Finance Minister Nicola Willis will reveal her first Budget next week where she will have to balance delivering Coalition election promises like tax relief and reining in spending, all against the backdrop of a weakening economy.
According to one major NZ bank, ANZ, it might not be the end of the spending cuts but just the beginning of "a very challenging few years".
In a pre-Budget report, ANZ bank economists said the big test for the Government won't be just signalling a path to better books, but also following through in coming years.
"While the cupboards may be 'bare' from an additional spending perspective, we think there will still be scope for further reprioritisations from within existing baselines as new cost pressures arise."
The bank says there's also scope to speed up debt reduction with "deeper spending cuts if desired".
ANZ's report also stated that even after National's proposed tax cuts are delivered, the public service will still be meaningfully larger than it was prior to the pandemic.
"That suggests the Government should be able to find further cost savings to replenish the cupboards over coming years if they so desire. It won't be easy, but we think living within a lower operating allowance is certainly achievable provided a really big shock doesn't come along."
In February's Budget Policy Statement, Treasury forecasts showed the government's tax take was forecast to drop by $14 billion over five years and flat economic growth for 2024 with the unemployment rate hitting 4.9 percent in 2025.
The latest job seeker data from employment website Seek shows the number of job ads fell 4 percent in April and are 30 percent down on a year ago. The industries experiencing the biggest decline are hospitality and tourism where the number of job ads fell 21 percent - the largest monthly decline in over two years.
