(Bloomberg) -- New Zealand's annual budget deficit widened much less than forecast as the economy performed better than expected and the government was able to curtail pandemic-related spending.
The deficit grew to NZ$9.69 billion ($5.5 billion) in the year ended June 30 from NZ$4.56 billion a year earlier, the Treasury Department said Wednesday in Wellington. In its May budget, the government projected a shortfall of NZ$19 billion.
New Zealand's economy rebounded strongly from sharp slowdowns when Covid-19 outbreaks stalled activity over the past year. Still, softer domestic growth lies ahead as the global outlook darkens and the central bank raises interest rates to curb inflation.
The better-than-expected budget numbers "give us a strong starting point to deal with what is undoubtedly a deteriorating global environment," Finance Minister Grant Robertson said. "We will keep running a tight ship in order to return to the surpluses our government posted pre-Covid."
Prime Minister Jacinda Ardern's government increased spending to support the economy when an outbreak of the delta variant of Covid-19 forced a national then regional lockdowns in the final months of 2021. Further support was needed as a wave of omicron infections struck the economy in early 2022.
The stimulus, together with low interest rates, enabled the economy to bounce back better than had been expected, boosting company earnings and the government's tax take.
Tax revenue jumped 11% from a year earlier to NZ$108 billion and was NZ$4.7 billion higher than projected in the May budget. At the same time, total expenses were NZ$2.8 billion lower than forecast.
Net debt at June 30 surged 72% from a year earlier to NZ$61.9 billion or 17.2% of gross domestic product. That was slightly higher than the 16.9% projected in the budget.
"There will be a cautious tone to the outlook" when the half-year fiscal forecasts are published on Dec. 14, Robertson said.
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