From gas loans to wilding pine, a run of early budget announcements have set the stage for Thursday’s big reveal, writes Catherine McGregor in today’s excerpt from The Bulletin.

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Last orders before Thursday

After a fortnight of press releases and media stand-ups, one of the final pre-budget announcements arrived on Monday: a Crown-backed loan scheme to help gas-reliant industries transition away from fossil fuels. The government will guarantee 80% of eligible loans, with $48 million set aside to cover potential losses. Finance minister Nicola Willis was at pains to distance the scheme from the previous government’s Government Investment in Decarbonising Industry fund – the decarbonisation initiative she once called “corporate welfare” and wound down in 2023 – arguing this is commercial banks making lending decisions, not ministers handing out grants.

It was the latest in a busy run of pre-budget spending announcements. Already confirmed: $131 million for primary education, $212 million to extend the healthy school lunches programme through 2027, $15.5 million for paediatric palliative care, $35 million in extra funding for St John ambulance, $1.5 billion for defence and maritime security and $79 million to tackle wilding pine.

Cuts and consolidations

As one hand of the government gives, the other hand takes away. The centrepiece spending cut of the pre-budget period is, of course, the plan to reduce the core public service headcount to 55,000 full-time equivalent staff by 2029 – down from 1.2% of the population to roughly 1% – generating $2.4 billion in savings over four years. The fees-free university scheme is another casualty, set to end after 2026, and a social housing overhaul will see income-related rent contributions rise from 25% to 30%, among other tightened rules.

Part of the savings drive involves consolidating agencies. Willis has pointed to the new Ministry of Cities, Environment, Regions and Transport – MCERT – as a template for what is to come. Cabinet minister Chris Bishop has cautioned against expecting overnight results. “This is about setting the public service up for the future. It’s not about immediate savings in the next six months or even the next year,” he told RNZ’s Jo Moir.

Carveouts and contradictions

The public service reform involves cutting 2% from the operating budgets of most agencies and departments in the coming year. Not included: MFAT. The Winston Peters-led ministry secured a carveout from the initial cut, though it will be included in the government-wide 5% cuts in subsequent years. In The Spinoff this morning Hayden Donnell uses the exemption as a jumping-off point for a wider observation about the coalition’s uneven approach to fiscal discipline.

Despite being part of a government ostensibly intent on belt-tightening, Peters has made little secret of his scepticism that the 5% job cuts will materialise. “The Budget doesn’t stretch four years – if you believe that with an election coming, you know nothing about democracy. That’s knucklehead stuff, mate”, he said.

Meanwhile Act leader David Seymour was enthusiastic about the 8,700 public sector job cuts – “fewer departments, fewer bureaucrats, and the public service sucking up less taxpayer money is just what the doctor ordered” – but seems rather more eager to splash the cash when it comes to his Ministry of Regulation or new charter school agency. As Donnell puts it: “when it comes to our politicians, it almost always seems to be nuance for me and tough economic necessity for thee”.

Constrained choices

Those tensions illustrate Nicola Willis’s problem as Budget 2026 approaches. Writing in The Post (paywalled), Luke Malpass argues she’s in an awkward position: the deficit hawks on her right feel she’s being too generous with the cash, while voters are reluctant to credit her for keeping spending in check.

Even without those political pressures, the government’s options are constrained by the lack of fiscal wiggle room. Spending over the next five years will continue to be concentrated in superannuation, health, welfare and debt servicing, Malpass says – “all areas driven either by demographic pressure or existing obligations”.

If one thing is certain, it’s that voters should expect very little new spending announced on Thursday. “Budgets are always about choices. This one will underline how constrained those choices have become.”