Nicola Willis hails progress on fiscal discipline as key Government financial indicators better than forecast

Finance Minister Nicola Willis said the results showed the Government's efforts to restore fiscal discipline. Photo / Michael Craig

The Government’s latest financial results show key indicators for the year to June 30 have come in better than forecast, including in terms of expenses and debt.

Finance Minister Nicola Willis says the statements show the progress the Government is making to “restore fiscal discipline”, including through its savings drive.

According to the Treasury documents, total revenue in the 2024-25 year was $169.8 billion, slightly higher than in 2024 because of a larger tax take, and marginally above the May Budget forecast.

“While growth in the economy has provided some lift to tax revenue, the impact was offset slightly by policy decisions reducing tax revenue, such as income tax threshold changes introduced from 31 July, 2024,” the Treasury said.

“Most of the remainder of the increase in total revenue came from higher sales of goods and services revenue, driven by the higher wholesale prices on electricity.”

Expenses were recorded at $183.5b, which is up from $180b in the previous period. But when put as a percentage of GDP (gross domestic product), expenses have fallen slightly from 42.9% to 42.1%. Expenses are also $610 million below what was forecast in the Budget.

“The year-on-year movement in expenses predominantly relates to the impact of indexation on most main benefit types, which are generally indexed to wage growth or inflation,” the documents said.

“Demographic changes associated with an ageing population have also driven the increase in New Zealand superannuation expenses.”

The difference compared with the forecasts was “predominantly driven by Crown entities, particularly in the transport and health sectors”.

Willis said the Government had “resisted calls for sharper reductions in expenditure because international evidence is that reducing deficits is best done over the course of several years”.

When looking at core Crown expenses – taking out Crown entity and state-owned enterprise spending – spending is up about $2.7b.

Willis said that compared with an $11.4b increase in the previous year, which captured June 2023 to June 2024.

Net core Crown debt was $182.2b, up from $175.5b, but below the $185.6b forecast. As a percentage of GDP, the debt indicator has stayed steady at 41.8%.

The operating balance before gains and losses (excluding ACC) showed the Government’s books were in a deficit of $9.3b, larger than the $8.8b in 2024. But it is better than the forecast deficit of $10.2b.

Labour finance spokeswoman Barbara Edmonds said the Government needed to continue “borrowing more to keep the lights on”.

There was a reduction in capital asset spending, and that was a reason why “our construction sector is in decline” and there were fewer construction jobs, she said.

The Government’s short-term fiscal intentions, over the next four financial years, include getting net core Crown debt down to 40% of GDP, reducing expenses as a percentage of GDP, and returning the operating balance to surplus by 2027-28.

In the longer term, for the next 15 financial years, it wants net core Crown debt to be within a range of 20% to 40% of GDP, subject to economic shocks, for surpluses to be maintained, and expenses to be reduced to 30% of GDP.

Jamie Ensor is a senior political reporter in the NZ Herald press gallery team based at Parliament. He was previously a TV reporter and digital producer in the Newshub press gallery office. He was a finalist this year for Political Journalist of the Year at the Voyager Media Awards.