The housing market is diving faster than expected, and the worsening drought is threatening economic growth, Finance Minister Michael Cullen has warned.
Dr Cullen said his ninth Budget, on May 22, would take seriously increased uncertainty on world markets, a downturn in the United States, and rising food and transport costs.
January’s plunge in world sharemarkets slashed the expected budget surplus for the six months to December from $2.5 billion to about $800 million, thanks mainly to losses by the “Cullen” superannuation fund.
Since Treasury’s pre-Christmas forecasts, uncertainty has increased. Most commentators were picking the US would go into recession, though that could be shortlived.
The outlook for New Zealand was still “reasonably optimistic”, however, though low growth was already expected this year.