Analysis: “I’m here a little earlier than expected – just like the surplus.”
Finance Minister Nicola Willis’ opening remarks as she presented her third Budget – and the coalition Government’s last before the looming election – made clear where she would like New Zealanders to focus as campaigning shifts up a gear.
Heading into Budget Day, Willis made clear there would be no last-minute lolly scrambles or pulling of rabbits from hats.
She has duly delivered on that promise of non-delivery, with pre-committed funding to mitigate the effects of the Middle East fuel crisis and address healthcare pressures combining with a cost-cutting drive to leave the Finance Minister with little fiscal headroom for any election bribes.
Instead, the Government’s focus has largely been directed towards infrastructure, with roading projects and new government buildings (primarily in regional New Zealand) among $7 billion in capital projects unveiled by Willis and Infrastructure Minister Chris Bishop.
There is some spending on frontline services, including new Corrections officers and a boost for school budgets , but no initatives as headline-grabbing as last year’s Investment Boost expensing regime or 2024’s tax cuts.
The silver lining? An improved fiscal outlook, with the country forecast to return to surplus in 2028/29 – a year earlier than expected – and the Government borrowing $6 billion less than forecast over the next four years.
That will do little to line Kiwis’ pockets in the immediate future, but Willis clearly hopes an emphasis on longer-term resilience will resonate given the extent to which the country (and the wider world) has been buffeted by a range of external shocks and natural disasters.
“One of the reasons the last [Labour] government was able to support New Zealanders through the pandemic was because of the fiscal restraint shown by its predecessor,” Willis said – a courtesy it had not extended to the current coalition, which made it imprudent to over-promise when it came to cost of living support.
“In the absence of magic money trees, it is our future selves who will have to foot the bill for the sugar hit, and we would have to foot the bill with interest.”
It is an argument with some logic to it – but logic may come as cold comfort to those paying more at the supermarket and when refuelling their cars.
There is also the question of how tangible that bright future will prove; through the coalition’s term, Willis and her Cabinet colleagues have often spoken of seeing light at the end of the tunnel, only for unforeseen circumstances – from cyclones to Donald Trump’s tariffs and the crisis in the Strait of Hormuz – to intervene.
The Government cannot be blamed for that, but it may lead to a degree of scepticism about the Treasury’s forecasts and Willis’ sunniness.
There is also uncertainty about how the coalition’s plans to pare back public service spending will pan out, with precious little detail on AI-related efficiencies and intra-coalition politics still to be managed in the event of an election win; Willis emphasised that the Ministry of Foreign Affairs and Trade would be expected to meet 5 percent reductions to baseline spending in the coming years, but New Zealand First leader Winston Peters has been equally clear that he has no intention of doing so.
Labour is certain to continue its attacks on the coalition for failing to give New Zealanders the support they need, and of gutting the public service – but the opposition will face pressure itself to front up with some meaningful policies, and will undoubtedly find the cost of each pledged initiative scrutinised in agonising detail by the coalition.
Will Willis succeed in setting the political parameters for the election, with a focus on fiscal prudence – or will voters sick of doing it tough look to the Opposition for an alternative approach?
.png?w=600)
