Finance Minister reveals Budget 2025 tighter than expected

Tuesday, 29 April 2025

Finance Minister Nicola Willis delivers her pre-Budget speech to the Hutt Valley Chamber of Commerce on the factory floor at Metco in Lower Hutt.

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Next month’s Budget will be even tougher than expected with the Government allowing only $1.3 billion for net new spending, Finance Minister Nicola Willis has revealed.

The Treasury had forecast in December that the allowance for increased operational expenditure would be an already low $2.4b, leaving little headroom for dealing with the impact of inflation and other pressures on the Government’s costs.

But Willis told the Hutt Valley Chamber of Commerce in a pre-Budget speech this morning that the cap will be even tighter.

The economy was still recovering from the damage caused during the Covid era and with the Treasury lowering its economic growth forecasts for both this year and 2026 due to the expected impact of global tariffs, this was “not the easiest time to be putting together a Budget”, she said.

Bringing down government debt would not be easy with its books still out of balance, she said in speech notes.

The finance minister gave a pre-Budget speech on Tuesday morning, where she outlined what’s in it.

But explaining the economy drive, Willis said the Government remained committed to achieving a small surplus in the year ending June 2029 if ACC’s deficit was excluded, and it also remained its intention to return to surplus a year earlier “if possible”.

Restricting the overall increase in operating spending to $1.3b would involve an absolute lid on spending in many areas to fund increases in others, she made clear.

“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.

“We have also found room for modest measures to support business growth and to provide some carefully targeted cost-of-living relief,” she said.

But beyond “a small number of exceptions”, government departments were not receiving additional funding in the Budget, she said.

“We expect government agencies to adjust themselves to New Zealand’s limited fiscal means.

“This will require restraint in public sector wage increases and an ongoing commitment to getting more impact out of every dollar spent.”

There would also be a “significant savings drive”, she said.

“That effort has involved ministers identifying areas of previously committed spending that can no longer be justified in light of the challenging circumstances New Zealand now faces.

“This has involved a line-by-line review of previous funding commitments, including money put aside in contingency,” she said.

Glenn Barclay, spokesperson for Better Taxes for a Better Future, a lobby group campaigning for tax reform, said the Government had painted itself into a fiscal corner because of its unwillingness to recognise the tax system was broken.

It needed to “raise more revenue for the betterment of all New Zealanders”, he said.

But Willis dismissed the idea of raising major taxes as an alternative means to achieve the Government’s fiscal goals, in her speech.

“Punishing Kiwis with higher taxes right now would undermine our recovery, strangle growth and threaten the economic stability New Zealand needs,” she said.

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