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Speaking to Newstalk ZB\u2019s Mike Hosking this morning, Finance Minister Nicola Willis said she wants to stick to her $3.5 billion promise for her budget.\xa0

\u201dIn terms of the economy, we\u2019ve got the treasury forecasts still coming in.\xa0

\u201dIn terms of discussions with coalition partners and ministers, I\u2019m still having budget bilaterals.\u201d\xa0

Willis said the economy was very slow, and that makes things \u201ctough.\u201d\xa0

\u201dIt\u2019s fair to say the shape of the budget is shaping up, it\u2019s looking good, I\u2019m confident it\u2019s all coming together well.\u201d\xa0

Hosking disagreed and said he thought it was looking dreadful because we are in a recession.\xa0

\u201dThe budget is looking like a budget that will bring together the small crumbs we have at the back of the cupboard.\u201d\xa0

Willis said her priority was tax relief for \u201cworking people.\u201d\xa0

\u201dWe are a country that is finding it very hard for businesses to grow.\u201d\xa0

Hosking asked Willis if she was surprised by criticism of her government\u2019s planned tax cuts.\xa0

\u201cSome people just do not like tax reduction, they can see a long list of things they\u2019d like to see the government spending money on and they think that\u2019s more important than something I think is a basic principle, which is that New Zealanders get up, they work hard and they deserve to keep more of their own money.\u201d\xa0

Willis said New Zealand hasn\u2019t \u201chad any changes to tax brackets or thresholds in fourteen years.\u201d\xa0

This isn\u2019t true, last year the Labour government introduced new top rate of 39%, but only on income earned above $180,000.\xa0

Nicola Willis has conceded she won\u2019t be able to get the Government\u2019s finances back in shape as quickly as expected, while delivering tax cuts, which may not end up looking as attractive as\xa0National promised before the election.\xa0

Hosking asked Willis why she wasn\u2019t going harder on the surplus.\xa0

\u201dThe numbers are the numbers,\u201d she said.\xa0

\u201dWe could choose to overreact to them, and do incredibly dramatic things... but we don\u2019t want to be radical in that way.\u201d\xa0

Releasing her Budget Policy Statement yesterday afternoon - a preview of the May 30 Budget - the Finance Minister emphasised the extent to which economic growth is expected to be slower than expected in December.\xa0

Consequently, the Government\u2019s tax take is likely to underperform, meaning the Government won\u2019t get its books back in surplus by 2026/27 as expected in December, and as National campaigned on before the election. In fact, the books are still likely to be in the red in 2027/28.\xa0

While Willis highlighted her commitment to being a prudent manager of the country\u2019s finances, she said she wouldn\u2019t chase a surplus at any cost - particularly if that cost was borne by frontline public services.\xa0

Willis didn\u2019t do what finance ministers tend to do during Budget Policy Statements and unveil the likely size of the upcoming Budget.\xa0

She didn\u2019t include her expected operating allowance in the statement - the figure that\u2019s typically seen to be the centrepiece of a Budget Policy Statement.\xa0

Rather, she kept things broad, saying her operating allowance would be less than the $3.5 billion figure pencilled in by the previous Government.\xa0

In other words, she will increase expenditure on day-to-day operating costs by less than $3.5b (net) in Budget 2024.\xa0

As for capital expenditure, on things like infrastructure, Willis said the Government will top up the multi-year capital allowance by up to $7b, with the final number to be confirmed at the Budget.\xa0

Coming back to the income tax cuts, Willis avoided confirming whether these would look the same as what National campaigned on ahead of the election.\xa0

She said they would be targeted at lower and middle-income earners and take effect on July 1 - as previously signalled.\xa0

Act Party leader David Seymour said the income tax changes hadn\u2019t gone through Cabinet yet.\xa0

\u201cWe\u2019re always jostling with our coalition partners, but on the tax issue, I think we\u2019re at a reasonable place,\u201d he said.\xa0

Willis assured the Government wouldn\u2019t need to borrow more to deliver tax cuts.\xa0

\u201cTax reductions will be funded by reprioritisation, savings and new revenue measures, and this package will not add to debt,\u201d the Budget Policy Statement said.\xa0

Willis didn\u2019t believe the \u201cnew revenue measures\u201d (which could include taxes, levies, fees, etc) would surprise the public.\xa0

Taking a step back, the Budget Policy Statement said the Government aimed to put net core Crown debt on a \u201cdownward trajectory towards 40 per cent [of GDP]\u201d over the next four years.\xa0

In the year to June 2023, net core Crown debt was worth 39 per cent of GDP. In December, the Treasury forecast it rising to a peak of 44 per cent of GDP this year.\xa0

Longer term, Willis said her goal was to ensure net core Crown debt sits between 20 and 40 per cent of GDP - a fairly wide range.\xa0

Former Finance Minister Grant Robertson got net core Crown debt to below 20 per cent before Covid-19.\xa0

Jenee Tibshraeny is the\xa0Herald\u2019s\xa0Wellington business editor, based in the parliamentary press gallery. She specialises in government and Reserve Bank policymaking, economics and banking.\xa0

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