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Budget 2016 Home Page Budget Economic and Fiscal Update 2016

Alternative Scenarios

The following scenarios show how the economy might evolve if some of the key judgements in the main forecast are altered (Table 3.1). They illustrate two of the many ways that the economy may deviate from the main forecast. Scenario One illustrates the economic impacts of significantly weaker trading partner growth, in China in particular, with a sharp turnaround in services exports, a slower recovery in the terms of trade, lower inflation and elevated global uncertainty. Scenario Two shows the economic impact if recent momentum is sustained. In particular, stronger net migration and house price growth support consumption and residential investment growth with stronger inflation and employment growth.

Table 3.1 - Economic and fiscal variables for main forecast and scenarios
June years 2015
Actual
2016
Estimate
2017
Forecast
2018
Forecast
2019
Forecast
2020
Forecast

Real GDP (annual average % change)

           
Main forecast 3.3 2.6 2.9 3.2 2.8 2.5
Scenario One 3.3 2.4 1.4 3.5 3.4 2.8
Scenario Two 3.3 2.7 3.0 3.5 2.8 2.6

Unemployment rate1

           
Main forecast 5.9 5.6 5.6 5.1 4.6 4.6
Scenario One 5.9 5.6 6.1 5.6 4.9 4.6
Scenario Two 5.9 5.6 5.5 5.1 4.7 4.6

Nominal GDP (annual average % change)

           
Main forecast 2.8 3.5 3.6 5.6 5.1 4.1
Scenario One 2.8 3.5 1.6 5.1 5.0 4.3
Scenario Two 2.8 3.8 4.3 6.1 5.2 4.2

Consumers price index (annual % change)

           
Main forecast 0.4 0.1 1.5 2.0 1.9 2.1
Scenario One 0.4 0.1 1.5 1.5 1.6 2.0
Scenario Two 0.4 0.6 1.7 2.2 2.0 2.1

Operating balance before gains and losses (% of GDP)

           
Main forecast 0.2 0.3 0.3 0.9 1.7 2.2
Scenario One 0.2 0.3 -0.2 0.1 0.9 1.5
Scenario Two 0.2 0.3 0.5 1.3 2.2 2.8

Net core Crown debt (% of GDP)

           
Main forecast 25.1 24.9 25.6 25.0 23.1 20.8
Scenario One 25.1 24.9 26.6 26.8 25.7 24.1
Scenario Two 25.1 24.8 25.1 23.9 21.5 18.8

Note:

  1. June quarter, seasonally adjusted.

Sources: Statistics New Zealand, the Treasury

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