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'Darkest Before Dawn': Nicola Willis Rules Out Austerity Budget

Willis delivers the speech on Thursday. Photo: RNZ/Samuel Rillstone

Nicola Willis has ruled out an austerity Budget, although she says the country's economic challenges mean the country is in a "darkest before the dawn" position.

In a major speech on Thursday, the Finance Minister promised her first Budget "breaks from the past" and will not "run long on good intentions but fall short on delivery".

"Every dollar counts and our Budget will reflect that reality."

While she will not be delivering a big-spending Budget nor would she follow the follow the advice of some commentators and take an austere approach.

"Our government knows how devastating it would be if we were to give up on overdue tax relief, to drastically cut back on investment and public services, and to downsize our ambitions for growing New Zealand's economy.

"That approach would be bad for the Kiwi families depending on us and bad for your businesses."

Instead, she would deliver a moderate, responsible Budget that charted "a sensible middle course".

Willis also announced the creation of a new Social Investment Fund which she promised would make smarter use of data and evidence to help vulnerable New Zealanders.



She said $70 billion was being spent every year on "well-intentioned social services" but not achieving strong outcomes.

"We can see the lack of appropriate support for the most vulnerable reflected in rises in welfare dependency, declining educational attendance and achievement levels and rising rates of youth and violent crime."

From 1 July it would replace the Social Wellbeing Agency and would work with community, non-government organisations and iwi providers.

"Over time I expect the fund to grow in partnership with other funders to deliver at scale with a wide portfolio of investments."

Willis also affirmed the government's commitment to "overdue" tax cuts.

"So I'm very pleased to announce today that our tax relief package will increase the take-home income of 83 percent of New Zealanders over the age of 15 and 94 percent of households.

"We will responsibly deliver these lower taxes for low and middle-income families, by fully funding them with a package of careful savings and targeted revenue measures," she said.

$3.5b spending limit announced

The government has set an operating allowance of less than $3.5 billion for the Budget.

"That's less than the previous government's allowance and it will be adhered to - a first in recent years. That has been possible because of our government's willingness to redirect existing spending to a better purpose."

She said since taking office the government had aimed to find $1.5 billion in annual savings across government agencies.

"I am confirming today that we have met that savings target."

The economy was in a "tricky spot" with inflation too high, soaring interest rates, rising unemployment and low growth.

"This is taking its toll on New Zealanders," she said, referring again to "the squeezed middle" who had been forced to soldier on through a cost of living crisis.

"Our government will not over-react to worsening forecasts. Instead, our task is to get on with making the economic changes New Zealand needs and that we were elected to deliver."

She said the priorities were:

  • Cost of living relief
  • Fairer tax
  • Better value from public spending
  • Balanced books for lower debt
  • A stronger more productive economy

"Our first Budget will make progress on all these fronts."

She promised a significant funding boost for health and targeted new investment in other essential frontline services including education, disability services and police.

Nicola Willis gives a pre-budget speech to the Hutt Valley Chamber of Commerce

Nicola Willis listens to a question from the audience. Photo: RNZ/Samuel Rillstone

During questions from those attending the event Willis said it would be "a major breach" of trust if the government did not follow through on tax cuts.

On trade, she said the country needed a diverse range of exports to sell in overseas markets and that was why ministers had embarked on several trips. She backed the agricultural sector to continue to be the backbone of the economy.

On improving productivity, lifting education standards, better infrastructure and a more efficient regulatory framework were important factors, Willis said.

"No silver bullet but lots of things we can do," she said.

New agency will be more effective - Willis

Speaking to media after the event, Willi said thenew Social Investment Agency woudl be all about "the human touch".

"We fail too many New Zealanders because we don't have the rigour of saying 'is the service we're providing working for you?'

Successive governments had had good intentions but not put in place evaluation methods to decide if they were working.

It was possible the government would work with some of the community-based Whanau Ora agencies to deliver some of the investments.

On public service cuts, Willis said there were some government agencies that had not met the 6.5 to 7.5 percent cuts in spending the government had sought.

This was for good reasons, she said. One example was the police who had expressed fears of cuts to frontline services which the government did not want to see happen.

Some agencies had exceeded requirements so it all balanced out, she said.

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