Gloomy bank forecast on Budget deficit

Press, 11 January 1986, Page 1

Gloomy bank forecast on Budget deficit

New Zealand’s Budget deficit might top $2 billion, says the latest National Bank “Business Outlook.”

If this happens, inflation is unlikely to keep below double figures, it says. The official deficit forecast of $l6OO million for the year to March “well understates” the likely figure, the publication says. Official forecasts of the Budget deficit have typically been overestimated.

In November the Government revised its deficit forecast from $1.28 billion to $1.6 billion.

Then the deficit for the first six months was running at $2.1 billion. Some analysts believe the large deficit results from the big structural changes in the economy. When the October deficit

figures were released, showing the deficit still over $2.5 billion, the Minister of Finance, Mr Douglas, said that the deficit would be cut in the final months, when receipts would rise. The Treasury reported the November deficit figures to Mr Douglas’s office before Christmas. The office will not release them until it receives Ministerial approval. The figures will be released next week at the same time as the new stock tender so that the market can make a “reasoned response.”

Full funding of the fiscal deficit is Government policy. The “Outlook” says that the final result could go either way by the “odd hundred millions of dollars.”