1 / 20

IPS & IPANZ Seminar The 2009 Budget and Macroeconomic Outlook

IPS & IPANZ Seminar The 2009 Budget and Macroeconomic Outlook. Jean-Pierre De Raad (NZIER) & Derek Gill (IPS) 2 June 2009. Part 1 – Comments on Budget 2009. Macroeconomic Context NZ Macroeconomic Outlook Fiscal Strategy & Outlook Emergent Strategy?

candy
Download Presentation

IPS & IPANZ Seminar The 2009 Budget and Macroeconomic Outlook

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. IPS & IPANZ SeminarThe 2009 Budget and Macroeconomic Outlook Jean-Pierre De Raad (NZIER) & Derek Gill (IPS) 2 June 2009

  2. Part 1 – Comments on Budget 2009 • Macroeconomic Context • NZ Macroeconomic Outlook • Fiscal Strategy & Outlook • Emergent Strategy? Part 2- Macro Impact of Fiscal Stimulus

  3. Macro Context –’Horns of a dilemma’ • “the global economy is experiencing the deepest most synchronised recession since the 1930s” (2009 Budget ES P1) • Consensus Trading Partner Growth Forecast (2009-11 Calendar AAPC) –2.5%,+1%, +2.2% • Perfect Storm – Inventory Cycle, Credit Crunch, Asset Price falls • Sharpest Real Economy/ inventory cycle since the 1930s e.g. Q1 2009 first (non war) fall world trade volumes, Japanese exports fell 26% and RGDP 15.2% (apc). • Financial Crises trigger prolonged recessions – output 9% fall over 2 years, 35% fall in house prices over 6 years (Reinhart & Rogoff: 2009: AER P&P) • Stock Market Crashes (+25%) go with 30% chance of major recessions (10%+ falls in RGDP) and 11% chance of depression (25%+ fall in RGDP) (Barro: 2009: NBER WP 14760)

  4. NZ Macro Outlook- ‘Between a rock and a hard place’

  5. NZ Macro Outlook- ‘Between a rock and a hard place’ • Comparison with other forecasts

  6. How does the current recession compare with previous recessions?

  7. Fiscal Strategy & Outlook – Balancing the short & medium term?

  8. Fiscal Strategy & Outlook – Balancing the short & medium term? • Revised Long term debt objective (new net debt peaks at 40% GDP aimed at 30% 2020s) • Cf 20% Gross Debt ratio & NZSF (2008 Budget P48) • Reduce future operating allowances increases to $1.1b. from 2010 (from $1.4b in 2009, $1.7 previously) • Delay 2010 & 2011 tax cuts • Suspend NZS contributions until surpluses

  9. Trends in the key fiscal aggregates (%GDP) • Core Revenues stable around 32% despite tax cuts • Core Current Spending increase from 32% (2008) to nearly 37% (2010-2012) • Operating Balance (ex NZSF, accy + /-) • +3% (2008) -5% (2010-2133) • Large deterioration in new net core debt from +6% in 2008 to 2013 : Central -30.9 Rosy -22.5% Gloomy -50%

  10. Trends in Sector Shares (%NGDP) • Where is 5% growth in core spending in 2008/10 • Social Welfare – 2% ($1.7b in 2010 only) • Health - 1% ($1.0b in 2010 only) • Education – 0.8% ($0.3b 2010 only ) • Law & Order – 0.5% ($0.15b 2010 only) • Other – eg Defence – 0.2% ($0.1b 2010 only ) • Nominal GDP broadly flat – 2008 – 2011 • How will a 1.7% increase ($1.1b) be managed in 2011? • How will long term trend growth in the big four be managed?

  11. Emergent Strategy? • Task forces on Tax, Infrastructure, Electricity etc. • “Predictable, pragmatic, if unexciting” • Budget emphasised infrastructure spending and sustaining income support, health and (non tertiary) education, law and order What will second term issues be: • NZ Super – 66% at 65? • Improving system performance eg health • Gloomy or Rosy Scenario?

  12. Macro impacts of the fiscal stimulus IPS/NZIPA lunchtime seminar 2 June 2009

  13. Supporting jobs one of three objectives in budget

  14. $10b fiscal stimulus package pre budget 09 • fiscal impulse indicator of 5.4% of GDP $b

  15. Sagging income puts dent in tax revenues

  16. Tax rises & spending cuts to curb rising debt

  17. Fiscal stimulus supports jobs % deviation from base case

  18. But it has to be paid back % deviation from base case

  19. Stimulus does not help external imbalance

More Related