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NZ budget update marked contrast to Aust

AAP logoAAP 8/12/2016 Colin Brinsden, AAP Economics Correspondent

As if the All Blacks' trouncing of the Wallabies in all three Bledisloe Cup rugby matches this year wasn't enough, Australia's cross-Tasman neighbours continue to hold the upper-hand in economic prowess as well.

Rubbing salt in the wound 24 hours after Australia posted its worst economic performance in eight years, New Zealand has upgraded its official growth forecasts and is predicting budget surpluses as far as the eye can see.

Little wonder that NZ Finance Minister Bill English is about to become his country's next prime minister after John Key announced his retirement this week.

In its half-year budget review released on Thursday, NZ Treasury predicted economic growth of 3.6 per cent in the year to June 2017, up from a previous forecast of 2.9 per cent.

There were modest growth upgrades for 2018 and 2019 as well.

There will be another budget surplus in 2017 of $NZ500 million ($A480 million), rising to $NZ8.5 billion by 2021.

JP Morgan economist Ben Jarman noted Mr English was able to use the update to declare he has "strong support in the caucus" for his leadership, as other contenders for the prime ministership dropped by the wayside .

Australian Treasurer Scott Morrison can only look on in awe.

His mid-year budget update on December 19 will tell a totally different story.

According to one recent independent report, Australian budget deficits could have blown out by around $24 billion over the next four years due to record low wage growth hitting tax revenues.

Mr Morrison has described that analysis by Deloitte Access Economics economist Chris Richardson as "very astute observations".

"We have been working along that track," he told ABC radio on Thursday.

Mr Richardson's report predicted the budget deficit for 2016/17 blowing out to $40.5 billion from $37.1 billion as forecast in the May budget, although Mr Morrison is adamant the government is still working towards a balanced budget by 2021.

His comments came after the national accounts for the September quarter on Wednesday showed economic growth contracted by 0.5 per cent, the first decline since March 2011 and biggest drop since the 2008-2009 global financial crisis.

That left the annual growth rate at just 1.8 per cent.

At least economists are fairly confident the Australian economy will bounce back in the December quarter and avoid a technical recession.

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