April 7, 2025 • 10 mins
The Finance Minister has been getting updates about the financial fallout from the latest batch of Trump tariffs.
New Zealand goods have been hit with a 10 percent tariff, as part of President Trump's trade plan.
Nicola Willis warns these changes will come with 'profound' economic implications for New Zealand.
"We will finalise our economic forecasts, which feed into the Budget - in the next few days, I expect to be briefed on them soon. Of course, the major effect is the estimate that global growth is going to be lower than had been predicted."
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Right now, Nicola, what is fin it's mister, good evening,
good evening, run, good to have you on the show.
The defense plan that we've had announced today. So how
much of this because I spoke to Juth Collins earlier
she said it's about twelve billion dollars three billion of
depreciation then nine billion left over over four years. How
much of it is capital versus operational expenditure? How much
(00:20):
are we spending on helicopters and things as opposed to
day to day Well.
Speaker 2 (00:26):
It will be a mixture of the two, and you'll
see our first announcements in that regard in this budget,
and you'll see a clear commitment from us to meeting
the commitments we've made in the Defense Capability Plan. It
strikes the right balance between on the one hand, providing
a meaningful response to what's clearly a deteriorating security environment,
(00:47):
but also being deliverable and being affordable and compatible with
our fiscal strategy. So every investment will be made on
a budget by budget basis, because we still have to
see a good business case for each individual item of kit.
But we're confident that we can deliver the plan as
envisaged in the capability plan within our budget constraints.
Speaker 1 (01:08):
So you what within your operating allowance.
Speaker 2 (01:12):
The combination of our capital and operating allowance, And of course,
what people often forget is that our operating allowance is
not just the money that we've put aside for new spending,
it's also any reprioritization that occurs across government that frees
up funding for our more pressing priorities. And our pressing
priorities include defense, education, health, and our law and order.
(01:36):
So those will continue to be priorities in future budgets totally.
Speaker 1 (01:40):
But you've got to understand, I mean, your operating alliance
is what two and a half billion, and then you're
talking here about, due to Colin's numbers, two point twenty
five billion a year that.
Speaker 2 (01:50):
Remember runs of We also have a we also have
a capital allowance of more than that of three point
sixty five billion indicatively, although that will fluctuate from year
to year. And so between those two allowances and our
commitment to ongoing reprioritization and savings, we've judged that this
(02:10):
plan is compatible with our fiscal strategy. And as I say,
the proof of that will be in this upcoming budget,
where you'll see a significant commitment in defense spending alongside
US keeping to our fiscal strategy keeping within those allowances.
Speaker 1 (02:27):
Will there be reprioritization from aid money.
Speaker 2 (02:32):
That is not in the plan to fund the Defense
Capability Plan, but of course the Minister of Foreign Affairs
on an ongoing way will always be looking to get
the maximum value out of our aid investment offshore.
Speaker 1 (02:45):
There will be a lot of people who'd be disappointed,
particularly in the Pacific, if we're ripping aid out while
the States is too.
Speaker 2 (02:51):
And as I say, that is not part of our
plan to deliver on the Defense Capability Plan. We're not
proposing to reprioritize aid funding towards the Defense Capability Plan.
Speaker 1 (03:00):
We're not going to have to borrow for the defense plan.
We're not going to have to delay surplus because of it.
Speaker 2 (03:04):
Either well, we can deliver it compatible with our current
fiscal strategy, which as you know, is to get the
books back in balance within the forecast period. Is to
ensure that over time we're getting our debt back down,
and to ensure that we're reducing our overall spending as
a proportion of our economy, our government spending. So it's
(03:25):
compatible with all of those objectives you can imagine. I
have worked very carefully through it to make sure that
it is affordable and deliverable, and I'm satisfied that it is,
as is the Cabinet, that this is a very important priority.
It is if you look around the world, we're all
giving to do it.
Speaker 1 (03:42):
I guess it's how important? Is it important enough that
you're willing to borrow more in order to get there?
I think that's what people will be wanting to know.
Speaker 2 (03:51):
Well, not beyond what we were already proposing in our
fiscal strategy. I think it's important to remember that right
now the country is running a deficit, so we are
borrowing right now. So I'm not pretending that that's not occurring.
It is occurring. Our plan is to get the books
back and balance over the next few years. We're working
hard to do that, but in a sustainable way, because
we don't want to crash the economy on the way through.
Speaker 1 (04:12):
The terriffs from Donald Trump that are coming through, and
it's going to be more of an indirect effect on us.
But have you had any hard numbers get in terms
of estimates from officials about what it might do to us?
Speaker 2 (04:24):
Look, I have been getting ongoing updates from official situation
updates because obviously this is a significant global economic event
which still has uncertain implications, but undoubtedly profound implications for
New Zealand. We will finalize our economic forecasts, which then
feed into the budget in the next few days. I
(04:45):
expect to be briefed on them soon. Of course, the
major effect is the estimate that global growth is going
to be lower than had been predicted. That has a
run on effect for New Zealand's growth projections, and so
you will expect that to be reflected in our budget
updates and I am going to continue to be updated
on that, and I do intend to keep New Zealand
(05:07):
as updated on the significant material developments for our economy.
Speaker 1 (05:11):
Can you update U some what your officials are telling you.
Speaker 2 (05:15):
Yes, what they're telling me is that it is likely
that the tariffs are going to reduce overall estimates of
global growth and that that will therefore reduce our forecast
growth in the New Zealand economy, which, as you can
work out, means potentially less revenue for New Zealand, which
(05:35):
is obviously a significant economic effect that we need to
be prepared for and we are prepared, we are aware,
we're keeping it monitored. We're prepared, and we're also resolute
that now more than ever, it's important that we be
backing our exporters, that we be backing our domestic growth settings,
and that we retain confidence in the New Zealand Investment Proposition,
(05:57):
which remains strong. We're a multilateral trade country with many
options for where we send our products with a stable.
Speaker 1 (06:04):
Economic environment, what by how much?
Speaker 2 (06:08):
By how much?
Speaker 1 (06:09):
In relation to what to our growth?
Speaker 2 (06:12):
As I say, Ryan, I haven't had the precise update
in terms of the financial forecasts that will be in
the budget, but I expect to be updated on that
over the coming days.
Speaker 1 (06:24):
But are they giving you estimates? They must be giving
you estimates, like, you know, half a percent of GDP
for the next year or something. I mean, they must
be giving you some kind of number. And if they are,
why don't we get to know?
Speaker 2 (06:36):
Well, of course, it depends on what they estimate the
decline and global GDP will be. For reference. Treasury research
in the past has indicated that if there's a one
percent decline in global GDP, that can reduce New Zealand
GDP by up to zero point three percent, But of
course there's a number of other factors in there, because
(06:57):
it depends on our commodity price, and it depends on
how much we think we will be exposed to that
global GDP impact, and it depends on the estimate of
what they think the global GDP impact will be. And
as you appreciate, everyone around the world still waiting to
work out what is the impact of global GDP complicated picture.
Speaker 1 (07:16):
I understand that. Okay, so we're predicted to grow what
is it, one point four percent this year and then
two point seven this is off memory in twenty twenty six.
Will are the numbers you're hearing enough to put us
back in recession?
Speaker 2 (07:30):
No, I haven't heard anything that makes me think that's
the case at this stage. But as I say, this
is a developing situation, and so what we need to
do is remain aware of what is happening and then
be analyzing what that means for New Zealand. But no,
I don't think that's the case. And of course there
have been other factors since those previous forecasts were put out,
(07:52):
some of which have been positive factors. So there's ups
and downs, overs and unders, and I intend to keep
people updated.
Speaker 1 (07:59):
The elder situation. You had any update from them?
Speaker 2 (08:03):
No, I haven't. Of course. We have requested that they
respond to our request for their interest in our market,
and look, there's no guarantee that they will respond. I'd
be very keen to see them do so, along with
Little who are another hard discounter who internationally where they
vented markets have brought grocery prices down. But ultimately whether
(08:25):
they respond to New Zealand's call is up to them,
not up to me.
Speaker 1 (08:28):
Have you have you specifically? Aren't? It seems old that
I mean, they're the big one you want and they
haven't even replied. Have they done it? Have they just
seen you on on? Have they left you on scene?
Speaker 2 (08:38):
No? To be clear, my officials have been asked to
write to them requesting that they respond to our request
for information process and I haven't.
Speaker 1 (08:48):
Well out of supermarkets, this is not the way to
go about it, Nicolas.
Speaker 2 (08:53):
Look, I disagree, Ryan, because there's still a few weeks
to go on the process, and we'll have an update
at the end of the process as to whether or
not they've responded.
Speaker 1 (09:02):
Now Adrian or how come your press secretary prepped you
for a question about Adrian or raising his voice.
Speaker 2 (09:11):
Oh look, I wouldn't read too much into that. That's
just press secretaries imagining the sorts of questions that I
might get asked.
Speaker 1 (09:17):
Did they often imagine that people raise their voice and
meetings with you or was it just Adrian?
Speaker 2 (09:23):
I think that this is just press secretaries anticipating you
wiley journalists and the broad range of questions that you
ask in a range of circumstances, and getting me prepared
for questions I might be asked.
Speaker 1 (09:35):
Did he ever raise his voice with you?
Speaker 2 (09:38):
No, as you can imagine, we had robust exchanges as
I do with a range of officials, but I don't
recall him raising his voice.
Speaker 1 (09:47):
And you would. I'm assuming why could a medical school
very quickly there is apparently going to be an announcement
on this or cabinet was making a decision or discussing
it today? Is that correct?
Speaker 2 (09:59):
A cabinet hasn't a decision on that matter. As you know,
we are considering a detailed business case in the future.
We haven't had that discussion yet.
Speaker 1 (10:09):
Okay, really appreciate your time, minister, Thank you very much.
Nikola Willis Finance Minister. For more from hither, Duplessy Allen Drive.
Listen live to news talks it'd be from four pm weekdays,
or follow the podcast on iHeartRadio
Right now, Nicola, what is fin it's mister, good evening,
good evening, run, good to have you on the show.
The defense plan that we've had announced today. So how
much of this because I spoke to Juth Collins earlier
she said it's about twelve billion dollars three billion of
depreciation then nine billion left over over four years. How
much of it is capital versus operational expenditure? How much
(00:20):
are we spending on helicopters and things as opposed to
day to day Well.
Speaker 2 (00:26):
It will be a mixture of the two, and you'll
see our first announcements in that regard in this budget,
and you'll see a clear commitment from us to meeting
the commitments we've made in the Defense Capability Plan. It
strikes the right balance between on the one hand, providing
a meaningful response to what's clearly a deteriorating security environment,
(00:47):
but also being deliverable and being affordable and compatible with
our fiscal strategy. So every investment will be made on
a budget by budget basis, because we still have to
see a good business case for each individual item of kit.
But we're confident that we can deliver the plan as
envisaged in the capability plan within our budget constraints.
Speaker 1 (01:08):
So you what within your operating allowance.
Speaker 2 (01:12):
The combination of our capital and operating allowance, And of course,
what people often forget is that our operating allowance is
not just the money that we've put aside for new spending,
it's also any reprioritization that occurs across government that frees
up funding for our more pressing priorities. And our pressing
priorities include defense, education, health, and our law and order.
(01:36):
So those will continue to be priorities in future budgets totally.
Speaker 1 (01:40):
But you've got to understand, I mean, your operating alliance
is what two and a half billion, and then you're
talking here about, due to Colin's numbers, two point twenty
five billion a year that.
Speaker 2 (01:50):
Remember runs of We also have a we also have
a capital allowance of more than that of three point
sixty five billion indicatively, although that will fluctuate from year
to year. And so between those two allowances and our
commitment to ongoing reprioritization and savings, we've judged that this
(02:10):
plan is compatible with our fiscal strategy. And as I say,
the proof of that will be in this upcoming budget,
where you'll see a significant commitment in defense spending alongside
US keeping to our fiscal strategy keeping within those allowances.
Speaker 1 (02:27):
Will there be reprioritization from aid money.
Speaker 2 (02:32):
That is not in the plan to fund the Defense
Capability Plan, but of course the Minister of Foreign Affairs
on an ongoing way will always be looking to get
the maximum value out of our aid investment offshore.
Speaker 1 (02:45):
There will be a lot of people who'd be disappointed,
particularly in the Pacific, if we're ripping aid out while
the States is too.
Speaker 2 (02:51):
And as I say, that is not part of our
plan to deliver on the Defense Capability Plan. We're not
proposing to reprioritize aid funding towards the Defense Capability Plan.
Speaker 1 (03:00):
We're not going to have to borrow for the defense plan.
We're not going to have to delay surplus because of it.
Speaker 2 (03:04):
Either well, we can deliver it compatible with our current
fiscal strategy, which as you know, is to get the
books back in balance within the forecast period. Is to
ensure that over time we're getting our debt back down,
and to ensure that we're reducing our overall spending as
a proportion of our economy, our government spending. So it's
(03:25):
compatible with all of those objectives you can imagine. I
have worked very carefully through it to make sure that
it is affordable and deliverable, and I'm satisfied that it is,
as is the Cabinet, that this is a very important priority.
It is if you look around the world, we're all
giving to do it.
Speaker 1 (03:42):
I guess it's how important? Is it important enough that
you're willing to borrow more in order to get there?
I think that's what people will be wanting to know.
Speaker 2 (03:51):
Well, not beyond what we were already proposing in our
fiscal strategy. I think it's important to remember that right
now the country is running a deficit, so we are
borrowing right now. So I'm not pretending that that's not occurring.
It is occurring. Our plan is to get the books
back and balance over the next few years. We're working
hard to do that, but in a sustainable way, because
we don't want to crash the economy on the way through.
Speaker 1 (04:12):
The terriffs from Donald Trump that are coming through, and
it's going to be more of an indirect effect on us.
But have you had any hard numbers get in terms
of estimates from officials about what it might do to us?
Speaker 2 (04:24):
Look, I have been getting ongoing updates from official situation
updates because obviously this is a significant global economic event
which still has uncertain implications, but undoubtedly profound implications for
New Zealand. We will finalize our economic forecasts, which then
feed into the budget in the next few days. I
(04:45):
expect to be briefed on them soon. Of course, the
major effect is the estimate that global growth is going
to be lower than had been predicted. That has a
run on effect for New Zealand's growth projections, and so
you will expect that to be reflected in our budget
updates and I am going to continue to be updated
on that, and I do intend to keep New Zealand
(05:07):
as updated on the significant material developments for our economy.
Speaker 1 (05:11):
Can you update U some what your officials are telling you.
Speaker 2 (05:15):
Yes, what they're telling me is that it is likely
that the tariffs are going to reduce overall estimates of
global growth and that that will therefore reduce our forecast
growth in the New Zealand economy, which, as you can
work out, means potentially less revenue for New Zealand, which
(05:35):
is obviously a significant economic effect that we need to
be prepared for and we are prepared, we are aware,
we're keeping it monitored. We're prepared, and we're also resolute
that now more than ever, it's important that we be
backing our exporters, that we be backing our domestic growth settings,
and that we retain confidence in the New Zealand Investment Proposition,
(05:57):
which remains strong. We're a multilateral trade country with many
options for where we send our products with a stable.
Speaker 1 (06:04):
Economic environment, what by how much?
Speaker 2 (06:08):
By how much?
Speaker 1 (06:09):
In relation to what to our growth?
Speaker 2 (06:12):
As I say, Ryan, I haven't had the precise update
in terms of the financial forecasts that will be in
the budget, but I expect to be updated on that
over the coming days.
Speaker 1 (06:24):
But are they giving you estimates? They must be giving
you estimates, like, you know, half a percent of GDP
for the next year or something. I mean, they must
be giving you some kind of number. And if they are,
why don't we get to know?
Speaker 2 (06:36):
Well, of course, it depends on what they estimate the
decline and global GDP will be. For reference. Treasury research
in the past has indicated that if there's a one
percent decline in global GDP, that can reduce New Zealand
GDP by up to zero point three percent, But of
course there's a number of other factors in there, because
(06:57):
it depends on our commodity price, and it depends on
how much we think we will be exposed to that
global GDP impact, and it depends on the estimate of
what they think the global GDP impact will be. And
as you appreciate, everyone around the world still waiting to
work out what is the impact of global GDP complicated picture.
Speaker 1 (07:16):
I understand that. Okay, so we're predicted to grow what
is it, one point four percent this year and then
two point seven this is off memory in twenty twenty six.
Will are the numbers you're hearing enough to put us
back in recession?
Speaker 2 (07:30):
No, I haven't heard anything that makes me think that's
the case at this stage. But as I say, this
is a developing situation, and so what we need to
do is remain aware of what is happening and then
be analyzing what that means for New Zealand. But no,
I don't think that's the case. And of course there
have been other factors since those previous forecasts were put out,
(07:52):
some of which have been positive factors. So there's ups
and downs, overs and unders, and I intend to keep
people updated.
Speaker 1 (07:59):
The elder situation. You had any update from them?
Speaker 2 (08:03):
No, I haven't. Of course. We have requested that they
respond to our request for their interest in our market,
and look, there's no guarantee that they will respond. I'd
be very keen to see them do so, along with
Little who are another hard discounter who internationally where they
vented markets have brought grocery prices down. But ultimately whether
(08:25):
they respond to New Zealand's call is up to them,
not up to me.
Speaker 1 (08:28):
Have you have you specifically? Aren't? It seems old that
I mean, they're the big one you want and they
haven't even replied. Have they done it? Have they just
seen you on on? Have they left you on scene?
Speaker 2 (08:38):
No? To be clear, my officials have been asked to
write to them requesting that they respond to our request
for information process and I haven't.
Speaker 1 (08:48):
Well out of supermarkets, this is not the way to
go about it, Nicolas.
Speaker 2 (08:53):
Look, I disagree, Ryan, because there's still a few weeks
to go on the process, and we'll have an update
at the end of the process as to whether or
not they've responded.
Speaker 1 (09:02):
Now Adrian or how come your press secretary prepped you
for a question about Adrian or raising his voice.
Speaker 2 (09:11):
Oh look, I wouldn't read too much into that. That's
just press secretaries imagining the sorts of questions that I
might get asked.
Speaker 1 (09:17):
Did they often imagine that people raise their voice and
meetings with you or was it just Adrian?
Speaker 2 (09:23):
I think that this is just press secretaries anticipating you
wiley journalists and the broad range of questions that you
ask in a range of circumstances, and getting me prepared
for questions I might be asked.
Speaker 1 (09:35):
Did he ever raise his voice with you?
Speaker 2 (09:38):
No, as you can imagine, we had robust exchanges as
I do with a range of officials, but I don't
recall him raising his voice.
Speaker 1 (09:47):
And you would. I'm assuming why could a medical school
very quickly there is apparently going to be an announcement
on this or cabinet was making a decision or discussing
it today? Is that correct?
Speaker 2 (09:59):
A cabinet hasn't a decision on that matter. As you know,
we are considering a detailed business case in the future.
We haven't had that discussion yet.
Speaker 1 (10:09):
Okay, really appreciate your time, minister, Thank you very much.
Nikola Willis Finance Minister. For more from hither, Duplessy Allen Drive.
Listen live to news talks it'd be from four pm weekdays,
or follow the podcast on iHeartRadio
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