WELLINGTON - New Zealand Finance Minister Nicola Willis said on Tuesday baseline spending in the 2025 budget would be reduced to NZ$1.3 billion ($777.14 million) from a forecast of NZ$2.4 billion, as she outlined worsening economic conditions in the country.

“That lower growth trajectory has an inevitable impact on the government books, reducing revenue and threatening our already difficult return to surplus and debt reduction,” she said at a speech to the Hutt Valley Chamber of Commerce.

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She said the government intended to return to a surplus in the 12 months ending May 30, 2029 under the measure it introduced last year, which excludes the financial position of the government-owned accident health provider.

“At our last update in December - well before Trump’s 'Liberation Day' - we were expecting a small surplus in 2029, and it remained our intention to returning it a year earlier if possible,” she said.

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“I can confirm that our Government remains committed to those goals,” Willis added.

Since being elected in October 2023, the centre-right coalition government has faced rising unemployment and lower tax revenue than expected. It has worked to reduce spending and has made significant cuts to the public service as it pursues a return to surplus and will release a new budget and updated economic forecasts on May 22.

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Willis said the situation has worsened, with the economy still growing but not as fast as forecast a few months ago.

She said Treasury had adjusted the forecasts it presented in December, reducing their assumptions of real GDP growth in New Zealand in 2025 and 2026.

She added, however, it does continue to forecast accelerating growth in the economy over the coming year, with falling unemployment forecast to follow in the second half of the year.