Budget 2026: What was cut to stay the coalition’s course

Thursday, 28 May 2026

As the Government promotes its spending in Budget 2026 it pays to look a little closer at exactly what’s been cut to pay for it.

The Budget spends an average of $2.1b each year in net new operating spending - $3.8b on 191 new spending initiatives, offset by $1.7b of 88 operating savings initiatives.

Where were these savings made, and who took the biggest hits?

The public service

The Government had already announced its intention to cull the public service down to 55,000 full-time equivalents by June 2029. That’s a cut of 8700 jobs that’s projected to save $2.4b over four years.

Catch up on all Budget coverage here: The Post Budget 2026

To enact that, most departments have been asked to make baseline savings over three years: 2% in 2026/27, 5% in 2027/28 and another 5% in 2028/29.

Not everyone is tightening their belt; Foreign Affairs Minister Winston Peters has managed to save his department from the first tranche of savings and believes he can stave off future cuts after election night.

The biggest baseline savings this fiscal year come from Inland Revenue ($63.2m), the Ministry of Business, Innovation and Employment ($54.6m) and the Ministry for Primary Industries ($52.8m).

Other big savings come from the Department of Conservation ($37.7m), Ministry of Education - tertiary only - ($37.6m) and Ministry of Culture and Heritage ($36.5m).

A total of 23 government departments - including Treasury - made cuts to the tune of $423.7m in Budget 2026, most made by cutting back-office staff, contractors, consultants and programmes considered to be low-value.

The next two savings years (5% and 5%) are expected to save a further $1.94b. But there is very little detail on how this will actually happen.

Tertiary students

One of the biggest savings can be found in the scrapping of the fees-free university scheme that covered first-time tertiary students’ final year of study up to $12,000.

Closing at the end of 2026, it saves $137m in 2026/27, $249m in 27/28, $308m in 28/29 and $342m in 29/30.

It adds up to more than $1b over the next four years.

Some of these savings will be spent on expanding the number of places in Trades Academies by 10,000 - to more than 20,000 - by 2030. This comes at a cost of $68.9m over four years.

Housing

More savings can be found in housing - $189m each year or $758m over the next four years.

This is largely driven by changes to lift the minimum Income-related Rent contribution for social housing tenants from 25% to 30% and the Accommodation Supplement.

The change is expected to scoop up $387m in operating savings over the forecast period - $374m of which will be diverted to a higher Accommodation Supplement rate.

Kāinga Ora is expected to cut its operating expenses by $368m through reduced maintenance and depreciation.

Capital savings

There are further savings in a Capital Savings and Tagged Contingency Returns initiative that collects cash from multiple sources.

This includes the indicative proceeds from early monetisation of Chorus securities, funds returned relating to the wind-down of New Zealand Green Investment Finance, the closure of several tagged contingencies, and other capital savings.

There’s no further breakdown in the Budget documents due to commercial sensitivities.