– Opening of government books at HYEFU reveals shrunken surplus, bigger borrowing requirements, greater fiscal risks and higher debt than forecast in the pre-election update.
- Coalition Government responds with urgent actions to deliver fiscal repair, safeguard frontline public services and provide cost of living relief.
- $7.5 billion of net initial operating savings and additional revenue committed to over the forecast period with action underway to deliver additional reprioritisation ahead of the May Budget.
The coalition Government is taking immediate steps to strengthen New Zealand’s fragile economy, deliver cost of living relief and restore responsibility to the management of public finances, Finance Minister Nicola Willis says.
“Today’s half-year economic and fiscal update lays bare the extent of Labour’s economic and fiscal vandalism.
“Labour inherited a growing economy, low government debt and surpluses into the future. Six years later, New Zealand is grappling with a toxic trio of high and sticky inflation, high interest rates and reduced economic output.
“Labour’s reckless approach of more tax, sky-high spending and heavy regulation has resulted in a cost-of-living crisis, financially-strained households and massive damage to the government books.
“The HYEFU, which was finalised on 24 November, records the state of the books prior to the new Government taking office and makes clear the scale of the financial challenges New Zealand faces.
“The pre-election promise of a return to surplus in 2027 has shrunk from $2.1 billion to a wafer-thin $140 million; with deeper deficits necessitating the fifth consecutive increase to the Government borrowing programme, up by $7 billion more over the forecast period.
“In addition, the HYEFU records a greater number of fiscal risks compared with the pre-election update which, if left unaddressed, could further weaken the Government’s financial position. Risks include cost blow-outs in government infrastructure projects, unfunded commitments and policy programmes for which time-limited funding is set to expire.
“Today’s mini-Budget sets out the immediate steps the coalition Government is taking to strengthen New Zealand’s economy, repair public finances and deliver cost-of-living relief.
“It sets out immediate Government decisions delivering $7.47 billion of operating savings and additional revenue over the forecast period; reductions to potential fiscal risks and work to drive future savings, revenue and reprioritisation.
“It confirms time-critical changes to adjust benefits in line with inflation, to bring the bright-line time-period test for rental properties back to two years from 1 July 2024, and remove commercial building depreciation deductions. It also confirms an intention to increase interest deductibility for rental properties from April 2024 and restates a commitment to responsibly deliver income relief measures in next year’s Budget.
“Finally, the mini-Budget sets out the coalition Government’s plans to safeguard the responsible management of New Zealand’s finances for the longer-term with work to upgrade the Public Finance Act, provide better oversight of major spending projects and ensure better outcomes for Government spending.
“This mini-Budget draws a line under six years of economic mismanagement. Today our coalition Government starts a new chapter for New Zealand’s economy, with our focus on reducing cost of living pressures, delivering better value for public money and enabling private enterprise.
“There is much work ahead to clean up the mess that Labour left us, but Kiwis should approach Christmas knowing better economic management has well and truly arrived and lower taxes are on their way.”