Budget 2024 locks in fiscal restraint for years to come

Analysis - The wall-to-wall coverage of public service cuts in recent months is set to become the new normal as the finance minister locks in fiscal restraint for years to come.

Programmes and initiatives being cut and staff consultation over job losses will not stop at the delivery of Thursday's Budget.

The operating allowance Nicola Willis dished out in her first Budget amounted to $3.2 billion - the lowest it has been in some years - and one of the only surprises of the rather-as-expected Budget is how little money there will be from here on out.

In National's fiscal plan last year, it campaigned on operating allowances - the money a government has to spend on new policy initiatives and cost pressures on existing ones - of $3.2 billion in 2024 followed by $2.85b, $2.7b, and $2.7b in the following years.

As of 5 April, at the time the Budget Update economic forecasts were finalised, operating allowances were set at $3.5b, $3.25b and $3b for each of Budgets 2026 and 2027.

Fast forward not even four weeks to the Budget getting signed off by Cabinet late last month and this year's allowance had dropped to $3.2b, while the following three Budgets were each slashed back to $2.4b.

That is a big shift at Cabinet and points to some tough talks between ministers about whether enough fiscal restraint was being shown.

Read more on Budget 2024:

• National unveils Budget 2024, keeps tax cut promises
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• The Budget winners and losers
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The effect is that once the $1.4b a year increase to allow for health cost pressures is accounted for - a commitment baked into the next few Budgets - there's just $1b a year left for the Coalition to distribute.

Willis wasn't joking when she told reporters in the Budget lock-up that she was "weaning off the addiction" to spending of which she has accused her predecessor Grant Robertson.

But a $1b operating allowance at her disposal in future Budgets is less weaning and more cold turkey.

Willis has repeatedly faced criticism for choosing and prioritising tax cuts, especially those given to landlords.

On Thursday in the House the finance minister, fresh off announcing her tax cut package, offered a crisp response to her critics: "Who in their right mind would oppose tax relief in a cost of living crisis?"

Labour has responded to the Budget by saying the money would be better spent on core public services and saving many of the roughly 4000 jobs cut in the process.

Te Pāti Māori is livid the Budget has cut back on targeted funding for Māori.

Te Aka Whai Ora, the Māori Health Authority, is gone, Te Kawa Matakura - an education qualification - reprioritised, and housing funding returned to the ministry as part of cost savings.

It comes after thousands turned out for a Budget Day protest, blocking roads and causing widespread disruption across the country.

Exactly how much Māori and Pasifika received in the Budget is difficult to measure as it was not calculated in the documents.

This was intentional, with both Willis and deputy Prime Minister Winston Peters telling reporters on Budget eve that funding would be allocated differently this year and would not be specifically targeted based on race, because that did not fit with the Coalition's view.

One Māori programme receiving a win was Te Matatini, the national kapa haka festival, which received $48.7m over three years - a promise Willis said she made to Māori Development Minister Tama Potaka that she was happy to keep.

A broken promise that did land on Thursday was funding for the 13 new cancer drugs pledged by National during the election campaign.

For those paying roughly $5000 a month to fund their own life-saving medicines, who put faith in that National promise when they went to the polling booth, tax relief will be welcome - but will not get anywhere near what is needed to cover their medical bills.

Willis has already said she hopes to deliver on that promise in future Budgets, though it is hard to see how, with so little money to play with in the coming years.

She has now set the fiscal tone for her future Budgets and will be dogged about not breaking those operating allowances, given she was Robertson's biggest critic for just that.

Having made a virtue of keeping her promise to New Zealanders, the question now is: will they thank her for it, given the belt-tightening at home and by the coalition government?