Bob Edlin: Just how sharp is the Minister of Finance?

Just how sharp is the Minister of Finance? You can tell from her funding cut at the RBNZ

The Taxpayers Union – in a newsletter to members – reports that as the country battens down the hatches for Cyclone Tam, it is preparing for a different storm: the economic implications on New Zealand of the Trump tariffs.

The newsletter then

… cut to the truth about whether Nicola Willis is spending big or cutting her cloth, and why she is so annoyed with the Taxpayers’ Union.

It focussed first on the economy and referenced forecasts from Infometrics:

The company says GDP growth for next year will come down from 2.4 percent to just 1.0 percent. Not good news for the Beehive or anyone who wants New Zealand to get out of the economic shtook.

Read more on the Infometrics website here: Economy’s recovery on ice as trade war hits growth

Let’s see how those forecasts stack up after Willis delivers her Budget in a few weeks. She and the government have been drumming into us their determination to go for growth.

The newsletter then turns to Nicola Willis’ claim to be a prudent fiscal manager.

Among other things, she claims to be reigning back the last Government’s excessive spending.

But the facts don’t fit the narrative.

Last year’s Budget (the first delivered by Nicola Willis) spent more than Grant Robertson’s Budget the previous year. That’s true for both measuring it in real (inflation adjusted) terms and as a percentage of the economy.

But Ms Willis continues to claims she’s spending ‘less’. How does she square the circle?

You see, it’s all framed up using what was projected using the earlier budgets.

In her Budget 2024 speech in Parliament Nicola Willis highlighted that the final “operating allowance” (that is the term used for new baseline spending) for Budget 2024 was $3.2 billion, which is below the $3.5 billion allowance set by the previous government.

Willis emphasised that this is the lowest allowance in nominal terms since Budget 2018 and the lowest in real terms since the Sir Bill English-era. That’s all true, but ‘reduced’ spending, it is not.

So let’s cut to the facts:

1. No matter how you measure it, Nicola Willis is spending more than Grant Roberson was actually spending (she’s also borrowing at a faster rate than Robbo!)
2. But she is spending less than Grant Robertson planned to spend.

Nicola Willis countered on Heather du Plessis-Allan’s NewstalkZB show (Listen here) claiming that “not for the first time, they haven’t got their facts quite in a row“.

She referred to a Taxpayers Union’s media release about the funding of the Reserve Bank.

Willis had released her own media release under the heading:

Reserve Bank funding reduction agreed

Hmm. A funding cut. Perhaps this explains the resignation and rapid departure of former governor Adrian Orr.

The Minister proclaimed:

The Government and the Reserve Bank board have agreed a funding agreement that will reduce budgeted operating expenses for the bank by about 25 per cent in the coming year.

“The new five-year agreement reflects the need for all government entities to identify cost savings and demonstrate value for money, Finance Minister Nicola Willis says.

Responding to what Willis told du Plessis-Allan, the Taxpayers’ Union buttressed its case by noting:

In 2015 – the Bank’s five-year funding was set at $324.3 million. In 2020, it was hiked up to $639.6 million. Grant Robertson also granted “emergency” top ups for 2023 and 2024 ($48 million and $30 million, respectively).

Now it’s time for the next five-year funding round and Willis says she’s “cut” the funding to $775.6 million.



But that still amounts to a 21 percent hike on the last five-year agreement, and a 131 percent increase on the one before that.

So what might justify the Government claim that this is a funding reduction?

We are reminded that the Reserve Bank asked for $1.03 billion – but Nicola Willis didn’t quite give them all of it.

And, it is a reduction from the “emergency” funding that Grant Robertson waved through before exiting the building for his good mate Adrian Orr.

Then attention is drawn to the inflation of staff numbers at the RBNZ in recent years:

Six years ago the Reserve Bank had 225 staff. Now it has 660 (not quite captured by the chart below).

Is Nicola Willis ‘cutting’ or just locking-in Grant Robertson’s big-spending legacy?


Click to view

It doesn’t bode well for what’s in store in next month’s Budget…

But the Reserve Bank is trimming the staff numbers reflected in the chart above. The Herald reports that the bank is losing two assistant governors following Adrian Orr’s resignation as governor, amid a restructuring of its executive leadership team.

The matter of Reserve Bank funding was examined in an article by Dr Michael Reddell – headed Spin (and obfuscation) – which PoO posted yesterday.

Readers might study that before deciding if Willis or the Taxpayers’ Union is making the more credible argument.

Bob Edlin is a veteran journalist and editor for the Point of Order blog HERE. - where this article was sourced.