![\"Nicola](\"https:\/\/www.newsbeep.com\/nz\/wp-content\/uploads\/2026\/05\/4JO0W9E_2605126_Budget_Photo_Op_2026_4_jpg.jpeg\")
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\nNicola Willis with Budget 2026.
\nPhoto: RNZ \/ Samuel Rillstone\n<\/p>\n
Analysis – Trying to please everyone will prove a near-impossible task for Finance Minister Nicola Willis when she delivers her third Budget on Thursday<\/a>.<\/p>\n The government’s finances, which had only just been starting to show signs of improving last year, have now been battered by an economy weakened by the fuel crisis.<\/p>\n A small, targeted election-year Budget surprise aimed at helping Kiwis tackle the cost of living isn’t out of the question, given some fiscal headroom will have been created by reprioritising spending and cuts to the public service.<\/p>\n However, those wanting to see a big election-year spending package of tax cuts or new entitlements are likely to be disappointed.<\/p>\n In fact, just keeping up spending on core public services like health and superannuation will prove challenging for Nicola Willis in the face of an inflation rate set to rise above 4 percent later this year.<\/p>\n Equally, those wanting to see the government make much bigger and deeper structural cuts to ongoing spending, in a bid to dramatically reduce debt, are also likely to be disappointed.<\/p>\n This is not a zero budget like Bill English used to deliver.<\/p>\n Operating spending has been reduced, but only by $300 million, to $2.1 billion this year.<\/p>\n Meanwhile, the allowance for one-off capital spending items on things like roads and schools has been increased to $5.7b from $3.5b.<\/p>\n A drastic, large-scale reduction in government spending, and with it the support it provides to the economy, appears to be a bridge too far for Nicola Willis in an election year when Kiwis are already doing it tough.<\/p>\n I’d expect Nicola Willis to continue making a virtue of the fact that she’s delivering a Budget that demonstrates fiscal restraint and certainty,<\/a> but not one that amounts to what the Prime Minister calls “hard austerity”.<\/p>\n Watching that talk of fiscal restraint from afar will, of course, be the credit rating agencies, which assign ratings to New Zealand government debt.<\/p>\n Currently, New Zealand retains strong ratings from both Fitch and Moody’s. That’s important because it helps keep government borrowing costs down.<\/p>\n However, Fitch and Moody’s have put New Zealand on notice ahead of this budget by downgrading the outlook for our ratings, if not the rating itself.<\/p>\n They are essentially saying that unless there is a credible long-term plan to return to surplus, a full downgrade is possible in future.<\/p>\n Given the government’s messaging on restraint and caution to date, it seems highly unlikely it would deliver a Budget that risks upsetting the ratings agencies in an election year.<\/p>\n So assuming it doesn’t upset the rating agencies, you could then say at least someone will come away from the Budget pleased.<\/p>\n