Source: The Treasury
– Population ageing remains a significant long-term fiscal challenge.
– Despite favourable economic tailwinds in the past 20 years, New Zealand’s debt is higher than anticipated
– It is vital New Zealand closes its structural fiscal deficit sooner rather than later.
– Fiscal pressures will accelerate in coming decades with costs of superannuation and healthcare expected to rise significantly as the population ages.
– There is no one solution and successive governments will need to consider a mix of options to deliver fiscal sustainability over the coming years.
The Treasury has published He Tirohanga Mokopuna, its latest Long-Term Fiscal Statement, which highlights the growing pressures on New Zealand’s public finances and calls for a proactive, balanced response to ensure long-term fiscal sustainability.
“Over the past two decades, the Treasury has consistently warned that population ageing is placing increasing strain on the Government’s fiscal position. Despite some positive developments, New Zealand has been running a structural operating deficit since 2019/20, underscoring the need for sustained fiscal adjustment,” said Iain Rennie.
“This means that even without future pressures from population ageing, climate change, or infrastructure needs, we must adjust our fiscal settings to bring revenue and expenditure back into balance.”
As per earlier Statements, He Tirohanga Mokopuna finds that population ageing remains a significant long-term fiscal challenge with New Zealand Superannuation (NZS) and publicly-funded healthcare expected to rise substantially.
In 1965, there were seven working-age New Zealanders for every person over 65. Today, that ratio is four to one, and by 2065 it is projected to be just two to one. Most New Zealanders over 65 receive a pension funded from general taxation. As the age structure of our population shifts, the cost of maintaining NZS in its current form will rise significantly. Similarly, health expenditure could increase from 7.1% of GDP today to around 10% by 2065 if policies remain unchanged.
The Statement also notes that climate change, defence, and infrastructure investment will add further fiscal pressures in the decades ahead.
The Treasury’s analysis shows that early action would reduce the overall cost of reform, make changes less disruptive, and result in higher per capita incomes and lower long-term tax rates.
“We don’t need to tackle 40 years of pressures in one fell swoop,” said Iain Rennie.
“Starting earlier provides more opportunities to share transition costs across generations and avoid more disruptive change later. It allows us to signal changes well in advance, helping New Zealanders plan and adjust.
“Returning to surplus is an important first step,” said Iain Rennie.
The Statement outlines a range of policy options, including adjustments to NZS eligibility and indexation, changes to tax settings, and improvements in public asset management. It emphasises that no single tool will be sufficient and Governments will need a portfolio of responses over time.
The Long-term Fiscal Statement is one of three stewardship reports the Treasury is publishing year. The 2025 Long-term Insights Briefing explores the circumstances under which fiscal policy can be used to buffer the economy from shocks and cycles, and how to do so in a sustainable and effective way. This was released in August and can be found here: Te Ara Mokopuna: Treasury’s 2025 Long-term Insights Briefing
The Investment Statement is due to be released later this year and will consider how governments’ management of the Crown balance sheet, including debt levels and investments, can support New Zealand’s living standards across generations.
