The budget almost reads like a McKinsey-esque corporate turnaround plan to fix a profit-and-loss problem.

New Zealanders struggling with high living costs and slow wage growth, if they are lucky enough to have a job, may have found yesterday’s budget underwhelming. 

The big centerpiece was a surplus forecast three years away. Is that it? Where was the plan to fix the economy? Was there a single policy aimed directly at creating jobs or stimulating growth? 

Leeann Watson, the chief executive of Business Canterbury, said that fiscal discipline was important but not sufficient. Nothing in the budget would shift the dial on economic growth and productivity.

“At first glance, there isn’t a clear, cohesive growth story running through this Budget, particularly when it comes to lifting productivity, encouraging investment, and supporting the private sector to expand,” she wrote in a press release.

But this type of thinking is back-to-front: Budget 2026 wasn’t offering to help the economy; it was relying on the economy to come to its rescue. 

Ben Udy, the lead economist at Oxford Economics Australia, said the coalition’s disciplined approach to spending was aimed only at the government’s bottom line.

“With the domestic economy already struggling, households set to absorb a big hit to real incomes, and the RBNZ already being pushed toward hikes, this budget asks more of an economy that has little left to give,” he said. 

Udy has it the right way around. It’s like the famous John F Kenney quote: “Ask not what your country can do for you – ask what you can do for your country.”

The McKinsey budget

A senior analyst from a credit rating agency once told me New Zealand had a “great balance sheet but crap profit-and-loss”. This is a business jargon way of saying the country had more assets than debt, but was eroding them by spending more than it collected in taxes.

Prime minister Christopher Luxon thinks of himself as the CEO of New Zealand and it shows in this budget – it’s almost like he’s been channeling consulting global consulting company McKinsey. The budget certainly reads like a McKinsey-esque corporate turnaround plan to fix that profit-and-loss problem. 

Cut non-essential spending (fees-free university), reduce headcount (14% cuts to public sector workers), increase prices and margins (fiscal drag and bank levy), and refocus only on core products (infrastructure and health etc).

Fiscal support for the economy and its workers are not part of the recipe. At least not until the Crown has returned to surplus and stopped eating its assets. 

Investments of national significant

That’s a simple telling of the budget story but the full picture has more nuance. For example, there was a big increase in capital investment that will support economic growth in both the short- and long-term.

Investment on physical assets provides immediate jobs and income to construction firms and then increases the productive capacity of the whole economy once finished. 

The largest single example in Budget 2026 is the $1.8bn earmarked to extend the Waikato expressway, which will supposedly make moving freight more efficient and improve economic links between Auckland and the central North Island.

Another $40m will be spent protecting critical roads from the severe storms which are increasing thanks to climate change. Or, if rail is more your style, there is $700m being invested across the regional and urban networks.

But it will take some time. The chief executive of Infrastructure New Zealand, Nick Leggett, said only 43% of investments included in the last three budgets had started within 12-months of announcement.

“At first glance this is a great injection of cash, but what matters to the market is that money is actually spent. That’s what keeps people in jobs and allows businesses to invest and gear up,” he said. 

$3bn tax hike

The promised surplus is also far away and uncertain, but Treasury forecasts a balanced budget in the year ended June 2029, even in most of its downside scenarios. 

A lot of ink has been spilled debating whether to use the OBEGALx measure and whether the small surplus could flip into a tiny deficit. Frankly, it doesn’t matter. All you need to know is that revenue and spending will be roughly balanced by 2028 or 2029. 

That is, assuming the coalition follows through with its spending cuts as planned and the economy does recover as Treasury forecasts. There is a lot of skepticism about both points, particularly with the Strait of Hormuz still closed.

Stephen Toplis, head of research at BNZ, said there was an obvious risk that growth could be lower, with unemployment, inflation, and interest rates all higher. 

“Treasury has lowered its near term forecasts in light of the Middle Eastern chaos but we wonder whether they have lowered them enough,” he said. 

Oddly, higher inflation helps the government’s path back to surplus by dragging workers into higher tax brackets. This silent tax increase will be worth almost $3bn over the forecast period. 

That’s a fact you won’t see on National Party billboards this election season.