Overview
- The government presented the budget on Thursday narrowing the 2025/26 operating deficit to NZ$15.06 billion and projecting a return to surplus in 2029/30.
- Finance Minister Nicola Willis cut the operating allowance by NZ$300 million to NZ$2.1 billion and ordered public departments to reduce headcount and seek efficiency savings.
- The plan shifts spending toward long-term projects with a 63% rise in capital investment focused on hospitals, schools and defence while trimming social housing costs and ending the free final year of university.
- The Reserve Bank held the cash rate at 2.25% and signalled further hikes to counter fuel-driven inflation, while Fitch and Moody's have set New Zealand's sovereign outlook to negative, increasing pressure for fiscal credibility.
- Treasury downgraded growth and lifted the inflation peak to around 4.0%, with net debt now expected to peak near 46.1% of GDP and a new prudential levy on financial firms to raise modest revenue over four years.