Government consumption expenditure

IBISWorld expects government consumption expenditure to decline by 2.6% in 2024-25, to total $56.3 billion. The New Zealand Government (Te Kawanatanga o Aotearoa) announced a range of spending cuts as it attempts to bring the Budget back into surplus by fiscal year 2028. The Government announced a substantial cut in contractor and consultant spending across all government departments, as well as a $3.9 billion cut in public service spending. This includes a baseline spending cut of $1.5 billion across the 34 government department agencies.

The majority of government consumption spending is attributable to the Central Government, which accounted for 86.6% of total expenditure in 2023-24 (latest data available). However, local government consumption has increased slightly as a share of total expenditure over the two years through 2023-24. Local Government consumption spending has increased at an average rate of 8.1% over this period, while Central Government consumption spending has remained relatively flat. The Central Government is responsible for functions as taxation, law and order, and defence, while it is also responsible for advancing the economic and social wellbeing of the country. Local governments are responsible for the general administration of territorial authorities in New Zealand. This includes various activities related to roads, transportation, water supply, planning and regulation, culture, and recreation and sports facilities.

Over the past five years, growth in local and central government spending has bolstered government consumption expenditure. In particular, government consumption expenditure has risen faster since the Labour led government was elected in late-2017. Government consumption expenditure has been focused on health, education, infrastructure, lifting Maori and Pacific incomes, investing in new technologies and transitioning to a more sustainable economy. The COVID-19 pandemic and related economic uncertainty also encouraged greater government expenditure over the two years through 2021-22, including boosting recovery of the tourism sector. Overall, IBISWorld forecasts government consumption expenditure to rise at a compound annual rate of 2.7% over the five years through 2024-25.