The International Monetary Fund (IMF) warns that New Zealand is spending beyond its means and needs to control its spending and be prepared to raise
The International Monetary Fund (IMF) warns that New Zealand is spending beyond its means and needs to control its spending and be prepared to raise interest rates. The IMF praises the country’s handling of the pandemic but highlights the overheating economy due to generous financial and monetary support. It urges a restrictive approach to macroeconomic policies and prioritizing fiscal recovery while limiting discretionary spending. The high current account deficit is identified as a risk, and the IMF raises concerns about the slowing housing market and rising debt arrears. The IMF suggests addressing housing affordability by increasing the supply of new houses and improving planning and infrastructure investment. The economy is expected to further slow, and the IMF supports the Reserve Bank of New Zealand’s approach to raising interest rates. Long-term challenges such as climate change, an aging population, and infrastructure gaps require targeted government spending. The IMF also advocates for tax reform, including a capital gains tax, to broaden the tax base and improve efficiency.
