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RNZ News
18-05-2025
- Business
- RNZ News
NZ Budget 2025: economic forecasting is notoriously difficult, but global uncertainty is making it harder
By Michael Ryan and Michael P Cameron* of Prime Minister Christopher Luxon in the 2024 Budget Debate. Photo: VNP / Phil Smith This year's budget will be one of the tightest in a decade , with the New Zealand government halving its operating allowance - the new money it has available to spend - from NZ$2.4 billion to $1.3b. The cut reflects weaker than expected growth owing to global economic turmoil. It also highlights just how difficult it is to predict what is going to happen when it comes to the economy. Economies are dynamic systems where relationships between variables shift. Even the current state of the economy is uncertain due to data revisions and lags in reporting. Despite this uncertainty, governments have to assume paths for revenue and expenditure to make meaningful plans. Based on the Pre-election Economic and Fiscal Update ( PREFU 2023 ), the National Party announced plans to achieve an operating surplus in the year ending June 2027 during the 2023 election campaign. As forecasts changed, so did those plans. By the Half-Year Economic and Fiscal Update ( HYEFU 2024 ), released in December 2024, the goal of an operating surplus had been pushed back to 2029. The table below shows the change in the 2027 forecasts for key economic indicators between the two fiscal updates. Photo: Table: Michael Ryan and Michael P. Cameron / Source: Treasury Nominal gross domestic product (GDP) measures the value of goods and services produced within a country during a specific period. It is a key determinant of tax revenue. Real GDP measures the volume of output of the New Zealand economy. Ultimately, the 2027 nominal GDP forecast at the half-year update was weaker than expected. This weakness was driven by lower than expected output, not by changes in prices. The 2027 forecast tax revenue fell even more sharply than the nominal GDP forecast. This was in part due to the government's personal income tax cuts which have been costed at $3.7b a year . Finance Minister Nicola Willis has warned that the 2025 budget will be very tight, reflecting uncertainty in the global economy. Photo: RNZ / Marika Khabazi We're likely to see further downward revisions in economic growth. The Treasury has already lowered its economic growth forecasts for 2025 and 2026 , in part due to the expected impact of global tariffs. While the direct effects of the tariffs on New Zealand may be limited , the indirect effects - particularly through increased global economic uncertainty - are likely to be substantial. Research has shown that United States-based uncertainty spills over into the New Zealand economy by making firms more pessimistic about the future. This pessimism leads to firms delaying investment, ultimately reducing potential output in the future. Potential output is important as it represents the economy's capacity to grow without generating inflation. Potential GDP is affected by productivity, which has also been weaker than expected and one of the reasons Treasury lowered its forecasts after the pre-election fiscal update. New Zealand is running a structural budget deficit . That means the government is spending more than it earns, even accounting for the fact that governments automatically spend more and tax less in economic downturns. These deficits add to government debt, which can limit future spending and taxation choices. High debt can also hamper the government's ability to assist in counteracting the next downturn if the Reserve Bank's official cash rate is already near zero. It can also limit the ability of the government to respond to external shocks such as disasters or extreme weather events. These concerns are possibly behind the government's goal of returning to surplus by 2029. But there are counter-arguments. With pressing needs in many areas, some argue the government should be spending more now to boost productivity and growth. These contrasting views reflect a legitimate debate about values and priorities. Still, one point is clear: weaker than expected economic growth since the pre-election update has made the trade-offs between present and future fiscal choices more acute. The takeaway is that economic growth is essential for expanding the resources available to both households and governments. This is so they can spend money on things they deem important both now and in the future. A growing economy is not just about producing more for prestige - it's about creating the economic and fiscal resources to improve lives both now and in the future. * Michael Ryan is a Lecturer in Economics at University of Waikato and Michael P. Cameron is a Professor of Economics at University of Waikato. This story was originally published on The Conversation.
Irish Times
09-05-2025
- Business
- Irish Times
Record green fees tee-up operating surplus at Lahinch Golf Club
Record green fee income of €3.3 million at Lahinch Golf Club last year helped the club post an operating surplus of €1.725 million. This year, the Lahinch has increased green fees to €375 for non-members to play a round of golf at its 'iconic' Old Course. In his report to members, outgoing chairman John Gleeson said that on foot of the 2025 green fee increase 'we expect our revenue from green fee activity to exceed 2024 levels'. The 2023 US Masters champion and LIV tour member, Jon Rahm won the Dubai Duty Free Irish Open staged at Co Clare club in 2019 which raised the course's international profile. READ MORE American golfers usually make up a sizeable chunk of the green fee income and the annual report shows that arising from green fees increasing to €375 from April 22nd to October 10th Lahinch Golf Club is projecting that its green fee income will increase to €3.8 million in 2025. Mr Gleeson said that while members' annual subscription income increased to €1.23 million in 2024 'we continue to rely very heavily on revenue generated from green fee visitors'. Last year, the golf club's Golf Shop alone generated €1.38 million in sales of Lahinch GC branded clothing and accessories and other items, contributing a gross profit of €611,318 to the club's finances. In his report attached to the club's 2024 annual report, Mr Gleeson stated that 'it was another successful financial year for the club'. He said that the operating surplus of €1.72 million 'has allowed us to rebuild our finances with our contingency fund of €2 million in place, while providing additional funding for our clubhouse project'. Construction work continues on the upgrade of its 'no longer fit for purpose' clubhouse, which is now almost 60 years old and Mr Gleeson said that 'the tender price was €6.6 million which is a major undertaking for the Club'. 'We look forward to having the 'new clubhouse' completed ahead of the Walker Cup in 2026,' he added. Mr Gleeson said that the €2 million contingency fund is in place 'to deal with any significant downturn which would put pressure on our finances'. 'Golfing activity was at record levels by both members and guests and in particular the Castle Course has seen a large increase in usage by members,' he said. The club's finances were also boosted by new members spending €245,000 on 'Overseas Life Memberships'. Overall staff costs last year increased from €1.88 million to €2.08 million. At the end of December, the golf club's equity had increased to €10.7 million made up of €8.76 million in accumulated funds and €2 million in a contingency fund. The golf club's cash funds increased from €3.57 million to €3.78 million.
