Budget 2026: Nicola Willis to plot leaner public service; union says up to 10,000 jobs could go
Tuesday, 19 May 2026
Finance Minister Nicola Willis will use a pre-Budget speech today to launch a new wave of public service reform, including slashing the number of Government agencies, driving public servant headcount down and leaning heavily into digitisation and AI adoption, The Post understands.
In the speech, which Willis will deliver to the Business North Harbour group, a mostly small and medium business association based on Auckland’s North Shore, she is expected to restate the need for fiscal discipline while also making the case for underlying structural reforms to the way the public sector operates.
The speech — and the expected focus on fiscal discipline — will come two days after NZ First leader Winston Peters promised to take on more Government debt to buy back the BNZ bank if re-elected. The BNZ, which is owned by National Australia Bank, currently has a market capitalisation of A$111 billion on the ASX. Market estimates put the price of the BNZ — which is not being held out for sale — at $25 billion or higher.
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But as a coalition Government, it appears public sector reform goals are more shared.
New Zealand has 42 ministries and agencies and it is understood Cabinet has agreed to streamline these into fewer agencies, although which entities are to be bundled together or abolished has yet to be determined and will not be announced by Willis on Tuesday.
In addition, Willis is understood to be setting a new target — also agreed by Cabinet — for the number of public servants relative to the population. Under the previous Labour Government it grew from a historical average of around 1% to 1.2%, while the Government is expected to explicitly promise to drive it back down to 1%.
According to the Public Service Commission, at the end of 2025 there were more than 63,600 full-time equivalent employees across the public service. In 2020 that figure was just over 57,000 and when Jacinda Ardern first came to power in 2017 the number was about 48,000.
The main union for public servants, the Public Service Association, said in a statement that based on Stats NZ population projections of 5.5 million, up to 10,000 public servants would lose their jobs in a workforce of roughly 55,000.
'This is an act of wilful destruction. It will devastate the services New Zealanders rely on every single day. This is irresponsible and reckless and make no mistake the price will be high,' said Duane Leo, national secretary for the Public Service Association.
'The Government needs to tell New Zealanders now which services they’re going to lose. Vague talk of mergers and headcount targets is not good enough.
The political right has pointed to growth in public servants as an example of bureaucratic bloat that has bedevilled the sector. Under the current Government there has not been a concerted campaign to drive numbers down, but rather changes to the composition of the service in line with the coalition’s priorities. That is expected to give way to a more explicit approach after today’s speech.
The Government also considers that sensible adoption of AI should help bring down headcount by improving productivity. Already, virtually every corner of the private sector — including law firms, consultancies and inventory management businesses, among many others — is adopting large language model AI programmes to replace human tasks and improve productivity.
The latest wave of reforms is likely to empower the public service to move faster in its endeavours, it is understood.
The 42 departments and ministries that administer votes are allocated funding for their activities. That compares to 16 in Australia, 24 in the United Kingdom and around a dozen in Finland.
Willis is understood to be arguing this will lead to better, more accountable government that delivers more efficient services for New Zealanders.
It is understood the speech will continue themes developed by Prime Minister Christopher Luxon in a well-received speech to BusinessNZ last week.
In it, Luxon cast New Zealand’s productivity and fiscal problems as broader national security challenges. He also said New Zealand today found itself at an “inflection point”.
“In a more volatile world, we must focus on controlling what we can control, and that starts at home,” Luxon said.
The Budget will be handed down on May 28.