Finance Minister Grant Robertson has hinted at climate change spending and cost-cutting in what's been described as the Recovery Budget.
In a pre-Budget speech on Tuesday, Robertson said he asked each minister to look again at the areas of COVID-19 spending for which they were responsible to see if it costs could be cut.
It resulted in $926 million - almost $1 billion - worth of savings.
"We have committed to only spending what we need to in terms of our response and recovery. I am pleased that we have found these savings, and that they can be returned to the fund to aid our recovery from COVID-19 and targeted to where it is needed the most."
Robertson said this year's Budget - to be announced on May 20 - will focus on "striking a careful balance" between continuing to invest in New Zealand's economic recovery but also reducing debt taken on during COVID-19.
Treasury's update last month, where the Government's books were opened up, showed we're now more than $100 billion in debt, representing 32.6 percent of GDP, a comparison of what the Government owes with what it produces.
How does the debt compare to pre-COVID times? In February 2020, Government debt was at $59.7 billion, representing just 19.5 percent of GDP. It means in the space of one year, debt increased by 73 percent because of COVID-19.
Debt is tipped to reach $190 billion by 2025 - 46.9 percent of GDP.
Robertson said the Government's focus continues to be keeping Kiwis safe from COVID-19 and addressing the "big three foundational challenges": housing affordability, climate change and child wellbeing.
But getting that huge debt mountain down is equally as important.
Robertson said Prime Minister Jacinda Ardern has tasked him with leading a new unit within the Department of the Prime Minister and Cabinet, to make sure spending is going in the right places, and "ensure we are tackling these core priorities".
"At a time where the Government is playing a much greater role in supporting the economy and investing for the future, it is crucial that we ensure that we are getting value for money from every dollar of spending, and that across the public service initiatives are being delivered in a way that supports our economic recovery."
The Government in March announced a $3.8 billion housing infrastructure fund, alongside a package of housing initiatives, to address both demand and supply issues.
Social Development Minister Carmel Sepuloni also hinted at an increase to welfare, speaking to Newshub Nation.
Robertson said while the Government aims to be careful with money, being too careful "runs the risk of undermining the recovery".
"A turn to austerity measures will simply mean it takes longer for us to rebuild society in pursuit of numerical goals that ignore the real world we are living in. It is all about getting the balance right, which we have shown through the COVID period that we can do," he said.
"We will move to reduce debt and return to surplus as a responsible Government should, but not at the expense of our people or the hard won stability and security from our COVID response."
Robertson hinted at more Government spending on climate change initiatives, to meet the draft recommendations of the Independent Climate Commission.
The Government must have set the first three emissions budgets out to 2035 and released its first emissions reduction plan, by December 31.
"Almost every sector of our economy is affected by the carbon budgets that have been outlined by the Climate Commission," Robertson said.
"I will have more to say at Budget time about our approach to meeting the targets we have set, but we will continue to look for not just the measures we must take to reduce emissions but the possibilities and opportunities that exist to create high paying and sustainable jobs as we make that transition."
