Summarised by Centrist
Finance Minister Nicola Willis has slashed $1.1 billion from new spending, citing “a seismic global economic event” – Donald Trump’s trade tariffs – and unsustainable debt.
With the government borrowing $500 million a week, interest costs now exceed the combined budgets of Police, Corrections, Justice and Defence.
New spending will drop from $2.4b to $1.3b, with Willis warning: “We can’t really afford to have that interest bill spiralling out of control.”
Labour leader Chris Hipkins claimed it would drive New Zealanders overseas. But Willis rejected comparisons to past austerity budgets and said health, police and defence would still receive increased funding.
“This is about responsible budget management,” Willis said. “We have debt at levels not seen since the mid-1990s. That can’t go on forever.”
She criticised “extravagant” wage demands such as the 12% claim by striking senior doctors and warned the public service couldn’t expect more money for doing the same work.
Infometrics economist Gareth Kiernan called the announcement a “surprise” but defended its intent. “It’s not about slashing and burning everything,” he said, noting savings would likely come from stalled programmes and unfilled vacancies – not mass redundancies.
Kiernan said global growth downgrades were real, and tariffs were already hurting trading partners like China. “If the economy grows more slowly… the government will have less tax revenue and less room to spend.”
Despite the cuts, Willis promised investment in social services and infrastructure would continue – “just not with blank cheques.”
Image: David Tong
