Budget Day 2025: What You Need To Know

Tuesday, 20 May 2025, 2:32 pm
Article: RNZ

Nik Dirga, Digital Explainer Editor

Explainer - Spoiler warning: If you're not a numbers person, this might not be your week.

Thursday is Budget Day, the biggest day of the year for the government, economists and journalists as Finance Minister Nicola Willis announces how much the National-led coalition will spend, where it will go and how.

What is the Budget?

Simply put, it's when the government lays out how it plans to spend money in the coming financial year, and where that money will come from.

Every May, typically on a Thursday, the minister of finance delivers the Budget in a speech in the House. Parliament will then go on to debate the details.

The government is required to present its Budget to Parliament by 31 July each year.

Budget Day isn't a done-in-one - the process behind it all carries on throughout the year, in a never-ending cycle from one Budget to the next. Select committees will scrutinise the spending plans and eventually pass the Budget presented on Budget Day.

In the 2025 Budget Policy Statement released in December that kicked off this year's cycle, Willis said the government's goals were a stronger, more productive economy, more efficient and effective public services and to "get the government's books back in order and restore discipline to public spending".

Read more:

• Budget 2025: How does government spending actually work?
• Budget 2025: Everything announced so far
• Cut to operating allowance coming in Budget, Willis says
• Big numbers for Budget 2025

So what actually happens on Budget Day?

There are a lot of elaborate rituals to Budget Day, which is equal parts practical and political spectacle.

Finance ministers often have their own quirks that turn into traditions - Sir Bill English was known to enjoy a pie at the start of Budget Day during the John Key years and Labour's Grant Robertson tucked into a cheese roll or two. Last year, Nicola Willis' children made cookies for their mum and the prime minister. This year's treats menu remains under lock and key.

On Budget Day

10.30am - Media and other interested parties will go into lockup at the Beehive - no phones, no internet - and get a first look at the Budget. A pile of documents will be released to them under a strict embargo. The finance minister will also give a presentation to journalists during lockup and journalists will dash to complete first takes on the highlights. If you break that embargo, you're in big trouble, as the Wall Street Journal found out in 2022.

2pm - The Budget embargo lifts, and here on RNZ and everywhere else you'll suddenly see a flood of Budget information. We'll be here to live blog coverage throughout the day.

This video produced by Parliament goes through what happens on Budget Day:

In Parliament, after Willis gives a presentation, the prime minister and other political parties will all weigh in as debate begins on the Budget.

Expect kudos and criticism in equal measures, followed by a lengthy period of hot takes and analysis that will continue for days to come.

Why is it such a big deal?

Roads? Hospitals? Schools? Resources we all use every day fall under the Budget.

Willis has called this year 'The Growth Budget', in line with the government's long-term goals to return to a surplus by 2029 at the latest.

We already know quite a lot about what the Budget will include.

"If you've been paying attention to the build-up to the Budget you probably won't learn anything new on Thursday," University of Auckland emeritus professor of economics Timothy Hazledine said.

"Perhaps wealthier citizens will be interested in whether the minister announces means-testing of KiwiSaver and best-start transfer payments. And wealthy foreigners may be hoping for relaxation of rules limiting their high-end property purchases in Aotearoa NZ."

So what are the key things to look for Thursday?

Less spending and a big focus on that "growth" word.

Willis said in April that the government is halving its operating allowance from $2.4 billion to $1.3b. That means less money for additional funding for government departments this year.

In a recent pre-Budget speech to BusinessNZ, Prime Minister Christopher Luxon also signalled restraint:

"The minister of finance was right last week to say Budget 2025 won't be a lolly scramble. It's not that we can't afford it, although frankly we can't."

Luxon has said the government needs to stay disciplined and focus on - there's that word again! - growth. And of course, there's also a lot of uncertainty in the global economy right now due to US President Donald Trump's trade wars and tariffs.

Luxon has already announced an increase to the capital expenditure - new money set aside in the Budget to maintain or upgrade assets. That money, which would be split mostly across health, education, defence, and transport, will total $6.8 billion.

One of the biggest pre-Budget controversies this year has been the government making changes to pay equity claims under urgency.

"The big bad news for many people (especially women) is the 'reprioritisation' of billions of dollars from pay equity spending," Hazledine said, noting that at the same time defence spending was going to get a big boost.

Another key thing to look out for are hinted changes to KiwiSaver, which may include means-testing the government's contribution to the retirement fund.

Hazledine said that despite challenging conditions, New Zealand is doing "quite well" in the global economy.

"Prices for our major commodity export (dairy products) are high (and so therefore we are paying more locally for milk and butter, alas), and our major service export, tourism, seems to be recovering from the Covid slump.

"The minister will be trying to keep a lid on borrowing whilst not threatening chances of a good economic recovery - a delicate balancing act."

Read more:

• Why forecasting this Budget is even harder than usual
• Pay equity claims: What they are and how they're changing
• Kiwisaver providers mull possible changes
• The multibillion-dollar boost for New Zealand's military: What you need to know

Does the Budget really make a difference?

New Zealand Budgets have helped make or break a government.

The late Michael Cullen, finance minister from 1999 to 2008, famously liked to say that "budgets don't win elections, (but) they can lose them".

In 1938, Prime Minister Michael Joseph Savage's Labour government introduced the Social Security Act with policies that were intended to provide "from the cradle to the grave," and shaped New Zealand society for decades to come.

In 1958, the Labour government released what became known as the 'Black Budget', where Finance Minister Arnold Nordmeyer attempted to reduce demand for overseas goods through imposing additional taxes on cars, alcohol and tobacco. It didn't go down well and Labour lost the 1960 election after just a single term in office.

And in 1991, the National government's 'Mother of all Budgets' released by Ruth Richardson heralded sweeping welfare reforms and privatisation. The National government went on to barely win the 1993 election in one of our closest contests.

While in 2019, Prime Minister Jacinda Ardern's 'Wellbeing Budget' introduced $1.9 billion in mental health funding - but as RNZ has reported, questions remain about the impact that funding had.

Willis aims to make the 'Growth Budget' of 2025 a key part of the government's legacy. On Thursday, we'll all start to find out how successful it will be.

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