Photo: RNZ
Think Budget Day is just for the economists, the politicians and the journalists? Budget Day is also for you.
Every time you drive on a state highway, send your child off to school for the day, or head to an emergency department, those services are being funded from the government's Budget - which in turn is being funded by taxes paid by millions of New Zealanders.
How much tax the government collects, how much it owes in debt, and how well it does at getting bang for buck all affect the range and quality of those and other government-funded services.
The health of the government books, and the decisions the government has announced today - which include big boosts for some areas and big cuts for others - will touch the lives of every Kiwi.
When it was elected, the government had plans to get the books back into surplus mid-way through 2027.
At its first Budget last year, that deadline had pushed out to 2028.
Using the government's preferred measure, which excludes ACC's revenue and expenses, the country will now finally return to surplus - although a very small one - in 2029.
But the numbers show that by traditional accounting measures, used for every modern Budget until last year, the country will still be in deficit to the tune of $3 billion in 2029.
And the deficits we face are now even deeper.
That means several more years of tight times ahead for everyone as the government pinches its pennies.
Major global conflicts and a complete shake-up of how the USA approaches trade and diplomacy have caused markets and economic outlooks to falter this year.
New Zealand has escaped most of the direct consequences, and Treasury says its latest forecasts show that even if the global economic outlook gets worse, New Zealand's economy will grow by nearly 3 percent next year.
However, there'll be a sharp dip this year before that happens - Budget forecasts show that gross domestic product (GDP) will actually contract, by 0.8 percent.
The tightest Budget in a decade
Last year's Budget was already tight - the government committed just $2.4b in new spending.
It's gone even further this year, cutting new spending nearly in half to $1.3b - the lowest operating allowance in a decade.
At a pre-Budget event in late April, finance minister Nicola Willis said there was "a pressing need" for more investment in health, education and defence, but "very little money to pay for those investments".
The government could choose to borrow to fund those and other investments - but it has been very critical of the previous government's liberal borrowing, much of it tied to funding the Covid-19 response.
There are arguments for and against big borrowing - but it's true that the more money the government has to spend servicing debt, the less it has to spend on other things right now.
Treasury's advice was that it was "unwise" to let debt get above 50 percent of GDP, "and I agree", Willis told journalists at the Budget lock-up on Thursday.
"Higher debt also constrains the givernment's ability to respond to a shock, like an earthquake or another severe weather event," Willis told journalists.
Even so, the debt track still remains dangerously close to that 50 percent line - peaking at 46 percent of GDP in 2028, up from the previous forecast of 44 percent this year.
Where's the extra spending coming from?
While there's only $1.3b of truly new money in the Budget, the government has included $5b oew funding each year for some services in its Budget.
Most of that money has gone to health, education, and defence.
How has it done this?
Willis told journalists that government departments had found billions of dollars to return, from a growth in spending under the "loose and broken regime" of the previous government.
The remainder has come from an estimated $11b in savings from the last-minute changes made to pay equity legislation.
It also found some money by means-testing the government's contribution to KiwiSaver, and halving it for everyone else.
Overall, the government's spending forecast remains very similar to last year's Budget.
Even with the meagre amount of actual new spending, the government is still spending more than it earns in tax and other revenue.
Part of this is down to its decision to forego some tax by giving most earners a tax cut in last year's Budget - at a cost of $3.7b a year.
But when the government opened its books for the half-year update at the end of 2024, the expected tax take for the next few years was still worse than forecast at last year's Budget.
Since then, the expected tax take has dropped still further, by another billion dollars.
So, like last year, the emphasis is more on shuffling things around - pinching pennies in some areas to put into others.
The government will claw back $1.3b in social security and welfare over the next five years - some of it from means-testing 18- and 19-year-olds who live with their parents - and $1.6b from core government services, such as public servants.
That money will instead go towards things like a $600m boost to Pharmac, $800m towards the existing compensation scheme for survivors of abuse in care, and $577m to more than double the film industry subsidy.
Where is all the money going?
You can use this visualisation to explore how the government plans to spend every dollar of its Budget in the next year.
High inflation is well and truly over (for now)
Inflation has fallen steeply from the 30-year heights it reached in 2022 and 2023, bringing the Official Cash Rate (and mortgage rates) down with it.
The cost of living is still biting hard for many people - butter prices have stolen recent headlines - but both international and domestic inflation is right down.
The consumer price index is now well within the Reserve Bank's target band of 1 to 3 percent, and forecast to stay there for the foreseeable future.
While that won't mean a reversal in cost increases over the last few years, it may mean any increases in the price people pay at the supermarket, in rent, and other household expenses may be a little more manageable.
That might not be the case for those without a job, however.
Unemployment will peak this year at 5.4 percent and will stay higher, for longer than forecast in last year's Budget.
But while unemployment will fall from next year, it masks something else that's happening in the job market: underemployment - which counts people who are employed less than full-time but want to increase their hours, as well as those who are unemployed and looking for work.
This rate has been steadily increasing since 2023 to about 12 percent - all people who will be feeling the pinch of not earning as much as they can or want to.
