The Finance Minister has spent weeks dampening Budget day expectations but experts say the healthy books will show the Government is on track to deliver its fiscal targets

Don’t expect many fireworks on Thursday, experts are warning, as Finance Minister Grant Robertson gears up for a “prudent” Budget.

Economists are confident this Finance Minister's first full Budget will show the Government can meet its fiscal targets but there will be little room for any “additional sweeteners.”

But this will come as little surprise to most, as Robertson and Prime Minister Jacinda Ardern have spent weeks dampening expectations ahead of Thursday’s announcement.

Ardern has called it the “rebuilding Budget,” accusing the previous Government of neglecting key areas of infrastructure.

The Budget is expected to be a “balancing act,” according to Westpac Senior Economist Anne Boniface.

“Stationed firmly at the pointy end of this process is Finance Minister Grant Robertson, who’s balancing the Government’s reputation for responsible fiscal management against a desire to allow the Government to follow through with as many of its pre-election promises as possible.”

Robertson and Ardern have both used their pre-Budget speeches to reaffirm their commitment to getting net Core Crown debt to 20% of GDP by 2021/22.

The most recent set of Crown Accounts shows Government debt was 21.4% of GDP in the nine months to March, 0.8% (or $2.2 billion) lower than expectations.

The Government’s surplus over the same period was almost $1 billion higher than expected, coming in at $3.3 billion, and tax revenue was $1.1 billion ahead of forecast.

Last week, Robertson was tight-lipped on where that extra capital would go; “you’ll see next Thursday,” he told reporters.

The big news from the Finance Minister’s Pre-Budget speech earlier this month was that the Government had freed up $1.4 billion in funding over the next four years.

Half of that will be from cracking down on speculators, tax dodgers and “ensuring multi-nationals pay their fair share of tax.”

The rest is from “reprioritised funding,” where the “obvious and most high profile” change would come from the Government’s removal of irrigation subsidies, Robertson says.

ANZ Economist Miles Workman says the combination of the reprioritised funding and the healthy books gives the Government a few extra options.

“But we expect there will be little room for additional sweeteners of any significant size,” he says.

The Prime Minister has already confirmed the Government has had to “reprioritise some of our own priorities,” one of which being cheaper GP visits.

Labour promised to have the scheme in place by July 1 this year, but earlier this month revealed it will now be phased in over time.

Boniface says other policies could meet the same fate, given the Government still feels constrained.

More ‘optimistic’ economic growth figures?

As well as Robertson unveiling new policy initiatives on Thursday, the Treasury will deliver its economic forecasts.

At the Half-Yearly Economic and Fiscal Update (HYEFU), Treasury expected economic growth of 2.9% and 3.6% in the years to June 2018 and 2019 respectively.

These forecasts were described as “overly optimistic” at the time.

Workman expects the economic growth estimates to be broadly similar to those outlined in HYEFU but says ANZ’s forecasts are not as upbeat.

At the time, Treasury’s rationale for its “optimistic” forecasts was underpinned by growth in business investment, ongoing growth in house prices and additional residential construction activity on the back of Kiwibuild initiatives.

Boniface says Westpac has a differing opinion on these issues.

“We expect a lull in business investment and hiring, modest house price falls in response to new policies targeting the housing market, and subdued growth in total construction activity over the next year or two – despite Kiwibuild starting.”

ASB Chief Economist Nick Tuffley is also expecting lower growth than the Treasury is forecasting.

“If that proves the case, then the Half-Year update may show less wiggle room for fiscal policy than we [are expecting].”

What’s already been announced

Details of some of the Government’s flagship policies, such as its families package and the Kiwibuild project, were unveiled during the mini-Budget in December.

This painted a more detailed picture of the costings of the Government’s 100-day plan.

But, as is the case every year, the Government has made a multitude of pre-Budget announcements in areas such as foreign policy and education.

The most high-profile of which was the almost $1 billion boost for foreign affairs.

Almost $715 million over four years will go towards aid in the Pacific and $190 million over the same period will go towards bolstering diplomat numbers and a new embassy in Sweden.

Housing and homelessness will also be a priority, with the Government forking out $100 million for its Housing First initiative, which will fund emergency housing.

Details of the $100 million Green Investment Fund will also be revealed, as well as a $21 million package for early childhood education.

A 12.5% R&D tax credit has also been announced. Under the rules, business will be able to claim a tax credit for up to $120 million of R&D expenditure each year.

Robertson said last week the Government’s capital spending plans over the next five years will total $42 billion – roughly $10 billion more than the National-led Government was forecasting.

But there was no increase over the HYEFU projections.