New Zealand’s government is heading into the November 7 election with a smaller projected operating deficit and an earlier return to surplus. The Treasury forecasts an operating balance before gains and losses (OBEGAL) deficit of NZ$8.73 billion ($4.94 billion) for the fiscal year ending June 30, 2027, compared with NZ$14.09 billion projected in May. It now expects an OBEGAL surplus in 2028-29, one year earlier than previously forecast. Stronger-than-expected economic performance lifted tax revenue, while government spending was lower than anticipated. The recovery remains gradual, with inflation above 3%, unemployment at a decade high and risks from Middle East instability and elevated energy prices. Treasury expects inflation to return to the government’s 1% to 3% target band in the second quarter of 2027.