Governance implications – 2024 HYEFU and Budget Policy Statement

Three quick takes from documents released by Treasury on 17 December 2024 are:

• A prescient ASB/IoD 2024 Director Sentiment Survey: Findings of the 2024 Director Sentiment Survey about an economic recovery are reflected in the economic forecasts in the 2024 Half-Year Economic and Fiscal Update (HYEFU). It forecasts a modest economic recovery starting in 2025, with real GDP expected to grow by 0.5 per cent in 2024/25 and accelerating to 3.3 per cent in 2025/26 as inflation eases and interest rates decline. However, productivity growth remains a concern, constraining the pace of recovery. For boards, this highlights the need for strategic focus on improving operational efficiencies and adapting to an economic rebound, although potentially slower than some expected.
• Ongoing and perhaps strengthened financial pressure on government-funded not-for-profits: The fiscal outlook presented in the HYEFU signals continued deficits in the short term, with the new “OBEGALx” fiscal indicator showing a widening deficit to $12.9 billion in 2024/25 before returning to surplus in 2028/29. Government debt is also projected to rise to 45.1 per cent of GDP by 2025. For not-for-profit boards relying on government funding, this fiscal restraint may result in reduced or reprioritised spending, particularly on time-limited initiatives. Boards should anticipate potential changes in funding arrangements and strengthen their financial planning to ensure continuity of services.
• Government ‘lolly scrambles’ won’t come anytime soon: The Budget Policy Statement 2024 prioritises fiscal discipline by constraining the operating allowance to $3.5 billion, requiring departments to reprioritise spending towards higher-value areas while identifying enduring savings. The Government aims to reduce deficits and stabilise net core Crown debt by tightly controlling expenditure growth while funding critical infrastructure investments needed to support productivity improvements and support ongoing economic growth.

Download the full HYEFU here, and Budget Policy Statement here.

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