Budget 2026: No tricks, no treats: Nicola Willis warns of lean Budget

Thursday, 28 May 2026

Finance Minister Nicola Willis has warned the nation that, despite fevered speculation, there will be no big surprise “new sexy thing”, “sweet new lolly” or magic trick in this afternoon’s Budget.

In a Budget-eve interview with The Post, Willis was emphatic about those predicting an election-year spending surprise.

“Oh, she's going to pull a rabbit out of the hat!” she said.

“There are no rabbits to pull out of the hat. The last Government killed them all, so I don't have that luxury.”

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For weeks, Willis has been laying the groundwork for a Budget expected to be long on fiscal restraint and short on cash handouts or election-year sweeteners.

She said the Budget, being delivered against the backdrop of a major oil shock caused by the war in Iran and the prolonged effective closure of the Strait of Hormuz, had been planned on the basis that more could still go wrong.

She said she hoped voters would see “a government that is responsibly responding to that in a way that the country can afford, given we know there could be more problems around the corner”.

Willis also said she wanted New Zealanders to think about debt, deficits and what actually constituted responsible decision-making.

“It’s the Ernest Rutherford quote: we don't have money, so we'll have to think — and that's really where New Zealand is at in this moment.

“I want New Zealanders to look at the Budget and see that we've made some really responsible choices. They may not be investments that become a slogan on a billboard, but they do matter for making us more resilient.

“More resilient in terms of a deteriorating geo-strategic environment, more resilient in terms of the increasing weather events we're having to face, and more resilient in terms of having the financial buffers needed to respond to what could be an ongoing series of economic challenges,” she said.

Willis’ comments came after the Reserve Bank on Wednesday held the official cash rate steady at 2.25%, but warned further increases were likely.

The bank’s Monetary Policy Committee was split on whether to hold or raise the OCR, with the vote tied 3-3 and Governor Anna Breman using her casting vote to keep rates unchanged.

“All committee members agreed that increasing the OCR at upcoming meetings would likely be necessary to ensure higher near-term inflation does not feed through to higher medium-term inflation,” a summary of the meeting said.

It was the first time votes had been publicly disclosed, a new innovation under Breman. Internal members of the MPC — Breman, Assistant Governor Karen Silk and chief economist Paul Conway — voted to hold, while external members Carl Hansen, Hayley Gourley and Prasanna Gai voted for an increase.

The bank now expects the OCR track to rise to 3.1% by mid-2027.

It was Breman’s first full Monetary Policy Statement and accompanying media conference at the Reserve Bank’s headquarters on The Terrace in Wellington. The event was more formal than in previous years, with Breman using a teleprompter and presentation slides to explain the bank’s thinking.

While interest rates are expected to continue rising, Silk said the Budget — or at least the public comments made about it so far — was only a small factor in the bank’s inflation outlook.

“I think we'd probably say that, based on the publicly available information we all have access to today, there are bigger things happening offshore for us to worry about when it comes to inflation,” Silk said.

Silk said the bank expected retail interest rates, currently around 4.9%, to rise to about 5.3% or 5.4% by the end of next year.

“Even based on where rates are today - the mortgage rates are today, we would expect to see over the next 12 months the average stock rate moved from 4.9% … up to around 5.3%, 5.4% over the next 12 months … I would expect to see some pass through happening,” Silk said.

Conway also said that while insurance price increases appeared to be easing somewhat — after being a significant driver of inflation over recent years — council rates and other “administered prices” remained elevated.

“Rating increases are still reasonably chunky. I think insurance has dropped out a little, electricity is still doing its thing, and administered prices as well, which we’ve commented on quite a bit in recent reviews, are also reasonably elevated at the moment, contributing to that non-tradables inflation,” Conway said.

Non-tradables inflation refers broadly to parts of the economy where prices are set domestically rather than internationally.

The warning of further rate rises is likely to add to the mood music surrounding the Budget, but Willis was also keen to strike a more optimistic tone.

“I don't want New Zealanders to see this as a hopeless message. I'm very hopeful about the future. I think we will come through the fuel crisis, we will bounce back.

“I know New Zealanders are really hurting in many cases, but I'm confident much will get better. I also think it is responsible — and kind, in the normal sense of the word — to make sure we're not doing things today that we'll end up paying for badly in the future.”

The Budget will be handed down at 2pm today.

Watch analysis from The Post’s Luke Malpass, Andrea Vance and Henry Cooke at 2pm live on www.thepost.co.nz