Venkat Raman
Auckland, May 23, 2025
The wraps have come off New Zealand’s Budget for 2025-2026, and as expected, it has sparked a vigorous debate across Parliament.
Amidst the ongoing cost of living pressures and a determined push for fiscal consolidation, the government’s ‘Growth Budget’ aims to steer the nation towards recovery and long-term prosperity.
However, Opposition Parties have labelled it as an ‘austerity budget,’ warning of deep cuts and a detrimental impact on vital services and vulnerable communities.
Prime Minister Christopher Luxon staunchly defended the government’s fiscal approach, arguing that it is the most effective way to address economic challenges.
Responsible Budget
“I am very proud of the efforts of our government to help New Zealanders with the cost of living. That is why we are getting control of government spending and inflation and interest rates are coming down,” he said, pointing to the government’s actions as a path to financial relief for families and businesses. He also highlighted the government’s commitment to increasing entitlements by roughly the amount of inflation and growth in real wages.
Finance Minister Nicola Willis characterised it as a “responsible Budget to secure New Zealand’s future,” emphasising a commitment to fiscal discipline and targeted investment.
Presenting the Budget to Parliament, she announced a significant reduction in the operating allowance. “The operating allowance for Budget 2025 is $1.3 billion on average per annum. This is the lowest allowance in a decade, significantly down from the $2.4 billion allowance signalled in the Budget Policy Statement in December,” she said.
Ms Willis affirmed that this “is not austerity but far from it.”
“In fact, it is what you do to avoid austerity. Getting the books in shape ensures New Zealand has financial security and choices in the future,” she said, touting the ‘Investment Boost’ Policy, allowing businesses to “immediately deduct 20% of the cost of a new asset from its taxable income, on top of depreciation.”
Significant investments
Corrections Minister Mark Mitchell underscored the government’s commitment to law and order, announcing a significant investment in the corrections system.
“Our government has restored proper consequences for crime. Budget 2025 invests more than $472 million over four years to ensure Corrections can continue to safely and securely manage the growing prison population. This includes funding for 580 new frontline staff, including 368 Corrections Officers,” he said.
Mr Mitchell reiterated the focus on “investing in the frontline because we are serious about bringing back law and order and creating a safer New Zealand.”
Trade and Investment Minister Todd McClay supported the budget’s overall direction, consistent with the government’s focus on economic recovery.
He said that the Budget will “secure New Zealand’s economic and fiscal recovery and advance reforms to make New Zealanders better off in future.”
This includes forecasts growth will accelerate over the next four years, bringing 240,000 additional jobs, rising incomes, stable inflation, lower interest rates, a return to balanced government books, and an end to rising debt.”
In his pre-budget announcement, Deputy Prime Minister Winston Peters and NZ First Leader announced $604 million from Budget 2025 for Rail, a sector generating $3.3 billion in economic value every year. $461 million is for the nationwide rail network.
“Rail is the clearing house of our ports, efficiently emptying their yards so they can handle more ships. More ships enable more exports, more imports, and more trade. While others may take convincing, we do not. As an export nation, efficient connections are the lifeblood of our economy and that is why we maintain our roads and our rails. This programme replaces decades-old bridges, culverts and other assets with infrastructure to last for generations to come and provides the bedrock for growth by the commercially funded freight operations to move our goods,” he said.
ACT Party leader David Seymour (who will take charge as the Deputy Prime Minister on June 1, 2025 as a part of the Coalition Agreement), championed the Budget’s focus on reining in government spending to free up resources for individuals and businesses.
“A dollar spent by the government cannot be spent by a family paying their groceries or renovating their house,” he said, arguing that less government spending leaves “more for the firms, farms, and families of this country to consume.”
Mr Seymour highlighted the budget’s investment in crucial areas like school attendance, with “$140 million more on school attendance,” and the significant funding for “locking up criminals,” which he deemed “the best money we’ll ever spend.”
He also welcomed changes to KiwiSaver contributions, saying they would “encourage Kiwis to save more for their first home and retirement.”
Opposition slams
Leader of the Opposition and Labour Party Leader condemned the Budget, describing it “as a series of cuts that would hurt ordinary New Zealanders.”
“This Budget is nothing but bad news for many families. The changes to Pay Equity claims leave women out, as if working Kiwi women are worth less. Some families will no longer get Best Start, which helps families buy a can of formula and a box of nappies each week. On top of that, 61,000 families will now be worse [off] by an average of $43 per fortnight,” he said.
Mr Hipkins said that unemployment is ‘scheduled to rise’ and that “thousands of people have lost their jobs under National and are choosing to head overseas.”
The Green Party fiercely condemned the Budget, arguing that it will exacerbate poverty and worsen the climate crisis.
Co-Leader Chlöe Swarbrick said that the government has done even worse than deny or delay climate action.
“They have actively chosen to pour gas on the fire. The government is setting $200 million of our public money on fire to support fossil fuel executives’ profit, instead of investing in renewable energy,” she said.
Green Party Spokesperson for Social Development and Employment Ricardo Menéndez March said that the ‘Growth Budget’ will result in a growth in poverty, particularly for the vulnerable teenagers who have had support stripped away from them.”
He cited the government’s documents showing it is “far off track to meeting the Child Poverty Reduction targets.”
Te Pāti Māori (The Māori Party) said that it was disappointed with the budget, arguing that it fails to address the systemic issues facing Māori and prioritises commercial gain over community wellbeing.
Spokesperson Belinda Himiona said, “There are little nuggets scattered throughout the budget, but let us be clear: they are small scale and will not relieve the crisis children and whānau are in today. Budget 2025 fails to deliver the bold investment required to build the foundation for a thriving future.”
The myriad of reactions to the Budget 2025-2026 underscore the deep ideological fissures in New Zealand politics. The government champions fiscal responsibility and economic growth as the pathway to a better future, while the opposition warns of social costs and environmental neglect. As the Budget’s measures begin to take effect, the true impact on New Zealanders will become clearer, fuelling continued debate and scrutiny.
