To fund the Budget, the Government has forecast bond issuance to $60 billion for the June 2021 year. Crown debt is expected to rise from 19.3% of GDP, up to a peak of 53.6% by 2023. This will surpass the level of 40% seen in 2013 after the GFC and the Canterbury earthquakes. The current Government Debt ratio is 19%, therefore we may have options other Governments don’t who’s current positions are significantly different to ours US (107%), China (50%) and even Australia (45%). Even if we balloon to over 50% by 2023, I think the trouble will be the wont hold that figure, its aspirational.
The key element is the establishment of the $50 billion COVID-19 Response and Recovery Fund (CRRF), with $20+ billion of it still to be spent over the next 4 years, with $29.8 billion of it committed through Budget 2020 – ten times that which the Government was planning to spend pre-COVID-19.
Treasury indicated that its forecasts and assumptions on Government expenditure and revenue given the current environment are highly uncertain.
The Budget assumes New Zealand’s borders remain closed to international visitors until the end of March 2021 – three months sooner than forecast in the earlier Treasury’s economic scenarios. The scenario relies on a vaccine being developed and distributed by this time.