NZ Engine

Source: NZ Music Month takes to the streets

Ulaanbaatar, Mongolia.

It is a pleasure for the New Zealand to be in Ulaanbaatar this afternoon. The welcome has been warm, even if the temperatures outside have not been. Though, your Ambassador tells me the temperature reached +1 degrees Celsius at midday today! Thank you to Foreign Minister Battsetseg for your generous hosting.

Despite our geographic distance, New Zealand and Mongolia share many commonalities: both small states committed to democracy, multilateralism, and the international rules-based order.

We also share proportional representation electoral systems, New Zealand since 1996, and Mongolia since 2024.

The New Zealand-Mongolia relationship is warm and long-standing. It is significant that this year we are marking 50 years since diplomatic relations were established in 1975. This is a seriously important milestone.

It was valuable exchanging views and experiences today with the Minister and colleagues, and discussing our respective regional and international priorities.

The New Zealand community here in Mongolia is small, but an important element to our relationship. We thank the New Zealand community – and Mongolians in New Zealand – for their support for this relationship, and for continuing to find exciting new ways to connect our countries.

Ties between our people continue to deepen. We continue to welcome Mongolian scholars to New Zealand, including through the long-standing English Language Training for Officials (“ELTO”) programme.

New Zealand is also pleased to provide targeted support to Mongolian NGOs and other groups through the New Zealand Embassy Fund. This has included support for sheep-shearer training programmes. This might sound ordinary, but shearing is a critical part of ensuring productivity!

This year we are contributing towards a rural water project, which will support over 100 families to access the water supply system. We are also helping Mongolian herders to build climate change resilience.

Once again, thank you to Foreign Minister Battsetseg and other senior Mongolian colleagues for your generous hosting on this important occasion.

And allow me to reiterate one last time what a special significance it is for me to be here today.

Thank you.

Source: NZ Music Month takes to the streets

Good morning, everybody.

It’s great to see such a good cross-section of people from local government here today.

Against a backdrop of skyrocketing rates and massive cost of living pressures, a lot has been made recently of the need to go ‘back to basics’ and to ‘go for growth.’

These two things are critically linked.

Moving back to basics means consciously reducing government scope to the bare minimum and avoiding unnecessary intervention in people’s lives.

Reduced intervention frees people to do what they do best, and unlocks potential gains in efficiency, innovation, and productivity – all vital ingredients to deliver economic growth.

With this in mind, it’s heartening to join you on a day focused on showing communities value, and sharpening councils’ value stories.

However, I’m aware that the ability to sharpen value stories is inherently constrained when working with such a blunting instrument as the Resource Management Act.

The RMA’s downfall

There are endless examples of the absurdity that’s ensued under the RMA. Every week I am reading new articles, receiving new letters, and hearing new stories about the obstruction it has delivered.

I think of the letter I received from an Upper Hutt man who was blocked from cutting down a tree on his own property, assessed as dangerous by both his neighbour and an arborist – a generic pin oak not even listed on the plan.

I think of Tracy Fleet in Ashburton who, facing a similar situation, was slapped with a $7000 fine and a criminal conviction for pruning a tree so dangerous insurers were turning away, after a years-long, strung-out saga that was also swallowing up her ratepayer dollars in the process.

I think of Curt and Tricia Zant whose Hawke’s Bay farm was slapped with an ‘Outstanding Natural Feature’ classification in the council’s plan, restricting their ability to invest time, care, and capital into their land to drive the growth we’re seeking, without any compensation for their loss – I’ll come back to this.

I think of Datagrid whose land provides a great location to invest in a data centre and subsea cable network expansion. This would capitalise on the window of opportunity that is the spiking demand for data storage and faster connectivity in the age of artificial intelligence and the cloud. How ironic that this immense growth opportunity has been stalled by the imposition of a so-called ‘highly productive’ classification on their land, tying them up in consenting quicksand to protect a turnip crop.

I think of attempts to build a new McDonald’s, Starbucks, Burger King, or even a supermarket, where the RMA’s breadth has somehow gotten us to a point where vexatious objectors have been able to weaponise any number of irrelevant ‘effects’ to obstruct things they don’t like.

These are just some of the many examples up and down this country where people and organisations, big and small, are facing massive restrictions on the use of their property, too often for tenuous reasons enabled by the RMA that amount to little more than subjective ‘vibe’.

Whether it’s protecting dangerous trees, debating the vibe of landscapes and architecture, pontificating on how a property owner should best use their own land, or having to consider all manner of reckons – from the health profile of food to the competition ‘effects’ of a new business – the current council ‘value’ story is a hard one to tell.

The solution

The good news is that our commitment to replace the RMA with a system based on property rights will reduce the scope of resource management and liberate councils to focus on things that actually deliver value for ratepayers.

Last year, Cabinet agreed the principles and direction that would guide the replacement.

First things first: we must narrow the scope of the system to focus on material effects, and to promote the enjoyment of property rights. As is clear from the examples above, and countless others, the RMA tries to do too many things, and in doing so has become a vehicle to stifle growth. 

When the RMA was developed, the key downfall was integrating management of development and the environment into one purpose, which has treated development as a privilege. We’re going to change that by replacing the RMA with two Acts with distinct purposes – one to manage environmental effects arising from activities and another to enable urban development and infrastructure.

Councils will have clarity on what environmental effects and domains need managing, what needs to be considered when setting limits appropriate to their regions, and the tools available to manage resources within those limits. These tools should include innovative methods for things like water allocation and discharges, so scarce resources go to where they’re needed most, and supply can respond to demand.

What is not negotiable, though, is that human needs will be met. Frustrating development to resist growth doesn’t abate the need for it, nor does it change the reality that human existence necessarily has effects on the environment. If development cannot occur within an environmental limit in one place, then it must occur in another. But development must, and will, occur.

Through codifying into standards established and accepted ways of undertaking activities, the new system will liberate councils from the regulatory anxiety which demands consents and treats applications for common activities like road construction as a potential extermination event. When we’ve done most things in most places before, there’s no reason to start from scratch each time.

Spatial planning will be a core feature, with several important roles. It will separate incompatible land uses, provide protection for infrastructure, and identify natural hazards. The separation of incompatible land uses will be a key mechanism for managing potential neighbourhood effects like noise, odour, and the likes.

A stricter effects-based system with a no duplication rule means stripping out regulation and consenting for anything that has no material effects on the natural environment or another property owner, is covered by and complies with another law or national standard, or is subject to a private agreement among all affected parties.

A stricter effects-based system also means limiting who gets a say on what others do with their property if they are not directly affected. Gone will be the days of every Tom, Dick, and Harry sticking their noses into other people’s business at the other end of the country.

All of this will go some way to respecting property rights.

However, for potential situations where management of genuine effects presents residual friction with property rights, we must ask ourselves through this process “who benefits from such a constraint?” and, therefore, “who should bear the cost?”

For example, coming back to the case of the Zants’ issues under the current system – should they be the ones to pay the price of someone else’s decision that the landscape their property sits on is ‘outstanding’ to look at? What incentives does this this create for making sound decisions about what is outstanding when it is costless to the decision maker?

Through all this change to unshackle people from the burdensome approach of up-front consenting, Cabinet has also recognised a corresponding need for a strong compliance monitoring and enforcement regime, ensuring accountability among system participants so this replacement system delivers for both development and the environment.

Conclusion

This is just a sample of some of the key elements to be determined as we shore up the design of the new system, and no doubt there will be interest across other areas – from the role of a planning tribunal type function, to the shift to one plan per region, and beyond.

With the Resource Management Expert Advisory Group now having taken Cabinet’s direction and developed a draft blueprint for RMA replacement, there will be more to share in due course.

One thing that is clear, though, is that engagement of key system participants is important.

Local government is a critical system participant, so I encourage you to take the opportunity to feed into this reform, 

Because liberalising resource management is a critical step in helping councils sharpen their value stories and unlocking the innovation and economic growth we so desperately need.

Source: NZ Music Month takes to the streets

Two new members have been appointed to the board of Eden Park Trust, Sport and Recreation Minister Mark Mitchell says.

“Marama Royal MNZM (Ngāti Whātua) and Hon Simon Bridges (Ngāti Maniapoto) will be bringing their extensive governance experience and passion for the Auckland region to support the leadership of New Zealand’s largest stadium.

“I am confident that these appointments will add fresh perspectives and expertise to help lead Eden Park through the current conversations about the park’s future.

“Marama Royal MNZM is Chair of the Ngāti Whātua Ōrākei Trust Board and has extensive governance experience. She is an esteemed and experienced iwi leader who will bring significant governance experience, strong networks and deep understanding of the whenua to the role. 

“Hon Simon Bridges is well known for his political experience where he served in several Cabinet positions, and more recently for his role as CEO of Auckland Business Chamber. His experience in both political and commercial settings offer unique perspective, skillset, and networks that would enable the board to thrive.

“I have also reappointed Kereyn Smith CNZM and Bill Birnie CNZM as members of the board to continue their steadfast commitment to the future of Eden Park. 

“These appointments and reappointments will ensure strong leadership and a commitment to the future success of New Zealand’s iconic stadium,” says Mr Mitchell.

“I also acknowledge outgoing members, Victoria Toon and Renata Blair, whose terms ended in February.  They have been influential in supporting relationships with residents, iwi and commercial entities, and I thank them for their services to the board over the years.”

Source: NZ Music Month takes to the streets

A pilot programme that will help financial technology (fintech) firms shake up competition in the financial and banking sectors is now underway, says Commerce and Consumer Affairs Minister Scott Simpson.

“Our Government is focused on improving competition in the areas that matter most to Kiwis. The financial and banking sectors are among the most crucial to our everyday lives and our economic growth – however, they are often criticised as being among the most regulated and, some say, least competitive,” says Mr Simpson.

“We have heard these concerns from the industry and have taken them seriously. I am pleased that the Financial Markets Authority has now announced the six firms that will take part in its pilot ‘regulatory sandbox’ programme, which was announced late last year.

“The sandbox is a testing ground where fintechs can experiment with new products and services in a controlled environment, ensuring they comply with regulations, before doing a full commercial launch.

“The benefits of this programme reach all corners of our economy. For consumers, it opens the door wide for new and innovative solutions that will challenge traditional banks and boost competition, providing more choices about how people manage their money, investments, and day-to-day transactions.

“For fintechs, it means having the freedom and guidance to develop new products and services that will not only benefit customers but also help them supercharge New Zealand’s economic growth. I expect the sandbox will enable firms to save time, reduce costs, and bring innovative products to market sooner.

“Fintechs are exactly the kind of high-value companies that we want to see thrive in New Zealand, but regulatory barriers have prevented them from competing on a level playing field. That’s why our Government is identifying and removing these barriers to support a thriving, scalable fintech industry in New Zealand.

“Our Government also recognises the potential of fintechs to disrupt New Zealand’s financial services sector, increasing competition and choice for Kiwis. With open banking now on track to be operational in New Zealand by the end of the year, this is another action we are taking to help further unlock that potential.

“I look forward to seeing how the firms make use of the sandbox. I encourage them to be bold and push the boundaries as they develop innovative solutions that will bring more choice and better services to consumers.”

Notes to editors:

The firms taking part in the pilot are:

For further details on the regulatory sandbox and the firms participating in the pilot, please visit: https://www.fma.govt.nz/business/focus-areas/innovation/.

It is anticipated the firms will operate within the terms of the sandbox for a period of between 12 and 24 months. Following the pilot, the Financial Markets Authority will make a decision on whether to make the programme permanent.

Source: NZ Music Month takes to the streets

The Regional Infrastructure Fund will invest up to $2 million to investigate building additional electricity transmission and distribution capacity in Northland, which could also have benefits further afield, Regional Development Minister Shane Jones says.

“New Zealand needs significantly more electricity generation as the economy grows and demand for power increases. Northland is rich in natural renewable resources, such as wind and solar which are suitable for generating renewable energy,” Mr Jones says.

The Ministry of Business, Innovation and Employment (MBIE) will use up to $2m from the Regional Infrastructure Fund to investigate the feasibility of upgrading Northland’s electricity infrastructure to act as an ‘energy bridge’ between Northland and Auckland.

MBIE will also carry out an economic analysis of the potential benefits in conjunction with local stakeholders.

“This project has the potential to unlock $1 billion of private investment in new renewable energy. If this is feasible, Northland could become a significant electricity generator and supplier of power which might have flow-on benefits for Auckland and the rest of the country,” Mr Jones says.

“This investment could increase electricity self-sufficiency in the region and improve the power generation capacity and resilience of the Northland network which will benefit local people. It could also reduce power prices for Auckland and nationally if wholesale prices can be brought down.

“More detailed work needs to be done into the feasibility of expanding Northland’s power generation before further government funding can be considered but if the outcome is positive, the payoff could be massive.

“This is a long-term project and there is a lot of water to pass under the bridge yet, but if it goes ahead some new power generation could come online as components are completed, with full commissioning by 2029,” Mr Jones says.

The project aligns with the Coalition Government’s goals of building infrastructure and doubling renewable energy generation for New Zealand by 2035 to reduce emissions and enable economic growth.

Source: NZ Music Month takes to the streets

Minister of Transport Chris Bishop has confirmed the Manawatū Tararua Highway will be opened to traffic from June 2025, restoring an important connection for communities and businesses on both sides of the Tararua Ranges.

“The new highway between Ashhurst and Woodville will replace State Highway 3 through the Manawatū Gorge, which was permanently closed in April 2017 due to landslides,” says Mr Bishop.

“Travel times will be greatly improved for both light and heavy vehicles using the new road. General traffic will take between 10 – 12 minutes to drive the road, which is a significant improvement on the current 20 – 25 minute detour route in place. The new road will be safer and more resilient than the road it’s replacing.

“The road will support productivity for businesses by improving travel times for freight and lowering vehicle operating costs. This corridor is an important freight link between Hawke’s Bay-Wairarapa and the Manawatu-Whanganui regions. Having an efficient, four-lane highway, divided by a median barrier through this transport corridor will boost economic growth for this part of the country and the rest of the North Island.”

“This highway will reconnect the communities severely affected by the closure of the old road. Woodville and Ashhurst have been impacted by the closure, and I would like to acknowledge their patience and their support for the project since its inception.

“The construction teams still have some work to do before the road can open. This includes laying the final stages of asphalt, installing barriers, line marking and, crucially, connecting the new road to the surrounding roading network. The expected cost to complete the project now stands at $824.1 million.

“I’m looking forward to the road being open and I know local communities are too.”

Source: NZ Music Month takes to the streets

Taupō Hospital has become the first hospital in the North Island to receive accreditation to deliver Australian College of Rural and Remote Medicine (ACRRM) training, Health Minister Simeon Brown and Associate Health Minister Matt Doocey have announced.

“The Government is committed to growing and strengthening our health workforce, and a strong rural workforce is a key part of that,” Mr Brown says.

“In rural settings where access to specialist health services can be limited, generalist doctors – who can work flexibly across multiple disciplines and service areas – play a vital role.

“This accreditation is a significant step towards building a stronger rural health workforce in Taupō. It will help increase the number of doctors trained with the broad skills needed to support the surrounding rural communities.

“Rural generalists can sustainably manage a broad range of patient needs and work within clinical networks to ensure patients get access to specialist teams when required.

“The ACRRM programme will enable registrars to train to work in Taupō Hospital while also developing advanced skills in fields such as obstetrics, anaesthetics, mental health, or endoscopy.

Mr Doocey says being an accredited ACRRM training location means Taupō can attract both New Zealand and Australian registrars and graduates and provides an opportunity for some New Zealand doctors working overseas to return home during their training.

“One of the five priorities of the National Rural Health Strategy is to create a valued and flexible rural health workforce, and training young doctors as rural generalists directly supports this goal,” Mr Doocey says.

“Taupō Hospital’s new accreditation complements the existing pathway for New Zealand doctors through the New Zealand Rural Hospital Medicine Training Programme.

“All New Zealanders deserve timely access to quality healthcare, and the Government is committed to improving health outcomes, particularly for the one in five Kiwis living in rural areas.

“To improve access and rural health outcomes, we must invest in growing and supporting the rural health workforce. Taupō Hospital’s accreditation is an important step towards that.”

Source: NZ Music Month takes to the streets

Outdated regulations stopping trained medical professionals from learning about new medicines through trade show advertising are out of step with other countries and disadvantage New Zealanders, Regulation Minister David Seymour, Health Minister Simeon Brown and Tourism and Hospitality Minister Louise Upston say.

“New Zealand’s prohibition on advertising medicines yet to be consented by Medsafe is a barrier to New Zealand’s ability to host medical conferences and trade shows. The opportunity cost of New Zealand missing out on these is huge,” Mr Seymour says.

These laws will be reformed so medicines yet to be consented by Medsafe can be advertised at medical conferences in New Zealand, instead of New Zealand health professionals needing to travel overseas.

“Prohibition was introduced in response to the perceived risk that pharmaceutical companies may attempt to circumvent formal medicine approval processes. The Ministry for Regulation has investigated and found this overly cautious approach is out of step with other recognised jurisdictions and is not proportionate to the perceived risk,” Mr Seymour says.

“Other nations like Australia, Canada, and the European Union allow advertising to generate revenue and provide medical professionals with information on cutting edge medicines. New Zealand doesn’t need to be left behind because of outdated red tape.

“This change is estimated to generate $90 million in associated revenue over the next few years.

“Prohibition also contradicts this Government’s efforts to increase medicines access. Allowing these products to be advertised would upskill doctors and give them the knowledge and skills to prescribe these treatments safely to Kiwis who need them.”

“This Government is committed to removing regulatory barriers so that we can drive economic growth. Removing the red tape around medical conferences will make New Zealand a better destination for conference organisers, while also making it easier for our own healthcare professionals to keep up with the latest innovations in health products and medicines,” Mr Brown says.

“New Zealand’s current health regulations can be overly bureaucratic, and this is slowing down access to care, increasing costs, and making it harder for patients to get the services they need.

“Our regulations can also make it harder to attract, train and retain healthcare workers. Workers want to work with top class treatments and patients want to be able to access them.

“Medical conferences are a great way to expand the collective knowledge and skill of the health workforce through the transfer of ideas and technologies.

“The Government is investing more than ever into our health system – a record $30 billion each year – and we expect it to deliver more for patients as a result.”

“Removing these barriers will also give us an opportunity to showcase our new conference facilities, fantastic hotels, and experiences, and pitch New Zealand as a world class location for business events like medical conferences,” Tourism and Hospitality Minister Louise Upston says.

“Business event participants spend an average of $175 more per day than other visitors, and often travel during the off-peak season, boosting tourism and economic activity year-round.

“Our message is clear, New Zealand is open for business. We are looking forward to welcoming more medical conferences to New Zealand, and we have great facilities to host them.”

Source: NZ Music Month takes to the streets

Transport and Infrastructure Minister Chris Bishop will travel to Sydney today to further promote New Zealand’s infrastructure investment opportunities following the NZ Infrastructure Investment Summit last month.

“The Government has signalled that New Zealand is open for business and going for economic growth. In Sydney I will present a New Zealand Government Infrastructure Investment update to the International Project Finance Association, highlighting the range of upcoming investment opportunities across New Zealand’s infrastructure pipeline,” Mr Bishop says.

“I will attend the 2025 National Infrastructure Awards dinner, hosted by Infrastructure Partnerships Australia, and host an NZTE Investors Roundtable lunch with a range of major potential investors in New Zealand.

“While there I will also visit a range of transport projects, including the WestConnex toll road, and the Paramatta Transit-Oriented Development (TOD) programme. All of these projects offer lessons for New Zealand as we embark on our ambitious transport investment programme.”

Mr Bishop leaves for Sydney today and will conclude his visit on Friday 2 May.

Source: NZ Music Month takes to the streets

Tēna koutou kātoa. Greetings everyone. Can I thank you Malcolm for that kind introduction and thank everyone who has taken the time to be here today. My special thanks go to our hosts Metco Engineering and the Hutt Valley Chamber of Commerce.

Let me also acknowledge my colleagues who join us today – your local MP and my Associate Minister of Finance the Hon Chris Bishop, together with the Minister of Education the Hon Erica Stanford.

This factory is a bit of a different setting than the conference centre or ballroom Ministers typically use for a pre-Budget speech. Why?

Because places like this are the engine room of the New Zealand economy.

Our Government knows that to speed up the economic recovery New Zealanders need we have to get this growth engine cranking.

I appreciate that economic growth can be a bit of an abstract concept: the work that happens on this factory floor is what it’s all about.

The workers at Metco solve problems, coming up with new products and manufacturing processes for a range of industries. They design and create clever components for customers around the world – producing everything from window stays through to bus stops.

Metco has grown successfully by making investments in its own machinery and technology and by hiring and up-skilling great people who come up with innovative ideas and then make them happen.

The growth of businesses like MetCo, and indeed of all the businesses represented in this room today, has created good jobs and livelihoods for the people of the Hutt Valley community.

It’s also allowed your businesses to make healthy tax contributions, which helps fund the Government’s investment in health services, schools, vital infrastructure and other important public spending.

Thank you for that contribution, we don’t take it for granted.

New Zealand needs more success stories like MetCo: Your growth is what’s needed to deliver the kind of country we all want: with better living standards, better job opportunities and more financially secure families.

That’s why our Government is going for growth.

Earlier this year we released a snapshot of the work we have underway to support this growth agenda. Going for Growth sets out 87 specific actions we are taking under five key themes:

• Developing talent
• Competitive business settings
• Innovation, technology and science
• Overseas investment and trade
• Infrastructure for growth

I encourage you to check out the plan and the work underway. There’s more to come.

For today though, I’m going to switch out of my Economic Growth hat and into my Minister of Finance hat and focus my remarks on this year’s Budget.

The Context for Budget 2025

The Government’s growth ambition has been front and centre as we’ve put the Budget together.

We know that global uncertainty is challenging for many of you and we’re determined our Budget will play a role in giving you confidence for the future.

But let me be blunt: it’s not the easiest time to be putting together a Budget.

New Zealand is still recovering from the economic damage inflicted during the Covid period and we’re now facing the headwinds of further global instability.

There is a pressing need for greater investments in our health system, our education system, our defence force and other areas, and very little money to pay for those investments.

Our Government is also acutely conscious of the challenging economic circumstances many New Zealanders have experienced in the past few years as we’ve emerged from a period of very high inflation and rapidly rising interest rates.

The pain is still rippling through our communities. Kiwis feel it in the higher prices they still pay for almost everything, in higher levels of unemployment and in struggling local businesses. The cost of living remains a top-of-mind concern.

The good news is that, despite significant global challenges, a steady economic recovery is now taking place here, with export-led growth gathering strength, business confidence coming off its lows and the primary sector benefiting from higher commodity prices and mostly favourable growing conditions.

Having considered everything happening around the world, the Treasury is continuing to forecast accelerating growth in the New Zealand economy over the coming year, with falling unemployment forecast to follow in the second half of the year.

There’s no magic wand to wish away the price rises baked in over recent years, but getting inflation and interest rates under control has been essential to achieving this economic recovery.

That’s why I always take pause to celebrate that since our Government came to office inflation has returned to normal levels, resulting in a 200 basis point reduction in interest rates.

We must not take this progress for granted.

While some pretend we can fix all the post-Covid damage with yet more extravagant government spending, the economic truth is that they are wrong.

The only way to sustainably overcome cost of living pressures is through successive years of stable inflation, careful investment and sustained economic growth.

Our Government is committed to the responsible fiscal management and growth supporting policies needed to make that happen.

Debt, deficit and the path out

An important part of that effort is getting our own books in order. That’s a big task.

The previous Government’s spending decisions during and after Covid have left New Zealand with a sea of debt and red-ink in the government finances.

Government debt leapt up by almost $120 billion between 2019 and 2024, soaring from under $58 billion to $175 billion.

Those are big numbers, almost too big to comprehend, so let me explain it this way: That amounts to $22,000 more in debt for every New Zealander.

You may well ask: what do we have to show for all that debt?

To give you some further historical context, New Zealand’s net core Crown debt, which once hovered between five and 25 per cent of GDP, rose to around 42 per cent last year. That’s the highest level of government debt New Zealand has shouldered since the mid-1990s.

Servicing that debt is expensive.

The interest bill on government debt has soared from $3.6 billion in 2014 to $8.9 billion last year. That sum is more than annual core Crown expenses for the Police, Corrections, the Ministry of Justice, Customs and the Defence Force combined.

Our Government’s goal is to put net core Crown debt on a downward trajectory towards 40 per cent of GDP and in the longer term keep it below that percentage.

Why? Because allowing debt to keep spiralling would threaten the livelihood of every New Zealander.

We must ensure our country is financially strong and resilient enough to effectively respond to whatever the future may throw: be it earthquakes, extreme climatic events, biosecurity incursions or whatever. We need the world to keep seeing us as a good country to invest in and lend to. Manageable debt levels are an essential foundation for a strong economy and for your financial future.

Achieving lower debt levels isn’t easy: especially because the government books remain out of balance.

The post-Covid ‘structural deficit’ has left a big gap between what the country needs to fund to deliver on the spending commitments previous Budgets have made and what we need to earn to pay for that spending.

The Government is currently borrowing billions to bridge the gap.

Every Thursday afternoon, New Zealand Debt Management issues around $500 million of Government bonds. Some of this is to that roll over existing bonds that have expired, but large chunks of it are for new borrowing.

That level of borrowing obviously can’t go on forever, or else our kids and grandkids will be left with unsustainable debt and considerable economic uncertainty.

Most of you can probably relate to this if you think about your own household budget: sure, sensible borrowing has its place, but no overdraft can be extended forever, and while you can keep giving the credit card a hammering, left unpaid, it does, eventually, get declined.

It’s worth bearing this in mind next time somebody tries to suggest to you that the New Zealand Government needs to spend more on something.

The second question always needs to be: but how will we pay for it?

Our Government’s strategy is to reduce the deficit over time, through a gradual programme of consolidation and careful spending choices.

We are committed to maintaining stability for New Zealanders, by continuing to invest in essential frontline services, infrastructure for growth and social supports like superannuation.

But delivering those things requires us to make careful choices about what we spend elsewhere.

That’s why we’ve committed ourselves to ongoing reprioritisation and fiscal restraint. It isn’t easy, but it is essential.

Believe me, I’d rather we were in clover, with money to spend on all the good ideas we hear. But the reality is that we are governing in tighter times.

Economic growth is essential to our fiscal repair job. It’s simply the most effective way to raise government revenue, and to give us better choices for the future.

Some have suggested a different approach. They say New Zealand should seek to close the deficit by simply adding more and higher rates of taxes to Kiwis’ wages, savings, wealth or capital.

We reject that approach.

Punishing Kiwis with higher taxes right now would undermine our recovery, strangle growth and threaten the economic stability New Zealand needs.

It would pull the rug out from all those businesses and industries who are already just hanging on. And it would send an exodus of Kiwi talent and wealth to Australia and beyond.

It would be exactly the wrong recipe for a country whose future prospects depend on investment and growth.

Changes in the economic and fiscal outlook since HYEFU

The Treasury’s last set of economic forecasts was presented at the Half Year Update in December.

As you know, the global economic outlook has worsened considerably since that update.

Tarriff announcements by the US government, countervailing tariffs being imposed by China and an uncertain path for future tariffs and exemptions have created volatile global economic conditions with forecasters around the world agreeing that global growth will be lower this year and next year than they were previously predicting.

New Zealand can’t escape the fallout.

Accordingly, Treasury has adjusted the forecasts it presented in December, reducing their assumptions of real GDP growth in New Zealand in 2025 and 2026.

New Zealand’s economy will still be growing, but not as fast as forecast a few months ago.

That lower growth trajectory has an inevitable impact on the government books, reducing revenue and threatening our already difficult return to surplus and debt reduction.

At the same time, it’s clear that the country’s need for investment has not lessened: whether it be in the infrastructure we need for a more productive future, the funding needed to meet pressures in our health service and education system; or the need to rebuild our defence capability to meet the challenges of a less stable world.

On top of all of that, it’s also the case that New Zealand’s long-term productivity and savings challenges haven’t gone away.

So there’s a huge amount to juggle in this year’s Budget.

How has the Government managed these challenges?

We started with that question that I suggested to you earlier: How do we pay for the things we need now without putting our future economic stability at risk?

Our approach has been threefold.

First, there has been a very high bar for new initiatives in the Budget. I can confirm today that there will be no lolly scramble in Budget 2025. New spending initiatives are strictly limited to the most important priorities: our focus has been on health, education, law and order, defence, and a small number of critical social investments. We have also found room for modest measures to support business growth and to provide some carefully targeted cost of living relief.

Second, beyond a small number of exceptions, government departments are not receiving additional funding in the Budget. We expect government agencies to adjust themselves to New Zealand’s limited fiscal means. This will require restraint in public sector wage increases and an ongoing commitment to getting more impact out of every dollar spent.

Third, we have undertaken a significant savings drive.

That effort has involved Ministers identifying areas of previously committed spending that can no longer be justified in light of the challenging circumstances New Zealand now faces.

We’ve analysed spending decisions made by previous governments and re-evaluated them in the context of today’s constraints. This has involved a line-by-line review of previous funding commitments, including money put aside in contingency.

This reprioritisation exercise has required careful consideration and some tough, but necessary, choices.

At every step, we’ve asked ourselves two questions:

1. Can these dollars be justified when we are borrowing to pay for them?
2. Can we be sure these dollars will do more good in this area than if invested in our most pressing priorities – like funding essential health services, better educating our kids, defending New Zealand’s security or ensuring our future growth?

Taken together, the Government’s savings drive has freed-up billions of dollars. Those savings will now be re-deployed to fund New Zealand’s most pressing priorities.

Sticking to the fiscal strategy

In this year’s Budget we’ve also had to carefully consider whether, in light of major global economic events, our fiscal strategy still remains achievable.

The strategy is focused on two key goals: putting net debt on a downward trajectory and returning the books to an OBEGALx surplus by 2028.

This strategy matters, it matters for getting the books back in order and that’s about more than a set of numbers. It’s about keeping interest rates lower and providing a solid platform for future growth. It’s about ensuring New Zealand continues to be seen as a stable, reliable place to invest in and lend to. It’s about making sure we don’t leave our kids and grandkids with debts they just can’t repay.

At our last update in December – well before President Trump’s “Liberation Day” – we were expecting a small surplus in 2029, and it remained our intention to returning it a year earlier if possible.

I can confirm that our Government remains committed to those goals.

Sticking to them has required some careful adjustments in this year’s Budget.

The key change we have made is to the size of this year’s “operating allowance” – that is the amount of money put aside for new spending.

At the Half Year Update, the Treasury forecast that the “allowance” in Budget 2025 would be $2.4 billion.

That was always a small envelope. However, as I outlined earlier, our approach has been to supplement our new spending by reprioritising funds from elsewhere.

I am confirming today that the Government has reduced the size of our Budget 2025 operating allowance to $1.3 billion.

This means we will be spending billions less over the forecast period than would have otherwise been the case. This will reduce the amount of extra borrowing our country needs to do over the next few years and it will keep us on track towards balanced books and debt reduction.

The fiscal forecasts will not be finalised until later this week, but according to the latest numbers I have seen, this smaller operating allowance means we will continue to forecast a surplus in 2029.

The reality of global economic events is that if we’d pushed on with a larger operating allowance then we would be staring down the barrel of even bigger deficits and debt.

Let me emphasise once again: our Budget will still deliver increased investment in the things that really matter to Kiwis: like health, education, law and order, the defence force, business growth and targeted cost of living relief. Those things are important to you and they’re important to our Government.

Our careful reprioritisation approach means we can continue to make progress on today’s priorities while ensuring we are better positioned to face the challenges tomorrow will bring.

Yes, those challenges loom large.

But let’s get real: global instability may not be a passing trend. New Zealand can’t expect to keep borrowing as much as we are now. The world doesn’t owe us any favours.

This is not the time to kick the can down the road.

We must act now to secure our financial future.

Conclusion

In conclusion, Budget 2025 takes place against a difficult global backdrop.

We can’t wish that away. What we can do is focus on the things in our control.

Our Government is doing just that, by providing a predictable, steady approach to economic and fiscal management.

In an unstable world we are staying the course with responsible policies that provide stability, support investment and make New Zealand an attractive place for the world to trade and do business with.

These sensible policy approaches are the base from which we will deliver better choices and investments in the years ahead.

With those basics in place, there is much for Kiwi businesses to feel optimistic about.

New Zealand has enormous economic growth potential.

We are a safe, secure country with a growing constellation of free trade agreements and a global reputation as a good place to do business.

We are blessed with abundant natural resources – everything from ocean to freshwater, fertile land and temperate weather to abundant minerals.

In a world worried about food security, we feed more than 40 million people with levels of efficiency and sustainability that are the envy of many.

We have a long history of stable democracy, strong institutions and rule of law.

We’ve delivered scientific breakthroughs and global success stories and we will continue to do so. As I stand here today, we are world leaders in sending rocket to space – rockets that include components made right here in this factory.

Fundamentally, I’m optimistic about New Zealand’s economic future because I have faith in you: the New Zealanders who get out of bed each morning and go and make things happen.

I’m optimistic because I see how hard Kiwis work. I see how much effort Kiwi parents go to for their kids. I see how much employers and workers care about their communities. We are a smart, innovative, resilient people.

The next decade can be our decade. That requires good and steady government and careful spending choices. This year’s Budget will not be a lolly scramble. What this Budget will be is a responsible Budget that secures New Zealand’s future.