Finance Minister Nicola Willis is promising more funding to health and law and order, and tax cuts for all income levels, but says it will take at least another four years for the Treasury books to move to surplus.“We won’t be chasing surplus in any given year, particularly when that cost would be frontline public services,” she said.
“Surplus in 2026/2027 is not achievable. Surplus in 2027/2028 is still achievable but not a given.”
Willis gave the assessment in the Budget Policy Statement (BPS), which outlines the National-led coalition Government’s spending priorities ahead of the May Budget, in the Beehive on Wednesday.The BPS is usually delivered in December, but was delayed because of the time it took for the coalition government to form.
Governments seek to have their budgets in surplus because it means they have enough money to pay down debt, and to weather any future shocks or large expenses. It usually suggests the economy is performing well.But the Government is also facing a number of pressures, including a reduced tax take which officials forecast will be $13.9 billion lower than expected by June 2028.She said the Government would have an operating allowance of up to $3.5b, but the actual operating allowance would be published in the May 30 Budget.“With an operating allowance of up to $3.5b we will not have to borrow extra to pay for tax reductions and they won’t be inflationary,” she said.In December, Willis outlined her mini-Budget, where she revealed $7.5b worth of savings from the public service – $2.61b from stopping work on initiatives including Let’s get Wellington Moving and Fair Pay Agreements, $2.0b from the Emissions Trading Scheme, and $2.8b from tax and benefit changes.Willis rejected that she was not giving the operating allowance on Wednesday because she had been unable to get coalition partners – ACT and NZ First – to agree to an operating allowance. An operating allowance is usually outlined in a BPS.She said it was getting increasingly expensive for the government to service its debts.“This year, finance costs are expected to reach $8.8b and I would rather use that money to fund front line public services, or give it back to hard working tax payers.”
The Government would not get to surplus until the 2027/2028 financial year – a year later than forecast in the half-year fiscal update.The government was seeking to bring net core Crown debt to below 40% and would also change the net debt headline indicator, the way it measures debt, back to the 2009 calculation.
