Treasury’s Austerity Advice Should Be Ignored | The Jackal


18 Jun 2025

Treasury’s Austerity Advice Should Be Ignored

The National-led government, under Christopher Luxon’s watch, is steering New Zealand toward a grim horizon, guided by Treasury’s cold, austerity-obsessed hand. It’s a betrayal of ordinary Kiwis, workers, families, small businesses, who are being financially crushed to pad the pockets of the ultra-wealthy.

The 2025 NBR Rich List exposes the stark divide: 119 individuals, including 18 billionaires, hoard $102.1 billion, over 40% of our GDP, while Treasury’s advice slashes vital infrastructure, health, education, climate initiatives, and public services.

This isn’t fiscal discipline; it’s a rigged game funnelling taxpayer money to the elite, leaving Aotearoa’s future in tatters. Worse, these brutal cuts, totalling roughly $6.1 billion, coexist with rising government debt, raising the question: how can Luxon’s government gut services while borrowing even more?


On Monday, the NZ Herald reported:

 
Simeon Brown challenges Treasury over plans to cut health spending

Health Minister Simeon Brown has attacked Treasury officials over their analysis of his Health Delivery Plan, which said Health New Zealand Te Whatu Ora will need to double its spending-cut target in the coming year and limit health workforce pay increases to an “unprecedented” degree.


Health cuts, another Treasury-driven disaster, spell misery for the vulnerable. Treasury’s insistence that Health NZ scrape by within its 2025/26 baselines, with Budget 2025’s $1.3 billion operating allowance the leanest in a decade, will mean longer waitlists, burnt-out staff, and worse outcomes, hitting Māori, Pacific, and rural communities hardest.

The NZ Herald reports $5.3 billion in total savings, including $2.7 billion from pay equity cuts, reflecting Treasury’s fixation on a 2028/29 surplus. These cuts aren’t savings—they’re a death sentence for equity, forcing the poorest to suffer without access to private care while future costs pile up from untreated illnesses and emergency care. It’s cruel and economically shortsighted, betraying those who need the system most.

The cancellation of the iRex project, meant to replace ageing Interislander ferries with modern, rail-enabled vessels, a short-sighted decision driven by Treasury’s idiotic advice. Citing cost blowouts to $3 billion, Treasury pushed for its scrapping, leaving KiwiRail with a $500 million write-off and 60 jobs lost. Smaller likely non-rail enabled ferries will clog supply chains, spike freight costs, and hammer exporters, farmers, and consumers with higher prices. Treasury’s own documents admit this avoids immediate costs but risks billions in future fixes for the Cook Strait link, strangling regions like the South Island. It’s a gut-punch to the working Kiwis who keep our economy humming, sacrificing long-term stability for budget optics.

 

In May, RNZ reported:

Kiwirail reveals $500 million spent on axed Cook Strait ferry project

Labour Party transport spokesperson Tangi Utikere told RNZ additional costs associated with the cancellation of iReX would cost $1.16b when including the cancellation of the deal and ongoing maintenance of the current ferries.


Education has also been bled dry under the secretive Treasury’s fiscal knife. Budget 2025 saw $614 million reprioritised from “underperforming” initiatives, with total education spending set to drop from $19.85 billion in 2025/26 to $19 billion by 2026/27. The Kāhui Ako scheme, costing $118 million annually, faces disestablishment, a move Treasury championed to trim fat. These cuts, totalling $732 million, threaten teacher support, student outcomes, and equity in schools, particularly for disadvantaged communities. Starving education to meet fiscal targets undermines the next generation’s potential, leaving schools scrambling and kids short-changed.

Climate and conservation initiatives haven’t escaped the chopping block. Treasury’s push for baseline savings led to $3 million annually cut from the Department of Conservation, gutting funds like the Mātauranga Kura Taiao and Nature Heritage Fund. Budget 2024’s $35.5 million cut over four years from climate schemes, like the Climate Change Development Fund, persists into 2025, equating to roughly $8.9 million annually. Total climate and conservation cuts for 2025 hit $11.9 million, weakening our response to the climate crisis and biodiversity loss. Treasury’s penny-pinching here risks our environment and global commitments, leaving future generations to clean up the mess.

Public sector budgets have also been gutted, with Treasury’s 2024 advice to slash $1.5 billion carrying into Budget 2025’s broader $5.3 billion savings push. Beyond health’s $2.7 billion, I estimate $2 billion in additional public sector cuts, covering areas like social services and infrastructure, are tied to Treasury’s fiscal restraint. The Auckland Light Rail project, axed with $131 million cut (including $98 million in capital funding), exemplifies this approach. These cuts, totalling roughly $6.1 billion across sectors, reflect Treasury’s obsession with short-term savings, even as they erode the public services Kiwis rely on.

However, while Treasury’s advice drives these $6.1 billion in cuts, government debt is climbing. Treasury’s May 2025 Economic and Fiscal Update projects net core Crown debt at $180.8 billion (40.7% of GDP) for 2024/25, rising to $196.9 billion by 2028/29. Operating balance deficits, excluding gains and losses (OBEGAL), hit $8.7 billion in 2024/25, with surpluses not expected until 2028/29. 

How can Luxon’s government justify slashing services while borrowing more? The answer lies in National’s $3.7 billion annual tax cuts that mainly benefited the wealthy and $2.9 billion landlord interest deductibility restoration, costing $13.3 billion over the forecast period. These handouts, backed by Treasury’s models, drain revenue, forcing borrowing to plug the gap. The Council of Trade Unions notes “mega-landlords” could pocket $1.3 million each, while workers face suppressed wages and higher costs. It’s a grotesque transfer of wealth to the elite, funded by debt that future Kiwis will repay.

The real scandal is the wealth hoarding. The top 10% hold over 51% of the nation’s wealth. Graeme Hart ($12.1 billion) and the Mowbray family ($20 billion) exemplify a system rigged for the few. This inequality tanks consumer spending, starves businesses, and fuels resentment, risking social unrest. Treasury’s failure to address the long-term costs, delayed infrastructure, sicker populations, underfunded schools, and a degraded environment, is negligence. Their forecasts admit tax cuts restrain revenue, delaying the surplus and strangling services. A fairer Aotearoa demands investment in public goods, not even more handouts to the Rich. Luxon must reject this elitist scam. The government must ignore Treasury's advice for even more austerity.

Published by the Jackal