Nicola Willis: Finance Minister discusses the Budget Policy Statement

Speaking to Newstalk ZB’s Mike Hosking this morning, Finance Minister Nicola Willis said she wants to stick to her $3.5 billion promise for her budget. 

”In terms of the economy, we’ve got the treasury forecasts still coming in. 

”In terms of discussions with coalition partners and ministers, I’m still having budget bilaterals.” 

Willis said the economy was very slow, and that makes things “tough.” 

”It’s fair to say the shape of the budget is shaping up, it’s looking good, I’m confident it’s all coming together well.” 

Hosking disagreed and said he thought it was looking dreadful because we are in a recession. 

”The budget is looking like a budget that will bring together the small crumbs we have at the back of the cupboard.” 

Willis said her priority was tax relief for “working people.” 

”We are a country that is finding it very hard for businesses to grow.” 

Hosking asked Willis if she was surprised by criticism of her government’s planned tax cuts. 

“Some people just do not like tax reduction, they can see a long list of things they’d like to see the government spending money on and they think that’s more important than something I think is a basic principle, which is that New Zealanders get up, they work hard and they deserve to keep more of their own money.” 

Willis said New Zealand hasn’t “had any changes to tax brackets or thresholds in fourteen years.” 

This isn’t true, last year the Labour government introduced new top rate of 39%, but only on income earned above $180,000. 

Nicola Willis has conceded she won’t be able to get the Government’s finances back in shape as quickly as expected, while delivering tax cuts, which may not end up looking as attractive as National promised before the election. 

Hosking asked Willis why she wasn’t going harder on the surplus. 

”The numbers are the numbers,” she said. 

”We could choose to overreact to them, and do incredibly dramatic things... but we don’t want to be radical in that way.” 

Releasing her Budget Policy Statement yesterday afternoon - a preview of the May 30 Budget - the Finance Minister emphasised the extent to which economic growth is expected to be slower than expected in December. 

Consequently, the Government’s tax take is likely to underperform, meaning the Government won’t get its books back in surplus by 2026/27 as expected in December, and as National campaigned on before the election. In fact, the books are still likely to be in the red in 2027/28. 

While Willis highlighted her commitment to being a prudent manager of the country’s finances, she said she wouldn’t chase a surplus at any cost - particularly if that cost was borne by frontline public services. 

Willis didn’t do what finance ministers tend to do during Budget Policy Statements and unveil the likely size of the upcoming Budget. 

She didn’t include her expected operating allowance in the statement - the figure that’s typically seen to be the centrepiece of a Budget Policy Statement. 

Rather, she kept things broad, saying her operating allowance would be less than the $3.5 billion figure pencilled in by the previous Government. 

In other words, she will increase expenditure on day-to-day operating costs by less than $3.5b (net) in Budget 2024. 

As for capital expenditure, on things like infrastructure, Willis said the Government will top up the multi-year capital allowance by up to $7b, with the final number to be confirmed at the Budget. 

Coming back to the income tax cuts