Thursday’s election-year Budget will be the centrepiece of New Zealand’s market week. Sure, the NZ government has signalled restraint. However, the markets should appreciate that New Zealand’s fiscal impulse is turning to the positive. To the extent fiscal policy is, on balance, still sucking money out of the economy then it’s largely from skimming a rapidly expanding (private) economy. Government expenditure itself is likely to keep picking up the pace, after expanding last year. All things considered, the implications for monetary policy should be clear – at least directionally.
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