The financial markets were underwhelmed by the Government's Budget, although a $3 billion cut in its borrowing requirement over next two years came as some surprise to many.
The NZ Debt Management Office (NZDMO) said its total borrowing from government bonds and Treasury bills would be $3b lower than that outlined in its half year fiscal update last December.
The NZDMO said it was considering launching two longer-dated bonds as part of the 2013/14 bond programme. Possible maturities being considered include an April 2027 nominal and a September 2030 inflation-indexed bond.
The office expects net borrowing of $9b in the current financial year, a $3b reduction next year, and net issuance of $5b and $7b the following two years. The reduction was on the back of improving Government accounts.
Westpac chief economist Dominick Stephens said the Government's fiscal position was better than expected. "But I thought the NZDMO would just continue to issue bonds at the same rate," he said.
Bank of New Zealand currency strategist Mike Jones said the Budget was "underwhelming" for the foreign exchange market, which meant the New Zealand dollar remained stationary at US82.5c just after the Budget's release at 2pm.
"If anything, the economic forecasts are being regarded as a shade pessimistic, which means there is potential for positive surprises," he said.
In the Budget, the Government said it was on track to achieve a surplus in 2014/15.
The Treasury said it expects the economy to grow modestly over the next four years. Growth is expected to reach 2.5 per cent in 2013, then to ease to 2.4 per cent in 2014 before peaking at 3.0 per cent in 2015.
"In our view, this is conservative, particularly in 2014 and 2015,' Westpac said in a commentary. In contrast, the bank forecasts growth at 2.9 per cent and 3.7 per cent, respectively, over these years.
Westpac said overall, the Budget was less contractionary than previously reported in the Government's December half year fiscal update, "and may put upward pressure on interest rates".
