(Bloomberg) -- New Zealand Finance Minister Nicola Willis will press ahead with tax cuts this year even as the stagnant economy curbs government revenue.

Tax relief will be announced in the May budget and delivered from July 1, Willis said Wednesday in Wellington when she released the Budget Policy Statement. She declined to offer any details other than to reiterate there will be an adjustment to the thresholds at which earners shift to a higher tax bracket.

“Tax reductions will be funded within the operating allowance through a mixture of savings, reprioritization and additional revenue sources,” she said. “We won’t have to borrow extra to provide tax relief and we won’t be adding to inflationary pressures.”

Willis’s National Party won the October election promising income tax cuts aimed at low and middle income earners. However, it has had to form a three-way coalition to govern, which has seen some of its policies amended, while the economy has been weaker than expected.

When pressed, Willis said the tax package will be “similar” to the plan National campaigned on.

Treasury Department forecasts in today’s statement showed a much weaker economy and less tax revenue over the next five years, which means a previously predicted budget surplus in 2027 is not achievable.

Read More: New Zealand Economy Will Keep Contracting in 2024, ASB Predicts

Annual average growth in gross domestic product for the year through June 2024 will be just 0.1% rather than the 1.5% projected in December’s fiscal update, the Treasury said.

As a result, tax revenue in the five years to 2028 will be NZ$13.9 billion ($8 billion) less than previously expected, it said.

Willis said the revised projections suggest a surplus in 2028 “is achievable, but not a given.”

The government wants to deliver its budget on May 30 with the aim of delivering a surplus in 2028 but not at any cost, she said, adding that front-line government services will not be put in jeopardy.

The budget operating allowance, which is the amount allocated to fund new spending programs and revenue initiatives, will be less than the NZ$3.5 billion signaled in the December update but won’t be disclosed until the budget, she said.

Willis said the government will target debt reduction, partly in an effort to reduce finance costs.

It will discard a new measure introduced by the previous government and return to a net debt calculation that excludes assets and liabilities in government-owned investment funds. Debt under that measure is currently about 44% of GDP and the government’s desire is to get it into a band of 20-40% of GDP over time, Willis said.

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