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Budget 2017 Home Page Fiscal Strategy Report - Budget 2017

Fiscal Performance

As a result of the recession of 2008/09 and the effects of the global financial crisis, fiscal projections prepared in early 2009 showed that, without a policy response, net debt would increase to over 60 per cent of GDP. Instead, as a result of the Government's ongoing programme of responsible fiscal management, operating surpluses are growing and net debt peaked at 26 per cent of GDP and is now falling.

Immediately following the recession, the Government supported New Zealanders and the economy by running deficits. The operating deficit reached a peak of $18.4 billion in 2010/11 following the Canterbury earthquakes, and between 2007/08 and 2012/13 net debt increased by 20 percentage points of GDP.

Over time it was necessary to make well-considered expenditure changes to reduce the operating deficit while continuing to improve public services.

New spending allowances were reduced, efficiency savings were made across the public sector and specific programmes were altered to control long-term costs. Contributions to the New Zealand Superannuation Fund (NZS Fund) were suspended, and new capital spending in Budgets 2012 to 2015 was funded through capital recycling rather than additional borrowing.

As a result of these changes the operating deficit was eliminated and the Government delivered a $1.8 billion surplus last year. Net debt is now falling as a proportion of GDP and is forecast to shrink in dollar terms from 2019/20 onwards.

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