This year’s budget, from the 2026 BEFU (Budget Economic and Fiscal Update) shows total government expenditure actually higher than in the 2025 budget. The out years do show government spending as a percentage of GDP falling from 42.2% this year to 38.6% in 2029. This compares to a pre-covid level of around 35.5%. As you an see from the graph below, this reduction is driven by the forecast rise in GDP rather than a reduction in spending. The government appears to believe that waiting for the Growth Fairy is a satisfactory economic policy.
The graph below shows actual/budget expenditure (Blue) compared to what it would have been with a 3.5%pa growth rate from the pre-Covid trend (Orange). The last Labour budget is shown in Grey. A 3.5% growth on the pre-Covid trend is extremely generous – no NZ government could reasonably expect the economy to grow at 3.5% indefinitely!
The problem here is that the savings are all in the out-years, and there may reasonably be some scepticism as to whether they will actually happen. Meanwhile this year, being an election year has plenty of extra spending that National can highlight during the campaign. As it stands, this National government is doing a decent impersonation of previous National governments who talked a big game in opposition and then became “Continuity Labour” in office. New Zealanders deserve so much better.