Purse strings to permanently tighten for the public service - Treasury boss

Thursday, 2 October 2025

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Iain Rennie doesn’t think any government will ever again be “relaxed” about spending money in the public service.

Rennie, the head of Treasury, is anticipating a permanent culture shift in the public service’s approach to money. No matter the government, the future looks to be of ministries under “quite a lot of financial constraint”, required to think constantly about better ways to use money - not just when New Zealand hits a crisis.

“I don't think we're ever going to go back to a world where when money was a bit more relaxed, it's hard to see that kind of future,” he tells The Post.

Rennie - a former adviser to Jim Bolger and top economist - landed the role of chief executive and secretary to the Treasury late last year.

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It has seen Rennie the bearer of much bad news. Months into the job, he issued a stark warning in March that New Zealand needs to get its public finances in order and plan for a shock worth 10% of gross domestic product every decade.

Just last week, he warned that Government debt will hit 200% of GDP by 2065 ‒ or $246,500 per person ‒ if changes are not made.

“It's really interesting having come back into government after a few years out. You just feel it's very different in terms of the degree of financial pressure than what I saw previously,” Rennie said.

That’s a mix of the current economy and ongoing, year on year increases such as the the number of people who are coming into the pension system, and increases such as national security costs.

“The world is different and therefore governments are having to make different kind of choices,” he said.

That’s going to make the job of the public sector more difficult and will mean a shift of focus and resources towards some parts of the public sector and away from others.

Looking back, Rennie said large-scale change in the public service in the 80s, early 90s and after the global financial crisis resulted in “a lot of pressure on the public sector and I think that required a lot of innovation and focus on on the financials”.

Rennie believes New Zealand is in another phase, post-Covid and the issues it left behind.

“The challenge for us is not that we've haven’t done it before, but … how do we build some of those skills and … corporate DNA … rather than waiting for the next crisis?

“Agencies are going to have to think on an ongoing basis, how do we use our money in smarter, better ways?

“There is a whole set of shifts that we need to make [in] how the public service is organised, how it works, that are going to make us more financially sustainable, but also more effective going forward.”

In terms of how they adapt to that fiscal environment, there are several levers, he said.

“Part of it is technology. Part of it is as [Public Service Commissioner Sir Brian Roche] has talked a bit about, moving to a simpler, less complex organisation.

“We’ve a lot of entities in public sector, and I think that gets in the way of timely decision making, and it's not particularly efficient.“

Rennie said it’s also about leadership, productive workforces, and ensuring “we're actively getting in the best and brightest, younger New Zealanders to make sure that we keep delivering fantastic services in the future”.

Already, Rennie says, public servants overwhelmingly recognise “that we need to treat taxpayers’ money with care, and so I don't see in a widespread way that people are willy nilly using taxpayers’ money carelessly”.

At the same time, the public service doesn't “have some of those same disciplines that private sector firms have, who have a much more uncertainty about their revenues”.

“We probably don't have some of the same pressures on us in that regard, and I think that is something that we need to think about.”

Rennie anticipated most agencies - no matter the government - “are going to find themselves under quite a lot of financial constraint”.

“I think that will change the culture over time relative to where we've been over the last 10 or so years.”

A major concern of Rennie’s is, if the current outlook remains, “we're making an active choice to say that people who are further away from retirement, so younger people, and potentially people not yet born, they have to wear the burden of high taxes to pay for current recipients of super and people who who will get it relatively soon - say the next 10 years”.

“Ultimately society and politicians are going to have to form a view about how do you make this transition, and how do you share the costs across generations? And ultimately that will be a social rather than a technocratic judgement.”

Rennie said there are a series of choices that New Zealand faces over the next 10 or 15 years.

“We need to get on with that sooner rather than later, because we have more choices now, relative to waiting where we have fewer choices.

“So what we're saying is actually, for government, you shouldn't just work on one lever, but work on a number, because that means that the adjustment can be smaller and it can be … probably less disruptive to the community.”

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