Then
there’s the increased spending she’s already signalled for defence, education, law and order, and health.
Among funding already announced (which will include capital and operating spending) are:
Willis has also been keen for a policy costings unit, which would assess party policies in an election campaign, and would need to be funded in this year’s Budget to be ready for the 2026 election.
Then there’s also the $2.5b in additional departmental baseline funding, according to Treasury, that will be needed in the coming year just to maintain existing services, assuming there is merit in preventing those service levels from dipping.
Some of these hefty bills will not come from the new spending pot, but from cuts (or reprioritisations, in Willis’ parlance) elsewhere.
The wider economic context in the coming decades is the massive increase in spending required for superannuation and health costs as the population ages.
The Government could raise revenue through new or higher taxes; it has already increased vehicle registration fees and ACC levies, and paved the way for congestion charges.
Willis received a regulatory impact statement for the revenue portfolio in April, though what this was about has been kept under wraps.
It could relate to a charities tax, which Willis has been looking into and could potentially raise $50m a year, but she has said there are no plans to introduce such a tax in this Budget.
There’s also speculation about allowing a return of foreign buyers into the high-end housing market and taxing them for the privilege.
It was part of National’s 2023 election campaign, but torpedoed by New Zealand First in coalition negotiations. Willis, in keeping with her position of recent weeks, refused to rule this in or out.
So how will the numbers add up?
Billions in cheaper pay equity claims
Law changes rammed through under urgency will save the Government billions of dollars in higher wages that would have been paid under the now-scrapped pay equity regime.
The controversial move lifts the bar on pay equity claims, which has sparked accusations of lying over whether it amounts to pay cuts for up to 180,000 women.
The Government argues the parameters were too broad and unworkable, with wage costs far higher than expected, while critics have asked – in the absence of any regulatory impact statement or expert submissions – what the evidence for this is.
Willis has said she won’t reveal how much the savings are until Budget day on May 22, but it’s a lot, so much so that Act leader David Seymour said the move had saved Budget 2025.
Contingency funding in last year’s Budget set aside $17b over four years in public sector wages and pay equity settlements.
A Cabinet paper on the law change said that pay equity settlements under the axed regime were costing the Government $1.55b a year, but that didn’t include the costs of successful future claims; the law change sent 33 pending claims back to the drawing board.
It’s a fair bet that this is where the Government is finding the bulk of its new cash to pay for Budget 2025’s goodies.
Means-testing KiwiSaver or Best Start payments
Willis has indicated changes to KiwiSaver subsidies, which are not means-tested at the moment.
Currently, New Zealand residents aged 18 and over can get up to $521 a year dropped into their KiwiSaver accounts from the Government if they contribute the equivalent of about $20 a week - $1040 over the year.
The payments are set to cost the Government $1.1 billion in the next Budget.
Willis could introduce a means-testing threshold at $180,000 for an individual or household. She has sought advice on KiwiSaver reforms, and is keen to increase contribution rates.
She hasn’t ruled out changes to Best Start, though a change here seems less likely.
Best Start was introduced as part of Dame Jacinda Ardern’s “families package” in 2017, giving families a $73 weekly payment to help with the costs of raising a young child. If means-tested, it could save the Government about $100m a year.
$1b in Emergency Housing
The Government will save more than $1b over the next four years as a result of outperforming its target of reducing the number of people living in motels and receiving emergency housing support.
Last year, the Government set itself a target of reducing the number of people in emergency housing by 75% from December 2023 levels by 2030.
The target has been achieved early with the 3141 households in emergency housing in December 2023 reduced to just 591 a year later, though questions have been raised over a correlation with an increase in homelessness.
Willis said the reduction is significant enough to be recognised as a saving for the Government, realising an additional $1.026b in operating savings over the next four years.
More public sector ‘trimmings’
Budget 2024 included $1.5b in annual savings from public sector cuts, including some 4000 fewer roles/vacancies and 240 initiatives that had been either trimmed or completely axed.
These were from the 6.5% or 7.5% cuts that Willis had demanded across most of the public sector.
But that wasn’t just a one-year exercise, but part of a continuous drive to make the public service, from the Government’s perspective, more efficient and tightly focused, or what the Opposition calls excessive cuts that will inevitably impact frontline services.
Recent examples of this include the Department of Conservation’s restructure proposal, which would see a reduction in 68 roles and save $5m.
Willis also recently said ministers had been continuing to find “areas of previously committed spending that can no longer be justified in light of the challenging circumstances New Zealand now faces”.
“This has involved a line-by-line review of previous funding commitments, including money put aside in contingency.”
Derek Cheng is a senior journalist who started at the Herald in 2004. He has worked several stints in the press gallery team and is a former deputy political editor.
