‘Bad news on top of bad news’: Public service job cut plan hits home in capital
Tuesday, 19 May 2026
Plans to further slash public service jobs will cause “anxiety” in an already subdued Wellington, mayor Andrew Little says - but he’s urging the city to play to its strengths in other areas.
Finance Minister Nicola Willis has confirmed the Government will cut 8700 jobs from the public service by mid-2029, with the aim of saving $2.4 billion.
The headcount reduction will come through a 2% cut to baseline operating allowances for many public sector agencies in the coming year, followed by 5% in each of the following two years.
The cuts are part of a target to get the public service down to a level of 1% relative to the New Zealand population which would reduce the government-funded job head count to about 55,000.
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Little, speaking after Tuesday’s announcement, said it was hard to know what impact the cuts would have on the capital, given about 45% of public service was based elsewhere, but any job losses “naturally cause anxiety to a lot of people in Wellington, as the home for public service”.
It would affect more than just those working with the public service, he said, citing retail and hospitality, which depended on foot traffic spend of central city workers.
Little said he was given no heads up, but would be seeking a meeting with Willis.
“This is a city that's been through cutbacks in the public service before - we have other strings to our bow - and the challenge is, I think, to play to our strengths, not to be rattled by the adversity.”
Hospitality stalwart Francois Febvre said the announcement, coming on the back of the fuel crisis and its impact, was “bad news on top of bad news”. The sector had just been getting back on its feet before the war in Iran and the fact that Wellington would likely see many more people out of work would have a big flow-on effect.
“Fewer people have been coming into the CBD because of the fuel prices, and now this…”
He expected many business owners would be considering where they could make savings. “That’s the general feeling, they might have to trim their teams, cut back on labour and other costs. It’s not good for the city at all.”
Alongside those changes are reforms to reshape how the public service works which features merging government agencies, simplification of systems, and digitisation including AI.
Willis said over the next four years the initiatives would deliver savings of $2.4 billion which will be re-deployed to deliver more health services, lift educational outcomes, build infrastructure and strengthen the defence force and police.
Agencies excluded from baseline savings were the police, defence force, Oranga Tamariki, health, justice and education ministries (excluding tertiary functions), the Government’s security services, Crown Law, the Serious Fraud Office and parliamentary agencies.
In the finance minister’s pre-Budget speech to Auckland’s Business North Harbour group where the changes were announced she said the trimming down of the public service was to get back to historic norms of the size of the sector.
“We will be tracking progress towards a numerical target of no more than 55,000 full time equivalent public service employees by July 2029. That’s 8700 fewer than were employed in December last year.”
Willis likened Tuesday’s announcement to trends from other governments overseas.
“In Canada, Mark Carney’s government is reducing the size of the federal public service workforce by 10% over the next few years.
“In Singapore, growth in the public service is pegged to not exceed overall growth in the labour force. The UK is systematically shrinking administrative budgets.”
Government investments in AI on the way
In a Q&A event after the Finance Minister’s speech Willis said public service commissioner Sir Brian Roche had been appointed as the Government’s chief digital officer and would lead the service’s investments in AI.
“Brian Roche, has been tasked with assigning which investments we need to make now to ensure that AI can be embedded, and we fully acknowledge sometimes you have to invest up front to create savings down the line.”
She said her own office had been using AI more regularly lately which she described as having “incredible” results.
“Things that may have taken three or four hours for a good analyst to do searching online for international comparisons can be done in 20 minutes using some good prompts into an AI tool, and that frees up my team to use their real human intelligence to apply an overlay.”
It was expected agencies and ministries excluded by the base line spending cut would still have to make investment in new technologies which was expected to reduce headcount overtime, the minister said.
After reports of the potential job cuts this morning, Labour Party public service spokesperson Camilla Belich said it sounded like more job cuts were on their way.
“I think it seems like last Budget women paid for Nicola Willis's Budget, and this time public servants and their families are going to be paying for the Government's Budget.”