By taking years to get the books back into surplus, aren’t we vulnerable to the next big external shock – be it a global financial crisis or natural disaster?
Willis’ initial response sounds a bit like something former Finance Minister Grant Robertson might have said to me when I asked him similar questions.
It certainly positions her in a more moderate place than many critics on the left believe her to be – one of the reasons some political commentators saw the debate playing well for her with the public.
One major trade union even tried to argue (unsuccessfully) that the whole debate was a “false flag” operation on the part of the right.
“New Zealand’s debt position is still far more modest relative to the rest of the world,” Willis argues.
Ruth Richardson and the Taxpayers’ Union are concerned about New Zealand’s long-term economic security.
“We are on a faster track back to surplus than many of the countries we compare ourselves to. You know, Australia isn’t forecasting a surplus at any point in the future,” Willis says. “Canada, the UK, and others are not on anywhere near as fast a track back to balanced books as we are. So in that relative global sense, we are okay placed right now.
“I continue to believe it’s really important that we get the books back in balance and bend that debt curve down.
“That’s not universally politically agreed, by the way,” she says, adding a reminder that the opposition parties do still present her fiscal approach as severe and conservative.
We do need buffers for future shocks, she says.
“The tight operating allowances that we’ve had in our Budgets and that we’re forecasting for the future involve real restraint and trade-offs. They are far smaller operating allowances than the previous Government had.
“My critics on the right are really great at the headline of: we should cut spending. If I could do that tomorrow in a painless way, I’d be 100% there. But actually, trade-offs [are] required.”
More extreme saving would not be good for the economy or New Zealanders “in the short, medium, or long run”, she says.
By way of example, Willis points to a part of the Taxpayers’ Union manifesto which advocates for the removal of all Working for Families tax credits.
“That would mean that 330,000 low-income New Zealand families with young kids would be, on average, $180 a week worse off,” she says.
“The idea of turning around to New Zealand right now and saying, the thing that’s required for our economy is that I slash the incomes of some of our lowest-income parents … that, to me, is not a sensible course.”
Willis says she is always open to ideas for making greater savings.
“But please set out for me what those plans are and what they add up to. You get the people who say: You should be getting rid of the Ministry for Women’s Affairs.
“That’s $12 million. Yeah. We’re talking about multibillion-dollar challenges.
“Yes, the Government needs to be up for ongoing efficiency, ongoing savings, and we are. But the course that we have projected is one in which there aren’t unnecessary levels of human cruelty.”
On Tuesday, Treasury delivered an ugly update to the Crown accounts, full of debt and deficit numbers to bolster fiscally conservative critics.
On Thursday, Stats NZ released better-than-expected GDP growth figures that have been widely celebrated as a sign that the economy is back in recovery.
How are ordinary New Zealanders supposed to interpret the whipsaw nature of the headlines?
The two releases don’t really change the underlying story, she says.
The GDP relates to the turning of the immediate economic cycle, and the Treasury half-year economic and fiscal update (Hyefu) relates to the structural foundations of the economy.
“This week, what we’ve seen is actually efforts to get the foundations in place,” Willis says.
“At the data level, we are starting to see that growth coming through in a pretty broad-based way. You are seeing firms doing the things you want to see them doing for the future, investing in machinery and equipment and plant. You are seeing the construction sector, the manufacturing sector, the job-rich sectors growing.”
That bodes well for the future in terms of job opportunities and income opportunities, which is what New Zealanders look to, she says.
“That will be happening in a stable inflation environment, that’s very positive.”
When you relate it back to the government books, it means we now have “conditions in which we can execute the path that we’ve laid out”.
Confidence, or what the PM famously called New Zealand’s mojo, is coming back, Willis says.
There’s no doubt the business community, and particularly sectors like agriculture and manufacturing, are upbeat going into 2026, but what about younger Kiwis? They have been leaving New Zealand in record numbers.
“On the Kiwis leaving thing, I really feel that very keenly,” Willis says.
Building a country that “has what it takes” to keep young people here was a big part of why she went into Parliament, she says.
“We need good government to make sure that people want to stay here, because we are small, and we are at the bottom of the world, and we don’t want this to be a country that talented, hard-working people feel they need to leave in order to live their aspirations.
“What we’ve seen throughout our history is that when our employment market is underperforming relative to Australia, where we go through tough economic times, you do see more people choosing to leave.
“But it’s also been the case that as our economy recovers, more people choose to stay, which is another reason why the economy really matters.”
Willis is optimistic that the trend has shifted. She cites the latest data from Stats NZ.
“We are seeing fewer people leaving now, and to me, you know, that is because the economy’s getting better. These two things are related, so we have to stick to that course of making the economy better.”
The economy was supposed to be getting better this time last year.
Growth collapsed in the second quarter of this year and undermined confidence in the recovery.
What does she think happened?
“I think it’s that we were feeling fragile. We’d only had the first beginnings of a recovery that had been very hard fought. We’d come through an extremely difficult period. So it didn’t take much to knock the stuffing out.”
She still sees US tariff policy – and President Donald Trump’s Liberation Day show – as a big factor in the slump, even though demand for New Zealand exporters has meant the worst fears were never realised.
Donald Trump’s tariffs spooked markets. Photo / Patrick Smith/Getty Images
“It’s always the perceived blow rather than the actual blow,” she says.
“Obviously, exports have stayed strong, and we have managed the tariffs as an economy really well. But, for a mum and dad looking at the headlines, it was like, what? The New Zealand economy is now going to be hit with massive tariffs and the world’s in flux? Can we really handle this right now?
“So I do stand by the view I shared at the time, which is that it had a psychological impact.”
She accepts that addressing some big structural issues may have slowed things down, but says New Zealanders have increasingly understood “at an emotional level” there were bigger issues than just the cyclical recovery.
“New Zealand has some fundamental underlying economic issues that require being addressed,” she says, taking a line that would presumably land better with the likes of the Taxpayers’ Union.
“Whether that’s the fact that in the past, too much of our growth, in my view, has come off the back of us selling houses to each other, rather than really having productive investments happening across the economy.
“Whether that’s the fact that basic literacy and numeracy skills of our school leavers haven’t been keeping up with the needs of the modern workforce.
“Whether that’s the fact that the Resource Management Act has been holding back investment in everything from quarries through to ports.”
These are the issues that people have started to contemplate more closely as they look to the cyclical recovery, she says.
“Our job as a Government, going into next year, is to give people confidence that we can actually fix those problems as a country.”
There are no silver bullets, she says.
“But we can make progress on them.”
Looking out to 2026, Willis is, more than anything, looking for a stable economy in which Kiwis feel confident to invest and build wealth.
“What I’m looking for is not a rock star economy, I just want a rock-solid economy,” she says.
“I want those foundations to be in place so that we can build on that, and people can have that sense of stability and security.
Her message for Kiwis heading into the holiday break would be to try to see New Zealand the way it is perceived by people internationally.
Channelling the positivity of a hypertheoretical US tech investor, Willis reels off a list of things we take for granted in this country.
“They say to me, wow, in a world that’s really worried, with conflict on its borders, you are secure at the bottom of the world, surrounded by ocean.
“You have all of these natural resources (some of which you don’t even use currently, whether it’s rare earth minerals or others).
“You have stable institutions. You fundamentally have pretty good social cohesion compared to a lot of other countries.
“You have a Government that’s pro-reform and pro-business. You have some incredible entrepreneurial stories that have emerged from your country, whether it’s Rocket Lab, Xero, Halter.
“And you have really high activity levels at the small business and entrepreneurial level. You guys have got good stuff!”
For various reasons, New Zealanders haven’t been telling ourselves that story, she says.
“We’ve been telling ourselves the story, that is true, which is we’re also a country that’s been through a massively tough time, very high cost of living, and it’s been very challenging for many people.
“Our job as a Government is to say, well, let’s look at the good story, let’s build on it.”
Liam Dann is business editor-at-large for theNZ Herald. He is a senior writer and columnist, and also presents and produces videos and podcasts. He joined theHeraldin 2003.
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