Where did the Government get its savings? KiwiSaver, pay equity and benefits

Thursday, 22 May 2025

ANALYSIS: The Government has found $5 billion in savings per year, made up largely from changes to the pay equity scheme.

Finance Minister Nicola Willis needed to find projects and initiatives which could be scaled back, in order to balance what is the tightest Budget New Zealand has seen in a decade. She had given herself just $1.3 billion in new spending money, but was promising billions in new spending with a focus on the defence force, health and a new tax incentive called 'Investment Boost'.

While Prime Minister Christopher Luxon had earlier admitted the Government would save 'billions' thanks its changes to the Equal Pay Act, ministers had refused to say the exact amount they were saving by scaling back the ability for female-dominated workforces to make pay equity claims.

That number was revealed in 2025 Budget. It showed the Government expected to spend almost $3 billion less on wages in the year ahead. Over the next four years, the Government expected to save $12.8 billion thanks to its urgent pre-Budget change to the Equal Pay Act. Without that saving, Willis' promise of returning the Government books to an operating surplus in 2029 would have been dead. That surplus is wafer thin, or as she called it 'very small', at $200 million.

$12 billion saved in pay equity claims

The Opposition and unions will seize on that $12 billion figure. In the weeks leading to the Budget, Labour leader Chris Hipkins has accused the Government of making low income women pay for the Budget.

On Thursday, as journalists, bankers, economic commentators and politicians were delivered the Budget under a Beehive 'lock up', yet another pay equity protest gathered on the forecourt outside.

With the total pay equity savings confirmed, the Opposition will question whether various spending decisions are worth paying female workforces - like nurses, librarians and teachers - less than would have otherwise been paid.

But Willis said there was still money allocated to settle pay equity claims.

'There are trade offs and there are choices. I stand by the fact that women workers in this economy are going to be getting pay raises under this Government into the future,' Willis said.

The pay equity savings made up more than half of the total 'reprioritisations'.

The other big saving was from changes to KiwiSaver, but the Government also continued to pursue a cost savings drive across the public sector.

KiwiSaver contributions halved

By halving the Government contribution to KiwiSaver, and by cancelling the contribution all together for those earning about $180,000 per year, Treasury estimated the Government would spend around $600 million less each year in contributions.

These payments had gone directly to the KiwiSaver accounts of workers who contributed at least $1042 each year, with the Government paying up to $521 to each saver.

That maximum annual contribution would fall to just $260.72 per year.

Across the next four years, the Government was expected to spend about $3 billion less in KiwiSaver contributions.

Less income support for unemployed teenagers

Social Development Minister Louise Upston said the Government would make it harder for unemployed teenagers to claim a Jobseeker and Emergency benefit.

'With this announcement, we're clearly saying that 18 and 19 year olds who don't study or work and can't support themselves financially should be supported by their parents or guardians, not by the taxpayer,' Upston said.

These restricted settings wouldn't come into place until July 2027, but it was announced in Budget 2025. The Budget estimated it would save $84 million for the Government per year, starting in 2027.

Some teenagers would still be able to access jobseeker support and emergency benefits, but they would need to prove that their parents were unable to financially support them. Willis said Cabinet was still working on the detail about how that would work.

Across welfare spending, there were expected to be other savings. The use of automated payment systems would cut $225 million over the next four years in administration costs, while shared data between the tax department and Ministry of Social Development was expected to save more than $350 million per year from 2028 onwards. Treasury said that was because it would 'ensure the right people are receiving the right payment.'

Means tested best start payments

The Government would save $211 million over the next four years by means testing 'Best Start' payments.

Those payments had given families with young children, aged under one year old, $73 per week.

But that universal payment would come to an end. Instead, only families earning under $97,000 would be able to get the $73 per week payment. That is the same criteria that had been used for families with children aged two and three years old.

Willis said the Government wanted to target the support it offered to families who needed it the most.

Cutbacks for public broadcasting

Radio New Zealand's funding would be reduced by $4.6 million each year.

This is just one example of the all-of-government 'savings drive' that Willis started for her first Budget, last year.

That reduced funding, which equated to about $18 million over the next four years, represented 7% of RNZ's funding. For Budget 2024, almost all government departments had been asked to find savings of around 6 or 7%.

'Just like every other public sector entity, we expect them to find discipline and efficiencies,' Willis said on Thursday, when asked why RNZ's funding was being reduced.

Many other public sector agencies, like the Ministry for Pacific Peoples and the Ministry for Culture and Heritage, had also delivered further funding cuts in Budget 2025.