Clock ticking for the new government's mini-budget, Israel-Hamas hostage deal on the cards and Jason Momoa filming leads to ancient find in the latest NZ Herald headlines. Video / NZ Herald
Finance Minister Nicola Willis faces her first big hurdle in the job today, as she unveils her mini-Budget.
Willis and her leader Prime Minister Christopher Luxon have been engaged in serious expectation management. What was once a “mini-Budget” is now a “mini, mini, mini Budget”.
The expectation management has seen the Budget lampooned, before its delivery as a “micro” or “nano-Budget”, in the words of Labour’s Finance spokesman Grant Robertson.
Ahead of the election, Willis said the mini-Budget would “[set out] some of the savings and reprioritisations we believe are necessary to get New Zealand back on track”, potentially including the 6.5 per cent back office savings National wants to use to fund $2.3 billion of its tax policy.
Robertson and Labour have put pressure on National to use the Budget to confirm how its tax policy, which cost $14.7b at the election, would be funded.
It’s not clear how much the policy will cost now. During coalition negotiations, a policy to allow landlords to fully deduct interest costs from their tax bills was ramped up, meaning it could now cost $3b, rather than the $2.1b budgeted for in National’s fiscal plan. However National also killed a Working for Families policy, costing some families $38 a week, but saving the Crown $605m.
This means the net effect on National’s tax plan could push the total cost of the plan just shy of $15b over four years.
With the exception of the property changes, the tax plan does not need to be included in the mini-Budget, as most of it triggers on July 1 next year, after the proper Budget in May.
But Robertson tried to get Willis to confirm in the House that the mini-Budget would include costings of the tax plan, and any coalition commitments.
“The member, along with others, will have to await the announcement of the mini-Budget tomorrow to get an answer to his question,” Willis said.
In the House, she hinted at the gloomy economic environment, using an answer to a patsy question to speak about the former Government’s economic record - a speech that was only just allowed by Speaker Gerry Brownlee.
“Since 2017, there has been cumulative inflation of 24.6 per cent, with annual inflation peaking at 7.3 per cent - the highest rate of inflation in more than 30 years,” Willis said.
“The latest data shows inflation remains high, at 5.6 per cent, and so it is clear that the Government has plenty of work to do. We know Kiwis are doing it tough after six years of economic mismanagement, which is why we are moving quickly to rebuild the economy for all New Zealanders,” she said.
Usually, Treasury’s December update, the Half-Year Economic and Fiscal Update, or Hyefu is unveiled at the Treasury building on The Terrace, but today, Willis is shifting proceedings to the Beehive banquet hall - site of the May Budget lock-up, giving the mini-Budget the look of the real thing.
Labour's finance spokesperson Grant Robertson wants to see costings of National's tax policy. Photo / Michael Craig
The Hyefu will give Treasury’s verdict on the state of the economy and the Government’s books. Observers will compare it to the last set of forecasts, the Pre-Election Economic and Fiscal Update, published in September.
The new Government will be keen to show that the economic forecasts look good, particularly those relating to GDP growth, inflation, wages and unemployment.
It will also be keen to keep the surplus, currently forecast for 2027, in sight. It would be fairly embarrassing for the new Government if that surplus were to slip into a later year.
Treasury will also release a list of initiatives that have only been given time-limited funding. This is in response to a criticism from Willis that the former Government left “fiscal cliffs” in the Budget.
Willis defines these as time-limited initiatives that should arguably have been given permanent funding, citing the example of additional funding for Pharmac, apprenticeships, and school lunches. Labour argues these alleged cliffs were not hidden, as evinced by the fact they were proactively published in Budget documents, and the fact that both Labour and National promised funding for them in their election fiscal plans.
Today, Treasury will reveal the list, allowing the public to judge for themselves.
One potential “cliff” is $20 million set aside for the Te Pae Tawhiti transformation programme. This is a massive upgrade of the Ministry of Social Development’s computer systems and overall way of working. MSD has long called for the funding, noting some of its systems pre-date the internet, and are arguably unfit for current needs.
IRD had a similar “transformation” project which has been an immense success, but came at a huge cost. The former Government funded $20m to start the ball rolling on transformation, but did not go further, largely through an unwillingness to commit a large amount of money upfront.
Thomas Coughlan is Deputy Political Editor and covers politics from Parliament. He has worked for the Herald since 2021 and has worked in the press gallery since 2018.
