Lolly Scramble 2.0: How Willis Swapped Your Rates for Rich-Kid Rewards

New Zealand’s forthcoming Budget, unveiled by Finance Minister Nicola Willis as a “Growth Budget,” cuts the operating allowance for new spending to NZ$1.3 billion - down from NZ$2.4 billion projected just six months ago - citing sluggish economic growth and the need to return to surplus by May 2029. Willis insists this restraint will help stabilise the public finances and reduce national debt over time.

Yet in the same breath she denies borrowing to fund tax cuts, even though Treasury forecasts show an extra NZ$12 billion in gross borrowing over the next four years is directly tied to a tax relief package worth around NZ$14 billion over that period. Willis has claimed these are “different pools of money,” but the numbers speak for themselves: tax cuts are a major driver of future borrowing NZ Herald.

Critics warn that delivering tax relief without offsetting revenue measures risks stoking inflation at a delicate moment. Although headline CPI inflation has eased back into the Reserve Bank’s 1–3 percent target band at 2.5 percent in the year to March 2025, some everyday costs remain stubbornly high: housing rentals rose 3.7 percent and local authority rates jumped a staggering 12.2 percent over the same period, while electricity, water and public-transport prices continue to climb Capital Brief.

Meanwhile, the government’s cost-cutting drive demands “restraint in public sector wage increases,” effectively this could stagnate pay for thousands of nurses, teachers,police, soldiers and other frontline workers in a bid to “get more impact out of every dollar spent.” This wage restraint layers further pressure on an already tight labour market and may sap morale in essential services RNZ. - Not addressing root causes (cost of living and inequality) will mean wages are always playing catch-up and now they are not catching up.

Beyond immediate belt-tightening, there is little in Willis’s plan to invest in the workforce, health system or social infrastructure that could generate economic returns - and curb growing inequality. A coalition of 15 economists warned that the Coalition’s “sinking-lid cuts” to public services and cancellation of key infrastructure projects are deepening New Zealand’s recession, deterring private-sector investment and risking long-term scarring of the economy NZ Herald.

Perhaps most alarming is the accelerating brain drain. In the year to June 2024, a record 131,200 people departed New Zealand - including 80,174 New Zealand citizens, the highest annual outflow on record - as rising unemployment and sluggish growth drove skilled workers across the Tasman. Australia’s aggressive recruitment packages only amplify this exodus, leaving gaps in critical sectors here at home Reuters.

Even on its own terms, the Budget does not eliminate borrowing: the Treasury projects a NZ$17.31 billion deficit for the fiscal year ending June 2025, with the first surplus not expected until 2029 under current policies. In effect, Willis is borrowing to cut taxes now, while postponing the hard grind of deficit reduction well into the next half-decade Reuters.

For young Kiwis, the gains look scant. While the typical taxpayer might pocket around NZ$102 per fortnight from the tax cuts, this is largely offset by higher council rates, water and electricity charges, public-transport fares and elevated food and rent costs - leaving little in hand to service future debts or get on the housing ladder. In the long run, today’s tax giveaways may simply saddle the next generation with heavier repayments and fewer opportunities for upward mobility.

Even when Nicola Willis tries to take credit for decreasing rates, this only addresses the cost of borrowing not the cost of living - not taking into account the long-term rate increases which will be blamed on future governments. 

In sum, Nicola Willis’s Budget blends modest tax relief with austere spending cuts, yet offers no clear path to sustainable surpluses or the investments needed to strengthen New Zealand’s economy and social fabric. The contradictions between borrowing to cut taxes and withholding funds from public services risk undermining growth, fuelling inflationary pressures and driving yet more skilled New Zealanders offshore - calling into question whether this really is the “Growth Budget” New Zealand needs.