Economists continue to pour cold water on the government's plan to return to surplus within three years, with a new forecast showing a $1 billion shortfall in 2014/15.
The National-led government has said it will eliminate the operating deficit by the financial year 2014/15, through a combination of restrained spending and economic growth.
However a poll of leading economists conducted by the New Zealand Institute of Economic Research (NZIER) released this afternoon, predicts the government's books will show a deficit of $1.08b in 2014/15.
In the near term, economists have also predicted larger deficits than they expected three months ago.
The consensus for the 2012/13 deficit is now $8.4b, $614 million more than forecast in June, while the prediction for 2013/14 is a deficit of $3.24b, $405m more than was forecast three months ago.
The quarterly NZIER poll queries economists at ten organisations, including all four of the major retail banks, the Reserve Bank and the Treasury.
Expectations for economic growth actually increased slightly in the near term, with gross domestic product expected to increase by 2.4 per cent in 2012/13, up from 2.2 per cent three months ago.
Over the next three years, growth is expected to average 2.6 per cent.
Over forecasts from the survey include:
- Inflation will remain within Reserve Bank's the 1-3 per cent target band over the next three years.
- Ninety-day bank bill rate expectations suggest the Official Cash Rate will remain on hold at its historic low of 2.5 per cent until about September 2013. The survey was taken after the release of the latest Monetary Policy Statement from the Reserve Bank last week, which pointed to the OCR remaining on hold until late 2013 or early 2014.
- Despite the government deficit lasting longer than predicted, borrowing costs will remain low, with the forecast for the interest rates on 10-year government bonds falling about 0.3 per cent since June.
- Unemployment will gradually drop to 5.4 per cent by 2014/15.
NZIER chief economist Shamubeel Eaqub said the figures were largely the same as those released three months ago, suggesting a gradual recovery, although offshore risks were rising.
''Really what we're seeing is there's a little bit of flattening in the export numbers, because the currency is a little bit higher [than expected] but the broad theme is the same, a gradual recovery, households not spending a lot more.''
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