-19 shock, the Labour Government is forecast to run five annual deficits averaging 3.2 percent of GDP. This reiterates the importance of policies to support businesses and workers while maintaining strong investment in infrastructure to keep activity strong.

Figure 9 - OBEGAL through to 2025/26

Figure 9 - OBEGAL through to 2025/26

Source: The Treasury

…with fiscal projections on track to maintain an average OBEGAL surplus in the long-term.

Figure 10 shows that the Government is expected to maintain an average surplus in the range of 0 percent to 2 percent of GDP over the forecast and projection period. The average OBEGAL surplus from 2024/25 to 2035/36 is 0.7 percent of GDP, assuming projected operating allowances are $3.0 billion per year and capital allowances are $7.0 billion in the first projected year of 2026/27, growing at 2.0 percent per year in subsequent years. See the section on fiscal projections and assumptions for more details on the long-term assumptions in making these projections.

Figure 10 - OBEGAL through to 2035/36

Figure 10 - OBEGAL through to 2035/36

Source: The Treasury

Your browser is out-of-date!

Update your browser to view this website correctly. Update my browser now

×

Back to Top