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Pre-Election Economic and Fiscal Update 2008

Economic and Tax Outlook (continued)

Economic Growth and Tax Revenue Lower than Previously Forecast

Figure 1.1 - Real gross domestic product
Figure 1.1 - Real gross domestic product.
Source:  Statistics New Zealand, The Treasur

The New Zealand economy, like a number of others, is currently facing imbalances in the areas of inflation, household debt, house prices and the current account. As a result of drought, higher consumer prices and previous monetary tightening, output declined in the first two quarters of 2008 and is expected to have declined marginally in the September quarter. Growth is forecast to be positive in the final quarter of 2008 thanks to the recovery from the drought and tax cuts, but will remain subdued throughout most of 2009 as negative influences continue to affect the economy. As the world economy recovers, the domestic economy picks up and inflation and monetary conditions ease, growth will return above trend later in the forecast period, driven initially by increased exports (Figure 1.1). With economic activity forecast to be lower than in the Budget Update, core Crown tax revenue is expected to be $3,148 million lower in aggregate over the next four years.

Table 1.1 - Comparison of core Crown tax revenue forecasts
June years, $million 2007/08
Est./actual
2008/09
Forecast
2009/10
Forecast
2010/11
Forecast
2011/12
Forecast
2012/13
Forecast
Budget Update 2008 56,673 56,523 58,228 60,319 62,712 N/A
Pre-election Update 56,747 56,058 57,415 59,268 61,893 65,084
Difference 74 (465) (813) (1,051) (819) N/A

Source: The Treasury

 

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