The financial crisis that hit the world economy forced the government in New Zealand to cut taxes and to increase governmental spending hoping to revive the economy. The exceptional procedures taken after the crisis led to a widening budget deficit, but fortunately the budget deficit in New Zealand narrowed in the 11 months ended March 31 due to exceptional circumstances.

New Zealand's cash budget deficit narrowed in the 11 months ended March 31 as it came in at NZ$7.14 billion narrower NZ$1.05 billion than forecasts. This came after NZ$515 million payment to the International monetary fund was delayed but the government didn’t announce the reason of delay. This came along with the NZ$700 million was received from a discontinued investment earlier than expected.

New Zealand government cut taxes in order to support the business sector that made company tax receipts come less than forecasts as it reached NZ$443 million, after company's profits was hit by the weak demand and falling exports, adding to this income tax receipts that declined due to the increasing layoffs.

The value of assets owned by the government inclined making the government's operating deficit that includes investments and other payments narrow to be NZ$ 1.17 million.

The Finance Minister Bill English said today that the government is facing large structural budget deficit for the next 10 years. He added that the government should restrain spending during the upcoming period in order to reach a budget surplus in less than 10 years, while he clarified that wages won't rise this year as much as it rose recent years.

English said that the government cut its allocation for future spending to control the deficit and debts, especially after the government revenues was affected by the crisis such as tax revenues.

Nevertheless, the New Zealand GDP showed a contraction more than forecasts in the first quarter as it shrank by 1.0% to be the fifth consecutive contraction. The economy lost the support of consumer spending that declined to -1.4% in the first quarter which is the lowest level in 18 years. Domestic demand was severely affected by the increasing unemployment as it resulted in lower spending levels pressuring company's profits.

The Reserve Bank of New Zealand had a series of interest rate cuts till the interest rate reached the lowest level at 2.5%, while Mr. Allan Bollard the Reserve Bank Governor said that the bank is not planning to increase interest rates before the end of 2010.

As for expectations for economic growth, the central bank forecasted that the New Zealand economy will continue contacting during the second and the third quarter of this year before starting to recover during the fourth quarter ending in 31 January. The bank is expecting the economy to shrink during the year ending in 31 March in a percentage of 1.3 before growing during the next year by 3.2%.