Willis’ budget cuts, announced in April 2025, slashed the operating allowance from $2.4 billion to $1.3 billion, one of the tightest budgets in a decade. She claims this will deliver a surplus by 2029, despite Treasury warning that global trade turmoil, particularly Trump’s tariffs, will slow growth. Treasury’s Half Year Economic and Fiscal Update (HYEFU) in December 2024 already painted a grim picture: a deeper recession than expected, with nominal GDP $19.8 billion lower over the forecast period, leading to $13 billion less in tax revenue. Net core Crown debt is now projected to hit $234 billion by 2029, a whopping 46% of GDP. Willis’ response? Hack away at public spending while borrowing even more. So much for fiscal restraint.
Economic analyses shows that austerity is a wrecking ball for growth. The Kaka points out that Willis’ cuts risk an “austerity doom loop,” where reduced government spending chokes demand, stalls private sector recovery, and deepens the downturn. IMF research supports this: a 1% GDP increase in public investment boosts output by 0.2% in the same year and 1.2% over four years. Yet Willis prioritises cuts over investments in productivity, education, or infrastructure...sectors that could lift New Zealand out of its economic slump.
Contrast this with past governments. During the Global Financial Crisis, National under John Key invested in infrastructure to cushion the blow. The COVID-19 response saw Labour borrow heavily to fund wage subsidies, keeping businesses afloat. Willis, however, seems to think austerity is a one-size-fits-all fix, ignoring how it amplifies unemployment (forecast to peak at 5.4% in 2025) and stifles recovery. Her cuts target “non-essential” spending, but as Bernard Hickey at the Kaka warns, defunding public services to failure often leads to privatisation, shifting even more costs onto ordinary Kiwis.
Then there’s the Kiwirail ferry debacle, an example of the coalition government overreacting without a proper replacement plan. The Interislander ferry project, meant to modernise transport infrastructure, spiraled into an additional $1.5 billion mess under Willis’ watch. The government scrapped plans for new ferries, opting for a cheaper, smaller version, leaving taxpayers to foot the bill for delays and cancellations. Mountain Tūī called it a “fiscal own-goal,” highlighting how Willis’ penny-pinching undermined a critical economic lifeline. If this is her idea of competence, we’re in for a very bumpy ride.
Willis’ austerity myth assumes cutting budgets magically balances the books, but it’s a gamble that’s backfiring. The Conversation correctly argues that New Zealand needs productivity-focused investments, not a “rush towards austerity” that risks our long-term prosperity. It's questionable whether the $6.6 billion business tax incentive will spark any growth, but it’s dwarfed by $21.4 billion in cuts, including $12.8 billion from pay equity reforms, a move that most economists have slammed as short-sighted. Meanwhile, her refusal to transparently detail these cuts and the Kiwisaver mistake fuels even more distrust in her ability to manage the books.
Kiwis deserve better than Willis’ austerity experiment. The economy isn’t a spreadsheet to be trimmed into submission; it’s people, businesses, and communities needing support to thrive. Readers, it’s time to demand transparency on where these cuts hit hardest and why. If Willis wants to play fiscal hero, she needs to show her work...not just wave a red pen and hope for applause. Write to your MP, question their priorities, and let’s hold this government accountable before austerity and it's economic aftermath puts us in a debt cycle that we may never escape from.
