5 Jun 2012

Treasury sticking to economic forecasts

6:42 pm on 5 June 2012

The Treasury is sticking to its economic forecasts in the Budget despite escalating turmoil in the world economy, but concedes there is an increased chance the predictions are too optimistic.

The Treasury put together its forecasts a full month before the Budget on 24 May, during which time the political situation in Europe worsened significantly and an exit from the euro by Greece is now viewed as a very real possibility.

The government department concedes there is an increased chance that its forecasts in the Budget will not now be met.

However, it is sticking to its main forecasts for the economy to grow by between 2.5% and 3.5% over the next couple of years.

It says while prices for New Zealand's main exports are down, offsetting this is a decline in the dollar and lower interest rates for the Government and households.

The Treasury also says business and consumer confidence remains above average.