New Zealand to tighten budget belt as US tariffs threaten growth
The budget will focus on health, education, law and order, defence, and a small number of critical social investments
[WELLINGTON] New Zealand’s government has been forced to slash new spending in this year’s budget as sweeping US tariffs threaten to curb global growth and imperil the country’s fiscal recovery.
The operating allowance for Budget 2025, to be delivered on May 22, will be cut to NZ$1.3 billion (S$1 billion) from NZ$2.4 billion, Finance Minister Nicola Willis said in a pre-budget speech on Tuesday (Apr 29) in Wellington. That will allow the Treasury Department to continue to forecast a return to budget surplus in 2029, while the government retains its aim to get there in 2028, she said.
“Let me be blunt: it’s not the easiest time to be putting together a budget,” Willis said. “There is a pressing need for greater investments in our health system, our education system, our defence force and other areas, and very little money to pay for those investments.”
The economic uncertainty unleashed by US tariffs is expected to curb global growth and therefore demand for New Zealand exports. Willis said while Treasury still expects the economy to grow, its has lowered its forecasts for gross domestic product in 2025 and 2026, which will reduce tax revenue.
The government will not raise taxes on wages, savings, wealth or capital and sees economic growth as the most effective way to increase revenue, she said.
The budget will focus on health, education, law and order, defence, and a small number of critical social investments.
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“We have also found room for modest measures to support business growth and to provide some carefully targeted cost-of-living relief,” Willis said. However, beyond a small number of exceptions, government departments are not receiving additional funding in the budget.
The government has undertaken a savings drive that has “freed-up billions of US dollars”, and those savings will now be re-deployed to fund the most pressing priorities, she said.
Willis said global instability may not be a passing trend and New Zealand cannot expect to keep borrowing as much as it currently does.
“This is not the time to kick the can down the road,” she said. “We must act now to secure our financial future.” BLOOMBERG
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