First, the good news: GDP inched up against expectations it would shrink in the June quarter, the external deficit shrank faster than expected, and Fonterra has raised its payout more than expected. Other positive numbers include net migration reaching 15,600, up from 4,900 the year before, and unemployment rising more slowly than forecast. Where the inflow onto the unemployment benefit was running at around 1200 a week, it has dropped back to 800. Finance Minister Bill English says any lift in business confidence and improvement in the job outlook are good signs. But they pose a problem for him because if people take the view things are getting back to where they were before the global credit crunch, then they will want the Govt to ease its clamp on spending and on pay rises in the state sector.

This is where to spot the bad news. The soon to be published Crown accounts for the June year will show just how dire NZ’s fiscal position has become, and why the Govt is borrowing $400m a week. Those accounts will show a huge turnaround in revenue flows, after the global financial crisis deepened the recession. Company tax has taken a big hit. The Govt’s books will also detail significant write-offs to take account of investment losses and impaired assets such as student loans. It’s a pretty ugly picture. It may prove salutary to those who refuse to believe NZ faces 10 years of fiscal deficits on the present track. As individual Ministers start to negotiate their departmental budgets for the coming year, they have to confront the hard reality there will possibly be only a bit over $1bn of new money available in next year’s budget where by comparison the Govt had in effect $2.5bn of new money to allocate in the 2009 budget.

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