(Bloomberg) -- New Zealand’s government will set a target for budget surpluses and introduce a new cap on debt that’s higher than previous limits, allowing greater investment in infrastructure.

Surpluses will be kept within a band of 0-2% of gross domestic product over time, Finance Minister Grant Robertson said in a pre-budget speech Tuesday in Wellington. A new measure of net debt will be introduced to bring New Zealand more in line with other countries, with a ceiling of 30% of GDP, he said. Under the previous measure, that equates to 50% of GDP. 

“It is a limit rather than a target, and again is flexible enough to allow a buffer against short-term shocks, while providing greater room for productive investment,” Robertson said. “The interaction of the two fiscal rules means that the additional debt cannot be used for day-to-day spending as that is limited by the surplus rule. This leaves the debt ceiling to guide capital investments needed in infrastructure to keep our economy moving.”

In 2019, Robertson introduced a net debt target range of 15-25% of GDP, which replaced a goal of 20%. Those fiscal responsibility rules were ditched during the pandemic, when the government borrowed heavily to stimulate the economy. Net debt is forecast to be about 38% of GDP this fiscal year using the old measure.

“A low, specific, set target can end up leading to perverse behavior where you don’t invest in things that you need to,” Robertson said. 

The budget will return to surplus in the 2024-25 fiscal year, a year later than Treasury projected in December, Robertson said. He will deliver the budget on May 19.

“The surplus target will also be the primary rule that controls our spending decisions and will require a careful and balanced approach,” he said.

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