Finance Minister Nicola Willis has revealed the Government has reduced the size of the operating allowance of Budget 2025 to $1.3 billion.
She made the announcement during a pre-Budget speech this morning, April 29.
“This means we will be spending billions less over the forecast period than would have otherwise been the case,” Willis said.
“This will reduce the amount of extra borrowing our country needs to do over the next few years and it will keep us on track towards balanced books and debt reduction.
“The fiscal forecasts will not be finalised until later this week, but according to the latest numbers I have seen, this smaller operating allowance means we will continue to forecast a surplus in 2029.”
She said Government debt grew by almost $120 billion between 2019 and 2024, soaring from under $58 billion to $175 billion.
“Those are big numbers, almost too big to comprehend, so let me explain it this way: that amounts to $22,000 more in debt for every New Zealander.
“You may well ask: what do we have to show for all that debt?
“To give you some further historical context, New Zealand’s net core Crown debt, which once hovered between five and 25 per cent of GDP, rose to around 42 per cent last year.
“That’s the highest level of Government debt New Zealand has shouldered since the mid-1990s. Servicing that debt is expensive.
“The interest bill on Government debt has soared from $3.6 billion in 2014 to $8.9 billion last year.
“That sum is more than annual core Crown expenses for the police, Corrections, the Ministry of Justice, Customs and the Defence Force combined.”
Willis said the reality of global economic events is that if the Government had pushed on with a larger operating allowance, it would be staring down the barrel of even bigger deficits and debt.
“Let me emphasise once again: our Budget will still deliver increased investment in the things that really matter to Kiwis: like health, education, law and order, the Defence Force, business growth and targeted cost of living relief.
“Those things are important to you and they’re important to our Government.
“Our careful reprioritisation approach means we can continue to make progress on today’s priorities while ensuring we are better positioned to face the challenges tomorrow will bring.
“Yes, those challenges loom large. But let’s get real: global instability may not be a passing trend.
“New Zealand can’t expect to keep borrowing as much as we are now.
“The world doesn’t owe us any favours. This is not the time to kick the can down the road.
“We must act now to secure our financial future.”
