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The Spinoff
22-05-2025
- Business
- The Spinoff
A guide to the 2025 Growth Budget for people that hate budgets
Everything you need to know about Budget 2025, and not a number more. This morning, journalists were ushered into the Beehive's banquet hall, and connected to a closed Wifi network that only allowed access to one website. On that website were the budget documents, which were then handed out as enormous stacks by Treasury staff. Later, the journos were treated to a lunchtime buffet including ham and mustard sammies. At 2pm, the embargo lifted, every media outlet scurried to publish summaries of the stacks (including us) and finance minister Nicola Willis stood up in parliament to present her work and say that 'every kiwi knows this government has their back' before being slammed by the opposition, which is simply tradition on budget day. What's all this hooha for then? The budget reveals how the government plans to spend all of its money for the next 12 months. Most of that money comes from tax – whether that be from paycheques, GST or company tax. Things like ACC levies, the emissions trading revenue and fines contribute too. How much money are we talking about? There are two big numbers within the budget. The operating allowance (sometimes called opex) and the capital allowance (sometimes called capex). The operating allowance is new money to spend on ongoing costs like public sector wages and infrastructure maintenance. Capital allowance is funding for assets such as infrastructure. If you think about it like running a household, the operating allowance is for bills and groceries, and the capital allowance is for buying a house. This year's operating budget is $1.3bn, half of last year's already small $3.2bn and the tightest in a decade. Some have said that this is not even enough to cover increases in population or inflation. Many, including Chris Hipkins and up to 800 people who protested at parliament grounds today, have said that these savings come at the expense of the 33 cancelled pay equity claims. The changes to the pay equity scheme are forecast to save the government $12.8bn over four years. The capital allowance has been set at $6.8bn, split mostly across health, education, defence and transport. Vast volumes of money are unknown to me. Can we start at the vibe of the budget? The budget's official title is The Growth Budget, but Willis has also called it ' not a lolly scramble ', a 'no B.S. budget' and a ' responsible budget '. She's been careful to highlight that the budget has been put together in ' very constrained ' circumstances with the 'kitty bare' and in 'serious overdraft'. On Monday she said that the most important thing to ensure in this budget is to protect and enhance economic growth with ' more investment in the things that make businesses productive.' Though commentators were sceptical in the lead up that a budget could simultaneously deliver growth and constraint, she's stuck to the numbers and Pattrick Smellie's analysis on Business Desk today suggests that the budget's business boosting initiative makes sense as a ' short term mood-lifter and a medium term spur to better commercial and economic performance.' Why do we have to be so stingy? Well, workers did get those tax cuts, I mean relief, last July and landlords are back to deducting their full mortgage interest from their rental income. But the top-line from the government is about reducing our debt. National has been promising a return to surplus since before the 2023 election, though the timeline has been pushed from 2027 to 2029. On Monday, Willis blamed the previous government for the debt (some of it is Covid recovery related) and said ' New Zealand is now running out of credit cards.' The narrative around debt has been called into question. Toby Moore argues in the Herald that the fears are overblown and misleading. He wrote that Willis has escalated the rhetoric in order to make ' otherwise unpopular cuts appear necessary '. Moore warns that in the health system, cutting costs now risks worsening fiscal and workforce pressures they're expected to face in the future. Apart from debt, we are still recovering from the economic damage caused by the Covid pandemic and facing global instability. OK on to the numbers. What could impact me directly? KiwiSaver is being revamped. Employers and employees will now be expected to make higher contributions – 3.5% from April 2026 and then 4% from April 2028. In return, the government will halve its contribution to 25 cents for every member dollar with a new maximum of $260.72 annually. Early next year, some medications will be able to be prescribed for up to 12 months rather than three months. Health minister Simeon Brown predicts that this could save patients up to $105 a year in appointment fees and lessen the workload for GPs. There's been an increase to Working for Families thresholds and rates which are expected to deliver an extra $14 a fortnight on average to about 142,000 families. So what's been cut? It's impossible to list them all, but here are a few: As well as halving the government KiwiSaver contributions to a maximum of $260.72 annually, government contributions will be cut altogether for those earning more than $180,000 a year. The Best Start child payment scheme will become fully income tested from the first year, with payments cut off when a family earns more than $97,000 a year. $1.5bn has been cut from the Ministry of Social Development mostly from emergency housing and a projected reduction in people on the jobseeker benefit (see below). Fewer 18 and 19-year-olds will be able to access Jobseeker and emergency benefits as they will now be means tested against their parents' incomes. The policy is forecast to save the government about $163 million over four years but is not expected to begin until July 2027. Kāhui Ako, an education scheme that groups schools together to work on common problems, has been cut, returning $375m to the budget. The Ministry of Health baseline funding has dropped by $49m and the Ministry for Pacific Peoples by $35m. A programme to decarbonise the bus fleet has been cut, saving $56m. RNZ will lose 7% of its annual funding, saving $18.4m over four years. What is the proposal for growth then? The headline policy is Investment Boost, a tax incentive for businesses to immediately deduct 20% of the cost of new assets – such as tools, machinery, equipment, vehicles and buildings – from taxable income, on top of the existing depreciation write-offs. This is intended to boost productivity. The government predicts this change will increase GDP by 1% and wages by 1.5% over the next 20 years, at a cost of $1.7bn in reduced tax revenue every year. Over the next four years $200m is being set aside as a contingency for co-investment in new gas fields. Details are yet to come, but the Crown is willing to take commercial stakes of up to 15% in gas field developments for the domestic market. On Monday a pre-budget announcement revealed that the government is planning to change rules around foreign investment, with the implication that taxing foreign investors less would mean more investment that would ' generate growth '. $85 million, over four years, has been designated to a new agency to streamline foreign direct investment in hi-tech sectors. Anything for retirees? More SuperGold cardholders will be able to claim back their rates with the eligibility threshold expanding from a household earning of $31,510 to $45,000 and the maximum payout rising to $805. These changes were first pitched in the National-NZ First coalition agreement. There are no changes to superannuation. Any big announcements in health? Most of the big health news was announced earlier this week and last week. There is a $447m boost for primary care and urgent after-hours care, $1b of new capital spending for infrastructure including redeveloping Nelson Hospital, Wellington Emergency Department and upgrading Auckland Hospital, increasing funding for the health and disability commissioner to improve care standards and money for a new multi-agency response to mental health distress calls. So is the budget good or bad? Depends who you ask. David Seymour's post on Facebook this morning said that ' the budget represents another year of stable government ' and that new policies to promote growth and reduce red tape will mean 'we can all be wealthier in the future.' In parliament, the opposition slammed the budget. Chlöe Swarbrick of the Green party called it the 'trickle down budget, the no ambition budget, the child poverty budget'. Labour leader of the opposition Chris Hipkins said that for many families, 'this budget is nothing but bad news'. He said it would be remembered as 'the budget that left women out' and started to list the cancelled pay equity claims. Hipkins said that no BS stood for no bold solutions, no bread and shelter and no back-paid settlements. Meanwhile, Winston Peters stifled a yawn.
Scoop
20-05-2025
- Business
- Scoop
Budget Day 2025: What You Need To Know
Explainer - Spoiler warning: If you're not a numbers person, this might not be your week. Thursday is Budget Day, the biggest day of the year for the government, economists and journalists as Finance Minister Nicola Willis announces how much the National-led coalition will spend, where it will go and how. What is the Budget? Simply put, it's when the government lays out how it plans to spend money in the coming financial year, and where that money will come from. Every May, typically on a Thursday, the minister of finance delivers the Budget in a speech in the House. Parliament will then go on to debate the details. The government is required to present its Budget to Parliament by 31 July each year. Budget Day isn't a done-in-one - the process behind it all carries on throughout the year, in a never-ending cycle from one Budget to the next. Select committees will scrutinise the spending plans and eventually pass the Budget presented on Budget Day. In the 2025 Budget Policy Statement released in December that kicked off this year's cycle, Willis said the government's goals were a stronger, more productive economy, more efficient and effective public services and to "get the government's books back in order and restore discipline to public spending". So what actually happens on Budget Day? There are a lot of elaborate rituals to Budget Day, which is equal parts practical and political spectacle. Finance ministers often have their own quirks that turn into traditions - Sir Bill English was known to enjoy a pie at the start of Budget Day during the John Key years and Labour's Grant Robertson tucked into a cheese roll or two. Last year, Nicola Willis' children made cookies for their mum and the prime minister. This year's treats menu remains under lock and key. On Budget Day 10.30am - Media and other interested parties will go into lockup at the Beehive - no phones, no internet - and get a first look at the Budget. A pile of documents will be released to them under a strict embargo. The finance minister will also give a presentation to journalists during lockup and journalists will dash to complete first takes on the highlights. If you break that embargo, you're in big trouble, as the Wall Street Journal found out in 2022. 2pm - The Budget embargo lifts, and here on RNZ and everywhere else you'll suddenly see a flood of Budget information. We'll be here to live blog coverage throughout the day. This video produced by Parliament goes through what happens on Budget Day: In Parliament, after Willis gives a presentation, the prime minister and other political parties will all weigh in as debate begins on the Budget. Expect kudos and criticism in equal measures, followed by a lengthy period of hot takes and analysis that will continue for days to come. Why is it such a big deal? Roads? Hospitals? Schools? Resources we all use every day fall under the Budget. Willis has called this year 'The Growth Budget', in line with the government's long-term goals to return to a surplus by 2029 at the latest. We already know quite a lot about what the Budget will include. "If you've been paying attention to the build-up to the Budget you probably won't learn anything new on Thursday," University of Auckland emeritus professor of economics Timothy Hazledine said. "Perhaps wealthier citizens will be interested in whether the minister announces means-testing of KiwiSaver and best-start transfer payments. And wealthy foreigners may be hoping for relaxation of rules limiting their high-end property purchases in Aotearoa NZ." So what are the key things to look for Thursday? Less spending and a big focus on that "growth" word. Willis said in April that the government is halving its operating allowance from $2.4 billion to $1.3b. That means less money for additional funding for government departments this year. In a recent pre-Budget speech to BusinessNZ, Prime Minister Christopher Luxon also signalled restraint: "The minister of finance was right last week to say Budget 2025 won't be a lolly scramble. It's not that we can't afford it, although frankly we can't." Luxon has said the government needs to stay disciplined and focus on - there's that word again! - growth. And of course, there's also a lot of uncertainty in the global economy right now due to US President Donald Trump's trade wars and tariffs. Luxon has already announced an increase to the capital expenditure - new money set aside in the Budget to maintain or upgrade assets. That money, which would be split mostly across health, education, defence, and transport, will total $6.8 billion. One of the biggest pre-Budget controversies this year has been the government making changes to pay equity claims under urgency. "The big bad news for many people (especially women) is the 'reprioritisation' of billions of dollars from pay equity spending," Hazledine said, noting that at the same time defence spending was going to get a big boost. Another key thing to look out for are hinted changes to KiwiSaver, which may include means-testing the government's contribution to the retirement fund. Hazledine said that despite challenging conditions, New Zealand is doing "quite well" in the global economy. "Prices for our major commodity export (dairy products) are high (and so therefore we are paying more locally for milk and butter, alas), and our major service export, tourism, seems to be recovering from the Covid slump. "The minister will be trying to keep a lid on borrowing whilst not threatening chances of a good economic recovery - a delicate balancing act." Does the Budget really make a difference? New Zealand Budgets have helped make or break a government. The late Michael Cullen, finance minister from 1999 to 2008, famously liked to say that "budgets don't win elections, (but) they can lose them". In 1938, Prime Minister Michael Joseph Savage's Labour government introduced the Social Security Act with policies that were intended to provide "from the cradle to the grave," and shaped New Zealand society for decades to come. In 1958, the Labour government released what became known as the 'Black Budget', where Finance Minister Arnold Nordmeyer attempted to reduce demand for overseas goods through imposing additional taxes on cars, alcohol and tobacco. It didn't go down well and Labour lost the 1960 election after just a single term in office. And in 1991, the National government's 'Mother of all Budgets' released by Ruth Richardson heralded sweeping welfare reforms and privatisation. The National government went on to barely win the 1993 election in one of our closest contests. While in 2019, Prime Minister Jacinda Ardern's 'Wellbeing Budget' introduced $1.9 billion in mental health funding - but as RNZ has reported, questions remain about the impact that funding had. Willis aims to make the 'Growth Budget' of 2025 a key part of the government's legacy. On Thursday, we'll all start to find out how successful it will be.
Newsroom
18-05-2025
- Business
- Newsroom
Budget announcements unlikely to fire up business confidence
It's already been termed 'The Growth Budget' by Finance Minister Nicola Willis, clearly intended to highlight its aspirational ambitions and to reinforce the Government's goal of reinvigorating the economy after its post-Covid malaise. However, the reality of the fiscal constraints it faces, combined with the recent tariff fallout and an increasingly gloomy economic outlook, will mean this Thursday's Budget is unlikely to achieve the kind of long-term growth ambitions the Government is desperately seeking to achieve.
