(Bloomberg) -- New Zealand can avoid a recession even in the face of a global slowdown and as the nation's central bank continues to aggressively tighten policy to slow inflation, Deputy Prime Minister Grant Robertson said.
New Zealand's exports are holding up "particularly well" and tourism is starting to come back, Robertson told Bloomberg Television on Thursday in Auckland, adding that the Reserve Bank "still had a job to do" to get inflation back within the 1% to 3% band.
"It's going to be a challenging year, no doubt, with the global slowdown," he said, responding to a question on the likelihood of a slump. "Most economists recognize that we will see less demand and some slowdown. But that doesn't mean, to me, a recession. There is balance to struck here."
The RBNZ on Wednesday raised interest rates by a half-percentage point for a fifth consecutive meeting and signaled more to come as it tries to rein in inflation that reached a 32-year high in the second quarter. Earlier that day, New Zealand reported its annual budget deficit widened less than forecast as the economy performed better than expected.
When asked about the prospects of returning the budget to surplus earlier than its 2024-25 projection, Robertson said he didn't expect so because of the slowdown in the world economy.
"Given the global conditions that there are at the moment, doing that any quicker feels unlikely," he said. "But we are still targeting that 2024-25 year."
Speaking later at the Bloomberg Address, Robertson said while the government could try to achieve a surplus earlier, a sharp correction would do "significant damage to New Zealand."
"Sure, we could go harder, but I actually think that would cause more social problems, more long term issues for New Zealand."
Robertson, who is also the nation's finance minister, said the economy's No. 1 issue remains labor shortages, as is the case in a number of developed nations. He pushed back against suggestions that conditions may worsen as kiwis head abroad in pursuit of higher wages.
"New Zealand is still a very attractive destination for people to come to," Robertson said. "It's a great place to come and live."
(Updates with Robertson comments)
More stories like this are available on bloomberg.com
©2022 Bloomberg L.P.