She is not kidding when she says things are going to be tight over the next few years.
In this Budget, she gave herself a $3.2 billion allowance of new money, well down on recent years.
After that, she has allocated herself just $2.4b a year and once she subtracts the pre-commitments of $1.4b a year increase a year for cost pressures in health, she will have just $1b a year. One billion a year!
She describes them as “tight but realistic” and vows in her speech “we intend to stick to them.”
That means one thing: constraint is permanent. Cuts to government agencies will become business as usual. Buckle in.
She has to sound like she means it because the Reserve Bank has to believe it before it will start to lower the official cash rate. And she will desperately want that to happen before September next year – the most recent estimate by the Reserve Bank.
Willis and Prime Minister Christopher Luxon have begun to say that they will “do more with less”.
Here is why – the economy has deteriorated so much since the coalition took office that forecast tax revenue since December has fallen by $25b.
Net core Crown debt is forecast to be higher by $17b than on the debt track that Labour left.
And that means that arguments about whether the Government is borrowing for tax cuts will continue.
The Government’s tax relief package – pretty much as advertised with adjustments to tax thresholds plus a handful of other changes – cost $14.72 billion over four years.
They were funded in by a series of measures, including cuts to government programmes, taxing online casino operators and removing depreciation on commercial buildings, totalling $14.84b.
Some will say the latter offset the former. Others will say Willis wouldn’t have to budget for an extra $17b in debt if weren’t for the tax cuts.
The books point to a $1.4b surplus in four years time. The jury is out on whether that is credible or not. It is a long way away and there are many variables, not least the economic growth forecasts (1.7 per cent cent, 3.2 per cent, 2.9 per cent and 2.7 per cent).
Whatever happens, however, Willis can be relied on to inject a sense of optimism into her ability to deliver.
