New Zealand’s economy is languishing, and the National-led coalition, with Finance Minister Nicola Willis at the helm, has been quick to point fingers at Labour’s Covid-19 spending.
The problem for the coalition of chaos is their narrative is a masterclass in gaslighting, deflecting blame from their own disastrous economic policies while misrepresenting the past. Let’s unpack their mess, because the truth is far uglier than the coalition’s polished spin.
Earlier this month, Stuff reported:
Finance Minister Nicola Willis was quick to draw attention to the Tresuary’s conclusions. She has long blamed current economic challenges on the previous Labour Government.
She said this report proved that, as she has said previously, the Labour Government was fuelling inflation.
“Unfortunately, the Labour government ignored [officials’] advice. The consequence was undisciplined spending that pushed up inflation, eroded New Zealand’s previously low public debt position, and fuelled a cost-of-living crisis,” she said.
“The lesson from Labour’s mishandling of the Covid response is that while there are times when governments have to increase spending in response to major events, the fiscal guardrails should be restored as soon as possible,” she added.
During the Covid-19 pandemic, Labour, under Jacinda Ardern and Chris Hipkins, rolled out a lifeline to keep businesses afloat and workers employed. The Wage Subsidy Scheme alone, costing $18.3 billion, ensured millions of Kiwis kept their jobs, while the $70.4 billion Covid-19 Response and Recovery Fund (CRRF) propped up health, aviation, and small businesses.
This was no reckless spending spree; it was a calculated response to a global crisis, with Treasury initially urging broad-based support like wage subsidies to stabilise the economy. The result? New Zealand’s unemployment rate dropped to a 40-year low of 3.2% by December 2021, and GDP rebounded faster than in any other OECD country. Labour’s spending wasn’t perfect, but it kept the nation afloat when the world was drowning.
In 2021, Stuff reported:
NZ dollar tipped to head higher as economy rebounds from Covid
The New Zealand dollar is heading higher as the economy recovers from the Covid-19 pandemic, which will make exports more expensive and imports cheaper.
Fitch Solutions on Wednesday lifted its forecast for the currency, and now expects it to average US74.34 cents over the remainder of this year, having averaged US71.84c over the first five months. The kiwi was at US72.52c around midday on Wednesday.
Economic growth would probably pick up by 3.6 per cent this year after a 1.2 per cent contraction last year, which would encourage investment flows into the country and tighter monetary policy, pushing the currency higher, Fitch said.
“We attribute the New Zealand dollar’s robust uptrend in recent months to the country’s strong economic recovery from the Covid-19 pandemic,” Fitch said.
Enter the National Party, clutching a Treasury report that claims Labour blew $66 billion. Sounds damning, right? Except it’s a sleight of hand. That figure includes general government expenditure, not just Covid-specific measures, inflating the narrative of Labour’s supposed recklessness while Willis has been borrowing even more than former Minister of Finance, Grant Robertson.
National’s comparison of New Zealand’s Covid spending to other countries while Labour was in power is equally dishonest, as those nations often exclude general expenditure from their Covid budgets. It’s a classic case of cherry-picking data to paint Labour as profligate while ignoring the global context. This isn’t analysis; it’s propaganda from a dishonest government that can only blame others for their own economic failures.
Meanwhile, the coalition of chaos has embarked on a slash-and-burn mission. Since taking office in 2023, they’ve axed 10,000 public sector jobs, including 2,000 in health, and imposed 7.5% cuts across ministries. Wellington, the public service hub, is reeling, with house prices down 6.8% and 19,500 jobs lost since January 2025. The downturn in the capital city is palpable.
In May, Reuters reported:
New Zealand's budget cuts punish public sector, business and workers
"We were told survive until 2025 and it will get better. Well, we're now in May 2025 and it doesn't feel better," said Thomson, who is currently doing paid freelance work.
New Zealand's conservative coalition government releases its annual budget on Thursday and is expected to continue to push fiscal discipline with many ministries not expected to see budget increases.
Spending cuts since December 2023 have been felt across the wider economy but perhaps most acutely in Wellington, a city of nearly 210,000 where the government has historically been a major employer.
House prices in Wellington have plunged 6.8% over the past year, far exceeding the national decline of 1.1%. Population growth stagnated in 2024, contrasting with a 1.7% increase nationwide. Consumer and economic sentiment in the city remains lower than in many other regions, with businesses and residents expressing concern over the city's prospects.
In Auckland, businesses are folding at twice the rate of last year, surpassing even the 2008 GFC failure rate. The coalition’s austerity obsession is sucking confidence out of the economy, leaving workers and businesses stranded and tens of thousands of young New Zealanders heading overseas to find a brighter future.
Worse, National’s policies are hammering the most vulnerable. Workplace Relations Minister Brooke van Velden’s 1.5% minimum wage increase to $23.50, well below the 2.7% inflation rate, is in real-terms a pay cut. Welfare cuts and increases in the cost of living further erodes people's purchasing power, hitting the elderly and disabled hardest. Even for people with a little bit saved, nobody is spending because nobody feels confident in the current government's economic agenda.
With household costs up 5.4% in the year to June 2024, driven by a 9.0% rise in rent, an 8.7% increase in mortgage interest payments, and higher food and energy prices, Kiwis are struggling to keep up. These pressures, that even the RBNZ's tweaks are not addressing, compounded by a projected 5% rent increase and persistent inflation in 2025, are bleeding many households dry. This isn’t fiscal discipline; its economic sabotage, draining demand and ensuring an increase in business closures due to reduced cash flow.
Earlier this month, RNZ reported:
A boom in businesses going bust
New Zealand is riding its highest wave of company liquidations in more than a decade, with thousands of businesses folding and countless livelihoods caught in the crossfire.
Many more are holding on, but just.
In the first half of this year alone, 1270 businesses have shut their doors - a 12 percent increase on this time year.
It's now anticipated that the total number of liquidations for the year will surpass 2024's 10-year high, when 2500 companies folded. That was an increase of nearly 700 compared to 2023.
Wellington economy shrinks as 177 businesses shut in a year – does Nicola Willis accept some blame?, via @nzherald https://t.co/TyMqKqrn3Y
— Jan Renwick (@nettieg3) August 26, 2025
Nicola Willis, the architect of this misery, has the gall to blame Labour while implementing austerity on the poor and pushing policies that fuel inflation. Treasury forecast inflation would be as low as 1.8% in 2025, but National’s policies have kept it at 2.7% and climbing.
National, and their coalition bedfellows, are becoming increasingly desperate, and are throwing everything they can to prop up their golden goose, the floundering housing market. Foreign buyers might make the numbers look good on paper for a while, but they'll do nothing to ensure New Zealanders quality of life improves through increased home ownership rates.
The coalitions much-touted Fast-Track Approvals Bill, now being spruiked as an economic saviour for families unable to afford basic food items, offers zero cost-of-living relief for everyday Kiwis. It’s a sop to developers, corporates and the existing supermarket duopoly, not families facing skyrocketing bills at the checkout.
Willis’ rhetoric about cleaning up Labour’s mess is pure gaslighting, obscuring the fact that her austerity is deepening the economic downturn.
The coalition of chaos is driving New Zealand into an economic abyss, while they attempt to cloak their failures in Labour-bashing and dodgy numbers. The Covid hangover is real, but it’s Willis’ heartless cuts and misguided priorities that are keeping the economy on its knees.
