New Zealand cuts spending plans as China, global economies slow

SYDNEY (Reuters) – New Zealand said on Monday it would cut its future budget allowances, reduce spending on consultants and for some government programmes citing a deterioration in the global economy, and particularly in its largest trading partner China.

The government said it would require public agencies to find permanent savings, though frontline services will be excluded from savings initiatives.

“Since May we have seen further deterioration in the global economy, particularly in China. This will continue to have a direct impact on the New Zealand economy,” Finance Minister Grant Robertson said in a statement.

“It is important that the government responds to meet our balanced and responsible fiscal goals.”

Ahead of an October election, the ruling centre-left Labour Party said the savings initiative would benefit taxpayers by almost NZ$4 billion ($2.37 billion) out to 2026/27 and that the savings would not be made available for any other new spending.

“We have been clear that this cannot be a big-spending election. Uncosted, untargeted tax cuts like those promised by the opposition are simply not affordable,” Robertson said.

New Zealand looks to be heading towards a change of government after the election, polls last week showed, with the opposition National Party and likely coalition partner ACT holding 50% of the vote. Labour, with just 29% support, is now at its lowest level in six years.

The government will aim to get its spending on consultants and contractors below 11% of its public service workforce spending, saving about NZ$165 million per year, and an 18% reduction on current spending levels.

“The economy is turning a corner, but inflation remains sticky. It is trending down but is doing so slower than we would like so we are doing our bit to help nudge it downwards faster,” Robertson said.

($1 = 1.6909 New Zealand dollars)

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