New Zealand’s Finance Minister Nicola Willis has delivered her first budget amidst nationwide protests against the effects of the government’s policies on Māori. She has kept the National Party’s pre-election pledge of across-the-board tax cuts with a package that will cost $14.7 billion (US$9 billion).
While National had campaigned on fiscal restraint, Ms. Willis has gone further than expected.
Labour had forecast operating allowances of $3.5 billion this year, followed by $3.25 billion next year and $3 billion in each following year. National had promised a relatively cautious cut to $3.2 billion this year, before gradually dropping new allowances to $2.7 billion during this term.
Instead, Ms. Willis has cut them far deeper and faster than forecast, cancelling over $5.5 billion in new spending over the next four years.
Next year’s expenditure will be just $2.4 billion, and the minister said it will stay at that figure for the next two budgets. This will help deliver a surplus sooner than expected, in 2028.
The multi-year capital allowance will get a $7 billion increase.
Ms. Willis characterised it as “a Budget for Kiwis who have been experiencing a prolonged cost-of-living crisis,” adding that it showed “light at the end of the tunnel for a prolonged economic downturn.”
However, the budget forecasts still make for a very grim reading. They show weak productivity and predict economic growth will be even slower than prior to the election, leaving the economy $10 billion worse off by 2028.
Even with Ms. Willis’ pared-back spending, that will necessitate far higher borrowing, peaking at $207 billion in 2027—much higher than the figure of $194 billion forecast last December.
Under the new tax rates, a minimum wage earner will be better off by about $12.50 a week; a working couple with a combined income of $150,000 will keep an additional $40 a week; while a single adult earning $55,000 a year will keep an extra $25.50 a week in their paycheck.
| Tax rate | Current threshold | New threshold |
| 10.5 | Less than $14,000 | Less than $15,600 |
| 17.5 | $14,001 to $48,000 | $15,601 to $53,500 |
| 30 | $48,001 to $70,000 | $53,501 to $78,100 |
| 33 | $70,001 to $180,000 | $78,101 to $180,000 |
| 39 | More than 180,000 | More than $180,000 |
But the biggest gains are made by families with children in early childhood education, who qualify for a package called Family Boost. For example, a couple earning $62,500 each and spending $600 a fortnight on childcare will get $126 a fortnight.
In addition, the Working for Families tax credit will increase, providing 160,000 low- and middle-income families with children with up to $50 a fortnight.
About $3.7 billion of the tax cuts come directly from the almost $6 billion reduction in costs through cuts to public service jobs and government programmes.
Funding Across Sectors
Health spending gets a boost of $8.15 billion across the next three budgets, but National’s pre-election promise to fund 13 new cancer drugs has been dropped.The increase is mainly to cover cost pressures, including $3.4 billion in hospital and speciality services and $2.12 billion for primary care and public health.
There is specific provision for more security staff in emergency departments and extending the breast screening programme to 70 to 74-year-olds.
Education, however, doesn’t do nearly as well. Operational grants to schools do not keep up with inflation, meaning a cut in real terms despite a $199 million increase over the forecast period.
The sector does, however, get $3 billion in new spending, including $1.5 billion for new schools and classrooms, $67 million for structured literacy support, and $477 million for healthy school lunches.
Police get $651 million over four years, including $226 million to deliver an extra 500 officers by the end of 2025, along with money for new cars and equipment and $242 million has been set as for the pending decision on Police pay.
Additionally, as expected due to previous announcements, there will be $28 million over four years for boot camps for serious repeat young offenders, plus $1 million in capital funding. This will be split between Oranga Tamariki (Ministry for Children and Young People), the courts, the justice sector and the police.
A national kapa haka (traditional Māori dance) festival, Te Matatini, has been given almost $50 million in funding, while cutting the budget of the Ministry of Māori Development.
The country’s ageing rail network will get $266 million to complete overdue track renewals in Auckland and Wellington.
Despite recent reported instances of spying, the Government Communications Security Bureau’s budget is to be reduced by $30.4 million from the 2024/25 financial year to the 2027/28 financial year, including those years.
A Return to ‘Trickle Down’: Labour
Labour leader Chris Hipkins criticised the government for not keeping all of its pre-election tax cut promises, noting that people receiving superannuation had been promised $13 a week before the election, but would now get only $4.30.“That’s less than a packet of chewing gum. I am astounded Winston Peters agreed to that,” Mr. Hipkins said.
He also claimed National had broken its promise to increase education spending by at least the level of inflation.
He said the finance minister was going back to “trickle-down economics,” leaving low-income people behind while allowing the wealthy to become even more so.
He also criticised the already-announced $2.9 billion tax break for landlords and said people should not believe ministers when they said tough decisions in the budget had to be made.
“I want to speak to the Kiwis who feel forgotten and left behind by this government,” Mr. Hipkins said. “We see you and we hear you.”
Prime Minister Christopher Luxon responded by calling Mr. Hipkins’ speech “sad, pathetic, and embarrassing” and claimed the Opposition Leader wasn’t working to develop any alternative policy.
