31 May 2024

Budget 2024 in charts: What does it all mean?

12:59 pm on 31 May 2024
Changes to tax in Budget 2024

Photo: RNZ / Angus Dreaver

Peering through the web of numbers accompanying this year's Budget, one thing is clear: the good times will not roll for a while yet.

Finance Minister Nicola Willis has been very careful to warn off anyone expecting big treats in the Budget, and it's clear why.

Last year's Budget deficit of $9.7 billion was meant to be rock-bottom. Now, there's even further to fall.

The government deficit is expected to balloon to $13.4b in 2025, before gradually returning to a (small) surplus in 2028 - a year later than previously forecast.

Part of the reason for that is that New Zealand's economy is doing even worse than Treasury and other analysts expected.

Economic growth was always expected to slow this year, but it's now forecast to actually shrink in 2024, before finally starting to pick up again.

Adding to the government's woes is the cost of debt.

Covid-19 forced the previous government to borrow massively to fund wage subsidies and other initiatives to keep the country afloat.

Now, just as rising interest rates have squeezed people on mortgages, the government's own debt is costing it a lot more - and there's a lot more of it.

Debt as a proportion of gross domestic product - the size of New Zealand's economy in dollars - was meant to start falling from a high of 43 percent this year.

Now it's forecast to remain stubbornly in the low 40s for the foreseeable future.

More money going to service debt and a shrinking economy means less money sloshing around for the government to spend - hence a slower return to surplus.

It also means less money for the government to fund new initatives with, or increase spending on existing ones.

This chart shows how much money the government believes it will spend each year - its own household expenditure, if you like, including the amount of money it has to spend on servicing debt.

In the past, Finance Minister Nicola Willis has accused the previous government of being "addicted to spending".

The chart shows that - despite the savings that government departments have been asked to find - spending is actually tracking almost exactly in line with the previous forecast.

Willis told gathered journalists today that the current government was "weaning off" spending.

The difference was that rather than continuing to add an extra layer of spending every year, the government was looking at what was possible within the current planned levels of spending, she said.

In other words, it's less about increasing the total money being spent and more about shuffling the budget around.

You can use this visualisation to explore how the government plans to spend every dollar of its budget in the next year.

The end of inflation is (maybe) in sight

For those wondering whether high inflation, and the rising costs that come with it, might ever end, there is some good news in the Budget forecasts.

Inflation has already started to ease off the 30-year highs plaguing households, but is now forecast to fall ever so slightly fast than predicted.

It should now get back within the Reserve Bank's target band of 1 to 3 percent by the end of the year - hopefully meaning some relief from price rises (although don't hold your breath for those increases to ever reverse).

Unemployment will peak this year

After record-low unemployment in 2022, job cuts have mounted and 5.3 percent of the labour force is expected to be out of work by the end of this year.

That means the Budget is likely to be cold comfort to some Kiwis.

After all, tax cuts and in-work tax credits aren't much good if you don't have a job.