So, what should those interested in the economy look out for in the Budget?
The shape, distribution and timing of income tax cuts
We will finally have clarity around how the Government will adjust income brackets to account for some of the inflation experienced since the brackets were last adjusted in 2010.
All eyes will be on whether Willis makes changes that are on par with what National campaigned on.
If she does, the lowest-income earners will pay $112 less tax a year, while middle to higher-income earners will pay up to $1043 less.
National campaigned, ahead of the election, on enacting these changes on July 1.
The other thing to look out for is whether Willis incorporates elements of what the Act Party wants - a flatter income tax system with fewer brackets.
New taxes, levies or fees
Willis has been at pains to say income tax cuts will be paid for by cost-cutting and new revenue generation methods, rather than more debt issuance than would otherwise be the case.
Job cuts across the public sector have been making headlines for some months, as have cuts to spending initiatives like the First Home Grant.
We should get more information on these cuts, and get a steer on the extent to which Willis wants to downsize the public service looking two or three years ahead.
We should also find out whether Willis will increase any existing taxes, levies, fees or payments, or whether she’ll come up with new ways of generating revenue.
Willis recently said she didn’t plan to do what previous National-led governments have done to save money in the near-term and pause contributions to the Super Fund.
The impact the of the sluggish economy on the Government’s finances
Government officials will do their best to put values on the new incomings and outgoings.
But a key part of the puzzle is figuring out how the strength of the economy - now and looking to the future - will likely affect the value of all incomings and outgoings.
This is where Treasury’s gross domestic product (GDP) forecasts come into play.
The economy has for some time been underperforming relative to expectations. This has meant the Government has collected less tax - particularly from corporates - than it thought it would.
How do you fill this gap without additional cuts, savings, or borrowings? Debt.
Bank economists believe Treasury may need to issue $10-15 billion (9-13 per cent) more bonds in the four years to 2027-28 than was forecast in December.
How quickly the books are expected to return to surplus
Pulling it all together, observers will focus on how quickly Willis plans to return the books to surplus.
She’s already acknowledged she’s unlikely to deliver on National’s pre-election promise to get the books out of the red by 2026/27.
Just how much longer it takes will be a focal point of the Budget - more so because this is something the coalition Government has said it would prioritise, rather than this being something credit ratings agency are worried about.
New Zealand’s trade deficit and high levels are household debt are what really erodes the country’s resilience.
The Budget’s impact on inflation and interest rates
Taking a step back, much of the debate will focus on how expansionary or contractionary the Budget is.
The Reserve Bank has already threatened to lift to the Official Cash Rate (OCR) by 25 basis points should inflation not abate quickly enough.
Willis will be mindful any brownie points she gets giving people tax cuts could be wiped out if the cost of living keeps rising rapidly, and high interest rates keep hurting indebted households and businesses to the extent this materially pushes up the unemployment rate.
The size of increases to capital and operational expenditure
An area where the coalition Government will be prepared to spend money is infrastructure.
The multi-year capital allowance is likely to receive a healthy top-up, with spending on infrastructure expected to be a key driver of economic growth looking to the future.
The surge in immigration over the past year only adds to the urgency around plugging the country’s infrastructure deficit.
As for day-to-day spending, Willis has committed to increasing operational expenditure by less than $3.5b in Budget 2024 (this was the amount former Finance Minister Grant Robertson said he’d increase it by).
Before the election, National said it would tighten its belt more looking ahead, only increasing operational expenditure by $2.85b in Budget 2025 and $2.7b in Budget 2026.
The questions are: Will Willis reaffirm these commitments, and, more importantly, stick to them?
The plan to unwind the Reserve Bank’s money-printing programme
Those interested in financial markets will be keen to see whether Treasury sticks to the plan set in the place a few years ago regarding how the Reserve Bank’s Covid-era Large-Scale Asset Purchase programme is unwound.
There is no reason to believe the plan will change under Willis’ leadership.
However, because the programme effectively saw $55b created by the Reserve Bank to buy bonds, even small changes to the arrangement would be noteworthy.
The current plan is for Treasury to buy-back $5b of bonds per year from the Reserve Bank until 2027.
The pinch is, Treasury is having to borrow more at relatively high interest rates to get the funds to buy the bonds.
Separately, Willis earlier this week told the Herald Treasury would stick to its current policy of ensuring the minimum amount of cash the Government keeps at the Reserve Bank remains at $15b.
While it might seem odd for the Government to borrow more when its Crown Settlement Account is quite flush, having enough liquidity in the system is seen to prudent.
Jenée Tibshraeny is the Herald’s Wellington business editor, based in the Parliamentary Press Gallery. She specialises in government and Reserve Bank policymaking, economics and banking.
