The 2025 Budget is done and dusted. While the Government claims growth is their priority, there was little within the budget to suggest it will deliver what they hope.
Finance Minister Nicola Willis would have us believe it is a prudent budget that gets us back on track to a surplus in 2029. But is that surplus real – or is National doing exactly what Labour did when they were in Government: changing the way budget measures are reported to make the figures look better than they really are?
Let’s remind ourselves of the trick that Labour played.
In 2022, in response to accusations he was “addicted to spending”, Finance Minister Grant Robertson changed Budget measures in order to claim government spending and debt weren’t as bad as they actually were.
To understand his strategy, we need to remember that the traditional measure of debt used by successive governments is “Net Core Crown Debt” – the sum of all the debt owed by Government Ministries and Departments along with the Reserve Bank, minus their financial assets.
This calculation does not include the semi-autonomous Crown Entities nor the asset-rich Super Fund.
The new measure the Minister introduced was “Net Debt”, which added both Crown Entities and the Super Fund into the equation.
The effect was to ’magically’ shrink debt from the Net Core Crown Debt value of $133.6 billion (36.9 percent of GDP) to the new Net Debt value of $61.2 billion (16.9 percent of GDP).
By changing the measure, $72.4 billion of Labour Government debt was erased in an instant!
Prime Minister Jacinda Ardern reinforced the ruse in her Budget speech to Parliament by boasting: “Debt sits at 16.9 percent”!
Questions are now being asked whether Finance Minister Nicola Willis is using the same tactic in Budget 2025, by redefining the Operating Balance Before Gains and Losses calculation. Termed OBEGAL, this is a measure which reports on the difference between total Crown revenue and expenditure – in other words, it evaluates whether the government is living within its means and will produce a surplus, or whether it’s not and will deliver a deficit.
The Minister has justified removing ACC – a semi-autonomous Crown Entity that is running a deficit – from the equation on the basis that eliminating it provides a better indication of government performance.
With ACC removed, the new OBEGAL measure called OBEGALx shows that in 2029, a surplus of $214 million is forecast. If ACC remains in the measure, as is the tradition, the surplus turns into a deficit of $3.01 billion.
Chief Economist at The Initiative, Dr Eric Crampton is highly critical of the move:
“This budget projected no return to balanced books. Headline figures projecting a return to surplus ignore ongoing accumulating deficits at the ACC. ACC is expected to spend $2.9 billion more than it earns in 2026 and 2027, with ACC’s deficit reducing to $2.3 billion by 2029. When those deficits are included, the government is in deficit through 2029.”
He explains, “The Public Finance Act requires fiscal responsibility. The legislation says that governments should aim at balanced budgets. It allows for deficits when circumstances warrant. But it requires the government to explain why it is in deficit and its plan for a return to surplus.”
In other words, the Public Finance Act is meant to ensure that governments do not spend more than they receive during normal times. By refusing to rein in spending, Dr Crampton believes the Coalition could be in breach of the Public Finance Act.
In essence, by continuing to spend more than they have, not only is the Coalition failing to demonstrate fiscal prudence, but through their actions they are revealing that they lack a true commitment to growth.
Furthermore, redefining a measure to claim a surplus, most certainly brings into question the Finance Minister’s assertion that she delivered a “no BS” budget.
Looking at the big picture, the Coalition’s strategy of reducing government spending to 30 percent of GDP by growing the overall economy rather than cutting expenditure is unlikely to achieve the economic potential our country is capable of, for two reasons.
Firstly, there’s ample evidence from countries that have transformed their economies that the optimum size of government is around 25 percent of GDP. That should be the Finance Minister’s target if she is serious about growth.
And secondly, with former Treasury Secretary John Whitehead claiming that around 60 percent of government budgets are allocated to programmes that are either outdated or no longer aligned to government policy, a comprehensive “line-by-line” review of all State funded programmes should have been undertaken, with a view to culling those that do not deliver Coalition policy.
If such a review had been carried out, Coalition Ministers would no doubt have been shocked to discover just how many of Labour’s extremist programmes – such as the toxic He Puapua agenda for tribal rule – are still in operation.
De-funding such policies would not only have helped the Coalition to deliver on their election pledge to “Stop He Puapua”, but it would also have saved millions of dollars to reduce spending and pay down debt.
Prime amongst the He Puapua policies that are still operating are “Rautaki Maori” programmes designed to deliver preferential hiring practices for Maori.
These came to light through a recent Herald article on the employment dispute between TVNZ and their former Breakfast host Kamahl Santamaria, which quoted staff emails opposing his appointment: “Where was the consultation … about how we can align this appointment with the Rautaki Maori [strategy] and see if there was a super-Maori out there who we could have recruited?”
It turns out that these “Rautaki Maori” programmes are not only being used by TVNZ to embed a Maori World View – Te Ao Maori – within the organisation and to justify the appointment of radicalised Maori into key positions, but they can also be found throughout the whole State Sector.
Parliamentary Services is one such agency that has embraced Rautaki Maori and the fact that they have just been awarded almost four million dollars in the Budget for ‘Personnel Costs’ – in order to “maintain the capability and capacity of the Parliamentary Service workforce and to enable the recruitment and retention of specialist skills and experience” – raises serious concerns over whether this will result in the hiring of yet more He Puapua activists.
Senior King’s Counsel Gary Judd has examined Parliamentary Services’ Rautaki Maori strategy and is shocked: “Embedded within the heart of our democracy is a force which, ultimately, is destructive of it. Nobody voted for this. It is subversive of the whole democratic process, because Te Ao Maori is not democratic. It is tribal.”
He explains that the Rautaki Maori strategy “is signed by the Chief Executive, Parliamentary Services, and the Clerk of the House of Representatives. It contains commitments such that it would be naïve to think any Minister or MP, or the Speaker can receive advice unaffected by the ideology contained within it.
“Guiding principles include: ‘We make a commitment to ensure Te Ao Maori is part of who we are and what we do… acknowledging its importance to our people, mahi, Parliament, and Aotearoa.’
“You will see that part of the mission of Parliamentary Services and the Clerk of the House is to engage with other public sector agencies who will look to them as a partner and a leader in Te Ao Maori. This mission started in 2022. Undoubtedly it will now be well advanced and will be part of the explanation for the actions of outfits like the Real Estate Agents Authority, other quangos and government departments.”
The fact that such programmes are still operational eighteen months after the new Government was elected on a promise to ‘Stop He Puapua’ and remove race-based policies, is an indictment of the Coalition.
New Zealanders voted against He Puapua when they threw Labour out of office.
It’s time the Prime Minister stepped up and explained to New Zealanders what he intends to do to put this right.
Treasury documents show the funding used in Budget 2025 not only came from $1.3 billion a year in new spending, but also from $5.3 billion of re-purposed funding.
This includes an $18 million reduction in Radio New Zealand’s four-year appropriation of almost $270 million, which, instead of being re-allocated into areas of urgent need such as health, is being used to fund regional journalism.
With RNZ’s audience dropping to the lowest level ever recorded, the Minister of Broadcasting Paul Goldsmith issued a warning: “Government-funded media must deliver the same efficiency and value for money as the rest of the public sector. I expect RNZ to improve audience reach, trust and transparency.”
If he was serious about this, he would link RNZ funding to audience ratings – as is the reality for commercial operators. Only then would RNZ get the message that if they continue to deliver radical advocacy dressed up as news, they will continue to lose relevance – and funding.
Budget 2025 also signalled the introduction of ‘means testing’ as a mechanism to reduce taxpayer support. Whether this is the beginning of a broader strategy by Coalition Parties remains to be seen.
The means testing of KiwiSaver was part of a wider suite of changes that will see contributions by employers and employees increased from 3 to 4 percent over the next three years – and government subsidies halved to $260 per year from July with individuals on incomes over $180,000 no longer eligible.
Best Start, which is a weekly tax credit for families with newborns for their first three years, will now be means tested from the first year instead of the second, with payments reduced for families with annual incomes above $79,000 and stopped at incomes over $97,000.
And from July 2027, since parents rather than the state will be responsible for unemployed 18- and 19-year-olds who cannot support themselves, a parental means test will be introduced for young people applying for Jobseeker Support or the Emergency Benefit.
While the policy aims to direct young people into education, training, or employment, so they avoid the trap of welfare, since it doesn’t apply to those who are married or in de-facto relationships, there are concerns that teenage pregnancy may inadvertently be encourage as young people seek to avoid reliance on parents.
This week’s NZCPR Guest Commentator Frank Newman, an investment analyst and former local body councillor, has examined the Budget from a business perspective and raises concerns about the flagship ‘Investment Boost’ policy:
“Much was made of the ‘Investment Boost’ policy, that enables a business to make a one-off 20% depreciation deduction in the year of purchase of a new ‘productive’ asset, in addition to the rate that would normally apply.
“In effect, the policy shifts the depreciation claim forward to the first year and is likely to create a situation where the book value is less than its market value at the time of sale. That means the tax ‘benefit’ on the one-off depreciation claim is likely to be clawed back by the government when the asset is sold.
“Ironically, the policy offers the least benefit to those businesses that use assets with a short lifespan (like plant and equipment) and benefits those who hold assets for a very long time.
“After understanding how the mechanics of depreciation work, it is easy to see why the government took this approach, rather than the more widely favoured approach, which was to provide permanent benefits to businesses by reducing the corporate tax rate.”
In summary, Frank believes “The budget lacked substance and was devoid of the economic reform that this country needs to reverse its long-term economic decline.”
He’s right. Budget 2025 represents a missed opportunity, not only to reverse wasteful spending – especially on programmes that are a legacy of the Ardern Labour Government – but also to bring about the fundamental transformation needed to guarantee New Zealand a prosperous future.
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THIS WEEK’S POLL ASKS:
*Should all Rautaki Maori policies be removed from the State sector?
*Poll comments are posted below.
*All NZCPR poll results can be seen in the Archive.
THIS WEEK’S POLL COMMENTS
| Absolutely – all He Puapua policies should have been removed within 6 months of the Coalition taking office! But as they say, better late than never! | Dave |
| It is an outrage that this subversion is still going on. It should be axed ASAP. | Barbara |
| There are so many racist programmes being operated by public servants. They need to be stopped and those responsible held to account. | PaulP |
| Aren’t Rautaki Maori programmes discriminatory and against the law? How can they be justified? How can the Government be letting this happen? Where is the accountability? | Hugh |
| We voted to get rid of the Marxist He Puapua agenda – why has it not been eliminated already? The Prime Minister needs to explain what he is going to do to sort this out. | Andrew |