Households didn’t get $5,000, but defence, landlords and business did. Natalia Albert looks at the past two budgets, and where the money actually went

By Natalia Albert*

Earlier this year, in his State of the Nation speech in Auckland, Christopher Luxon said:

"In just the last two years, our Minister of Finance, Nicola Willis, has delivered savings of around $11 billion per annum, equivalent to around $5,000 for every single household in the country."

Great. Excellent. Wonderful. I haven't seen $5,000 in my bank account, have you? I checked with Emile Donovan at RNZ a couple of weeks ago. He hasn't seen $5,000 either. I've asked around. Nobody I know has seen $5,000.

When Luxon says $11 billion is "equivalent to around $5,000 for every single household," the maths is correct. New Zealand has about 2.1 million households. $11 billion divided by 2.1 million is roughly $5,200. The number checks. Easy peasy lemon squeezy. "Let's put that in a speech," said one of his advisors. Sigh. It's misleading and irresponsible. 

The government says repeatedly that they're saving money, but where the money goes is a bit of a mystery to me. They say they're making government smaller to save money and put it into frontline staff, sure. But that is not what is happening. The money is going inside government, actually. It’s not $5,000 per household, I know that much. 

I get that they redirect it, sure, but what does that mean, and why do they call it saving when what they are doing is moving it? Genuine question. 

Budget 2024: from climate to business 

The story Nicola Willis sold in May 2024 was savings plus reprioritisation equals tax cuts, fully funded, no extra borrowing needed. The actual numbers: $23 billion in claimed savings across four years, $14.7 billion of tax cuts over four years, and $12 billion of extra government borrowing over the same period.

Earlier this month, Bernard Hickey called the "fully funded" claim "a semantic question," and his maths is not wrong. About $3.68 billion a year of extra money was going out to taxpayers, which over four years comes to roughly $14.7 billion. Over the same period, government borrowing rose by about $12 billion. As Hickey put it: "These are tax cuts funded by borrowing. And that's because the economy's worse than expected." So where did the $23 billion in "savings" actually go?

About $3.68 billion a year funded the tax cuts. For a typical individual earner, up to $51 a fortnight. For households with children, up to $78 a fortnight. For a retired couple on Super with no other income, $9 a fortnight, rising to $26 a fortnight in 2026. That's something. It is not the $250 a fortnight National promised the average household with kids in its pre-election "Back Pocket Boost."

The biggest single line was $16.68 billion for health across three Budgets, alongside a build-up of frontline services in police, corrections and defence. But the telling move was smaller: $2.9 billion in restored interest deductibility for landlords. And to help pay for it, the Climate Emergency Response Fund was dissolved entirely, first-year Fees Free was cut and 20 hours of free Early Childhood Education for two-year-olds was reversed, alongside hundreds of smaller savings line items across the public service.

The pattern in Budget 2024 was tax cuts plus a build-up of frontline services, a quiet handout to landlords, paid for by closing climate, childcare and education programmes, and an extra $12 billion of borrowing. Nobody got $250 a fortnight. Some people got a fraction of it. Most of the money went somewhere else.

Budget 2025: from pay equity to defence 

In Budget 2025, Willis cut the operating allowance from $3.2 billion to $1.3 billion, less than half what she'd run the year before. She called it the "Growth Budget." The savings claim was $5.3 billion a year in "reprioritisation," which in government-speak means cutting one programme and using the money for another. Which is, conveniently, exactly the mystery box trick. In Budget 2025, the government moved billions from women in pay equity sectors to defence, business tax breaks, and a structural pension shift onto households. 

But the biggest single "saving" was the pay equity change, rushed through Parliament under urgency in the week before Budget Day. Stopping 33 active pay equity claims and raising the threshold for future ones was scored as $12.8 billion in fiscal savings over four years. About $3.2 billion a year.

The headline destination was defence, $4.2 billion of it, the biggest reinvestment in over a decade. The rest went to things that don't look like household relief at all: Investment Boost, a 20% upfront deduction for new business assets costing around $1.7 billion a year in foregone tax, and a KiwiSaver change that halved the government contribution and pushes default rates up to 4%, which is a saving for the government and a cost shifted onto households and employers.

The 2020 pay equity framework had real implementation problems: very broad sectoral claims, uncertain timelines, costs hard to predict, and a one-size-fits-all approach that hit small and medium employers as hard as it hit large corporates. Reforming that framework was defensible. But scrapping it under urgency in Parliament, with the explicit goal of scoring it as a $12.8 billion fiscal win, was a mistake. The message was unacceptable. On defence, I'll grant that the world is going in a direction where being prepared isn't a bad idea. But you can grant that and want them to not ignore institutional discrimination, which is a fact.

The missing $8.5 billion

According to Budget documents released in September and reported by RNZ, back in April the Public Service told the Treasury that they needed an extra $27.9 billion over four years to keep delivering, because costs like wages, supplies and equipment keep rising. The pressures were heaviest in education, defence, health, disability support and transport. The government reshuffled most of it, then left $8.5 billion unfunded. The bet is that growth fills the gap, or that letting services fray slowly is easier to survive politically than borrowing.

Why not borrow it? Because borrowing for everyday running costs, as opposed to building something, breaks the whole "we're the responsible ones" story. It would cost them more in brand than in books. And to be fair, they have half a point: you can't borrow forever to cover costs that come back every year. Eventually you raise money or you cut.

So, the honest argument is about timing. Borrowing to hold services together through a rough patch is defensible, it's what the OECD and IMF recommend, and Willis has yet to make a convincing case that cutting your way through a downturn grows the economy. Borrowing to paper over a permanent gap is another thing entirely. But "we can't afford it" was never true. They could. They'd just rather not.

And before you ask whether this week's public service cuts fix it: they don't. The 8,700 public service job cuts Willis announced on Tuesday are meant to save $2.4 billion, and she's already told us where it goes. Not into the hole, but into new priorities like infrastructure, defence and police. 

Line up the three budgets and this is the story. Budget 2024 was tax cuts and law and order, paid for by climate and childcare. Budget 2025 was for defence and business, paid for by pay equity claims. Budget 2026 is the public service redirected into health and balancing the books and avoiding debt. 

Judged by where the money has gone, this government wants a bigger military, a smaller state, and a better deal for business. The losers have been just as steady: the climate, the care economy, and the everyday services that $8.5 billion hole is quietly hollowing out. 

*Natalia Albert is a political scientist living in Wellington exploring how to govern divided societies in diverse, liberal democracies, with a focus on New Zealand politics. She writes weekly on her Substack, Less Certain. Albert stood as a TOP candidate in the 2023 election.