It’s budget day! So what exactly are the government’s plans for spending our tax dollars asks Henry Oliver in today’s excerpt from The Bulletin.
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It’s finally here!
Budget day! Christmas for policy nerds, the day we find out what the government plans to spend our money on. So this morning, let’s take a look at the presents we know we’re getting, the ones we think we’re getting, and how our parents are going to break it to us that we’re not getting exactly what we asked for, but it’s still actually really good.
What we already know we’re getting
Helpfully, Stuff has a welcomed roundup of all the government’s pre-budget announcements. So to catch you up on the last few weeks if you missed it (or jog your memory if you didn’t), here’s what we already, definitely, 100% know is in Budget 2026.
Public sector job cuts: Approximately 8,000 jobs lost over the next four years. Estimated saving: $4.2 billion.
A brand new ministry: The new Ministry of Cities, Environment, Regions, and Transport (welcome ‘MCERT’) will replace the Ministry for the Environment (officially ‘scrapped’ by parliament last night – RNZ), and the Ministry of Housing and Urban Development, the Ministry of Transport. And the local government functions stripped out from the Department of Internal Affairs. Estimated cost: $2.5 million.
Social housing rent increases: Social housing tenants will pay 30% of their income instead of the current 25% (the government paying the rest directly to the landlord. Estimated saving: $387.5 million.
Ambulance services funding increase: Charitable ambulance services like Hato Hone St John will get a much needed funding boost. Estimated cost: $35 million.
Miscellaneous health spending: Additional funding for specialist paediatric palliative care, for the Otago Central Lakes area, and a general funding increase for Health NZ. Estimated cost: $1.6 billion.
Shoring up the border: New funding to improve Customs’ equipment, especially cargo X-ray equipment, increasing the security of Customs facilities and controlled areas, better training for staff, and increased capacity to store seized illicit goods. Estimated cost: $70.7 million.
Defence: Funding to fix ships, strengthen the navy and buy drones. Estimated cost: $1.5 billion.
Pine control: Wilding pines are taking over productive farm land, expanding 5% a year and must be stopped. $79 million.
Crown-backed loans to help transition business away from gas: The government isn’t lending the money but is providing security to the banks that do. Estimated cost: $54 million.
Reading and writing: Further funding for literacy and numeracy tools. Estimated cost: $131 million.
Courts: Two new court facilities for Rotorua to improve safety and capacity. Estimated cost: $100 million.
What’s left and what we might get
Of the approximately $2.1 billion available for discretionary spending, after all of the above, how much has it got left? As Thomas Coughlan writes in the NZ Herald (paywalled), how the above spending and savings are calculated can be difficult to parse without seeing the actual budget, but Coughlan estimates that the government has found roughly $3.2 billion in savings across the four-year forecast period through a combination of cutting $300 million from the operating allowance, $2.4 billion from public service reductions, $600 million from scrapping fees-free tertiary study, and smaller amounts from housing support changes.
So any more new spending?
There is speculation about a venture capital-style fund to grow small businesses, possibly drawing on a tactic Labour used in 2019 of diverting Super Fund contributions. A new levy on migrants – lighter than Act’s proposal – may also be on the cards.
Councils might also expect the government to share some of the GST collected on the construction of new houses, a coalition agreement commitment with Act.
Willis has dampened expectations of anything lavish, as finance ministers traditionally do the day before a budget. With an election five months away, however, there is reason to suspect she has kept something back.
The OCR looming in the background
The government will surely be relieved that today’s budget will not be tarnished with the brush of interest rates increases, a risk that was squashed yesterday when the Reserve Bank opted to keep the Official Cash Rate (OCR) at 2.25% for now (though perhaps not for much longer). The decision was the result of a 3-3 split vote of the Monetary Policy Committee with Reserve Bank governor Anna Breman casting the deciding vote. It’s worth noting that the votes to raise it by 25 basis points were all three external members, who, according Gyles Beckford on RNZ, thought an increase was necessary to curb inflation, while the votes to keep it stable were all three internal members who are due to appear this morning before MPs at select committee. That would have been awkward.
Bonus tracks
If all the above isn’t enough and you really want to get in the weeds, try The Post’s political editor Henry Cooke’s historical deep dive into the eight budgets that shaped our nation. Fans of the Vogel Budget of 1870 (government subsidising of immigration and major investment into telegraph network, transport, public buildings and ports) may be disappointed with the snub.
Also, if you got this far, you’ll be pleased to know that we’ll have The Spinoff’s Lyric Waiwiri-Smith and Joel MacManus in the lock-up ready to report on the economic planning of our nation as soon as the embargo is lifted; and Toby Manhire will be weighing in sometime in the afternoon, so stay tuned.
