New Zealand on Thursday lifted welfare benefit rates and promised billions of dollars more towards addressing rising inequality in its annual budget, as it predicted smaller deficits and a faster economic recovery from COVID-19.
The budget for the 2021 fiscal year allocated funds towards housing, healthcare, education and infrastructure, while also targeting issues like child poverty, climate change and welfare of the indigenous Maori.
"By investing in those who need it the most, we are driving the recovery by reducing need, at the same time as providing stimulus for our economy." The Treasury predicteda budget deficit of NZ$15.127 billion for the fiscal year ending June, compared to the NZ$21.576 billion seen in its half-year fiscal update in December. The deficit peaks at 5.3% of gross domestic product in June 2022 before declining to 0.6% of GDP by June 2025.
"Given the pace of recovery, we believe the government's credit metrics can withstand further negative shocks to the economy and its fiscal position at the current rating level," S&P said in a statement.While New Zealand's economy contracted in the final quarter of last year, recent improvements in business confidence and an unexpected fall in the unemployment rate to 4.7% in the March quarter have pointed to an economic rebound.
But these measures, coupled with housing shortages, sent property prices soaring, forcing the government to step and announce cooling measures.
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