New Zealand’s long run of deficits and exploding debt will come into focus as Chris Luxon’s coalition government hands down its second budget.
Finance Minister Nicola Willis will reveal the new state of the books at noon AEST on Thursday, as well as the conservative government’s new spending plans.
Ms Willis has warned Kiwis to expect a “no BS” budget, in keeping with the government’s aims to lower debt and “right-size” government spending.
“We’ve committed ourselves to ongoing reprioritisation and fiscal restraint. It isn’t easy, but it is essential,” she said in a budget preview speech.
“There will be no lolly scramble in Budget 2025.
“New spending initiatives are strictly limited to the most important priorities: our focus has been on health, education, law and order, defence, and a small number of critical social investments.”
Another way to describe the government’s plans is for cuts.
Workplace Relations Minister Brooke van Velden shocked Kiwis with a pre-budget announcement it was axing “pay equity” claims for around 180,000 workers, which effectively iced wage rises for a series of women-dominated industries.
That move alarmed unions and drew dozens of protests across the country, but showed the government’s firmness to find savings and get the books back in black.
The last projection from Treasury, issued last December, was for a $NZ12.9 billion deficit in the upcoming financial year, with the government posting its next surplus in 2029.
Should that come to pass, that will mean New Zealand has spent a decade in the red, with its last surplus coming under Jacinda Ardern in 2019, before COVID-19 protections required the use of the government’s chequebook.
In that time, debt has spiralled.
Grant Robertson, Ms Willis’ predecessor as finance minister, boasted of his responsible books-balancing, with net debt at just 19 per cent of GDP – or $NZ58 billion – before the pandemic hit.
It now sits around 42 per cent of GDP, or $NZ175 billion and climbing.
“That amounts to $22,000 more in debt for every New Zealander,” Ms Willis said, “and servicing that debt is expensive”.
“The interest bill on government debt has soared … to $NZ8.9 billion last year. That sum is more than annual core Crown expenses for the Police, Corrections, the Ministry of Justice, Customs and the Defence Force combined.”
Despite the push for savings, several large investments are already known, including a multibillion-dollar defence push to get military spending close to two per cent of GDP by decade’s end.
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