WELLINGTON (AFP) – New Zealand said Tuesday that a long-awaited return to budget surplus was unlikely to happen this financial year after a slump in dairy prices sapped government tax revenues.
The deficit is expected to reach NZ$572 million (US$442 million) in the year through June 2015, the Treasury said, casting doubt on government plans to put the books back in the black for the first time in six years.
The last time the Treasury made a similar prediction in May, it forecast a NZ$372 million budget surplus for the year.
“Falling dairy prices and low inflation are restricting growth in the nominal economy and government revenue,” Finance Minister Bill English said.
“This is making it more challenging for the government to achieve surplus in 2014/15.”
Prices for dairy products, which account for about a quarter of New Zealand’s exports, have halved since January due to a glut of world supplies.
Despite the setback, the Treasury predicted the government will achieve a surplus of NZ$565 million in 2015/16, a year later than originally scheduled.
Returning to surplus in 2014/15 was a central plank of the government’s economic platform during a general election in September in which Prime Minister John Key won a third term.
English said the government would not be changing its spending plans to try to meet the target. “We won’t be heading to slash-and-burn expenditure because one forecast shows us falling short of the surplus target,” he said.
New Zealand’s economy was still performing strongly compared to other developed countries, he said.
“GDP (gross domestic product) growth is expected to average almost three percent over the next five years, better than the euro area, the US, the UK, Japan and Canada,” he said.