NEW ZEALAND BUDGET FORECAST SEEN AS POSITIVE
Analysts said they were surprised at
the government's announcement of a forecast budget surplus for
fiscal 1988 but said it was consistent with previous policy
statements and positive for the economy.
    Finance Minister Roger Douglas predicted a budget surplus
for the year ending March 1988 of 379 mln New Zealand dlrs
against a 1.95 billion deficit last year.
    Analysts polled by Reuters said the forecast budget surplus
was even more positive than the most bullish analysts'
forecasts and that this was good news for financial markets.
    Market expectations among analysts questioned by Reuters
before the budget varied widely between a balanced budget and a
2.3 billion dlr deficit. But none predicted a surplus.
    The forecast initially looks positive for both the bond and
the foreign exchange markets, one analyst said. Paradoxically,
the New Zealand dollar could rise in the medium term, despite
lower interest rates, as overseas investors became more
confident about investing in New Zealand, he said.
    However, some foreign exchange dealers disagreed, saying
the local dollar is primarily interest rate driven and will
move lower.
    The local dollar dropped to 0.5940/50 U.S. Dlrs in after
hours trading, against 0.5970/77 just before the budget
release.
    Analysts said the budget was also positive for the share
market, despite an increase in the contribution of company
taxation to revenue figures.
    One equities analyst predicted that the budget surplus
announcement could push the share market up by 50 points
tomorrow.
    The Budget statement was broadly as expected, with a
continuation of existing policies, and the absence of
traditional pre-election incentives would be viewed positively
by overseas investors, another said.
    But one merchant bank economist said that certain anti-tax
avoidance measures could damage some sectors of the share
market, particularly multi-national companies.
    The government is also lowering its borrowing requirements,
through bond tenders, as a result of the surplus. The
requirement for the rest of the year is now down to 950 mln
N.Z. Dlrs from a predicted 1.75 billion.
    Predicted revenue in the Budget looked sustainable and
there appeared to be no holding back on expenditure, another
economist said. He added that the document seemed entirely
credible.
    "Altogether it looks good for Labour's election prospects,"
he said.
    An election is due before the end of September.
 REUTER
