Photo: RNZ / Samuel Rillstone
Even if the government throws more than a billion extra dollars into health and education, those sectors will be standing still - the money eaten up by inflation
Budget 2025 will deliver some big numbers, but closer examination suggests they might not be all they seem.
Next Thursday (22 May) Nicola Willis will deliver her second annual Budget, setting out how and where money will be spent over the next financial year.
There are some giant figures; $190 million for social investment, $100m for kids needing extra maths help and a whopping $12 billion over the next four years for defence.
But according to Brian Roper, an associate professor in the political programme at Otago University, a key phrase to keep in mind when looking at these figures is "in relation to inflation".
"You always have to take account of inflation, because that's really what the government is spending in real terms as opposed to nominal terms," he says.
For example, you might have previously got by with $100 per week for groceries. But this year you find things are more expensive and you have to add $20 to your budget to keep buying the same list of items. That's an example of change in real spending.
But let's say you only upped your budget by $10. While it's technically an increase it's not enough to cover the more expensive grocery bill so it's really a cut. That's a nominal spending change.
Treasury has forecast 1.8 percent CPI inflation for this year and 2.1 percent inflation for 2026. Roper has crunched the numbers and says health needs an additional $588m and education needs an extra $435m, just to continue operating the way it is now.
But he's not confident that's what this Budget will deliver.
"Looking at the pre-Budget speeches of Nicola Willis and Christopher Luxon they are both crystal clear that they want to see a decline in government spending as a percentage of GDP," he says.
Roper says that means we can expect nominal increases to social sector budgets that won't be enough to match the rate of inflation.
Whether or not that's a good thing depends on which side of the political divide you're on.
"If you're Business New Zealand, or Federated Farmers or one of New Zealand's business lobby groups, then really what you want to see this government doing is cutting taxes on the one side and cutting social spending on the other. Pretty much what this government has been doing," he says.
But for low- to middle-income earners, or those who are reliant on public services such as health, housing, education and retirement income, Roper says this budget is unlikely to bring many benefits.
The Detail also speaks to Luke Malpass, political editor for The Post and The Press, who says both sides of the political sector will try to swing the budget narrative in their favour in the lead up to Budget Day. That includes labelling them.
"So for example the 2023 Budget ... the government said, 'this will be a bread-and-butter Budget'.
"That was obviously when inflation was high, cost of living was very high on people's priority list and the idea of a bread-and-butter Budget is 'we're paring it back to basics'," he explains.
Malpass says an example of where the opposition won control of the narrative was the 2008 "block of cheese Budget", a label coined by Labour after working out that John Key's tax cut package actually only gave the average wage earner an extra $16 per week, the equivalent to a block of cheese at the time.
Malpass says this government is following a similar track to previous governments when it comes to what they deliver in each budget over their term.
"When you first get into power you want to spend money on your priorities ... and the second budget is usually a response to basically to whatever the economic conditions of the day are.
"It's worth noting that Grant Robertson, when he was still Finance Minister, had very much pointed out that this was what was coming down the line regardless of who won the 2023 election. So, politically the question is, how the government responds to that and how fair and reasonable New Zealanders think that response is."
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