New Zealand's deficit unlikely to be surplus 'anytime soon', economist Cameron Bagrie says

Independent economist Cameron Bagrie says the large Government deficit is unlikely to be surplus anytime soon.

Earlier this month, the Government's books were revealed to be in better shape than expected - recording a $9.7 billion deficit. 

However, that deficit was "still not a good number", Bagrie said.

While it wasn't as bad as the anticipated $19b deficit, he said the economic outlook wasn't great.

"All political parties, I think, will face a bit of economic reality when we get the December economic and fiscal update forecasts," Bagrie told AM.

"The Budget projections had baked in a general expectation [of] a bit of hard work, tight expenditure control and pretty solid economic growth, then we're going to turn deficits into surplus by 2024/2025 and Government debt is going to start coming back down.

"That was yesterday, now is today because it's pretty obvious we're going through what's called the 'understage' in the economic cycle."

While Bagrie believed the Government's books were "reasonably healthy" - given the earlier projections and the global economic storm - he said inflation and weak growth would continue having an impact.

"As we speak, Treasury will be preparing a set of updated fiscal forecasts for the Minister of Finance and I suspect those numbers will have a fair bit of red ink - i.e, we're not going to be back into surplus anytime soon.

He warned the Government and Opposition political parties against additional proposed "spending on that inflationary bonfire" ahead of election 2023.

"If you look at what was baked in at the Budget, the $3 billion operating spending allowances for 2023/2024/2025 Budgets - they're really tight," Bagrie said. "To put that in perspective, the spending allowance we saw within the 2022 Budget was roughly double that so there's not a lot of money to throw around - whether you be the incumbent Government or whether you be the challengers.

"I hope the 2023 election does not fall into the hole of, who's going to either spend more or give us more in the form of some sort of tax bribe."

Labour has not ruled out tax cuts at election 2023. Both National and ACT have already promised them. 

Bagrie has long said tax cuts aren't the answer to the current economic woes but was in favour of adjusting brackets in line with inflation - something National has also proposed.  

"At the moment inflation [and] higher wages are just forcing people into a higher tax bracket which is where the tax man just comes along and just takes more money out of people's pockets in the form of thievery," Bagrie said on Tuesday.

Finance Minister Grant Robertson said earlier this month the Government's books were "favourable" compared to the Global Financial Crisis.

"Our economy has bounced back quicker, unemployment is lower and the increase in debt compared to the size of the economy is comparable." 

The figures showed the Government's COVID-19 response was "one of the best economic responses in the world", he said.