New Zealand Central Bank Budget Reduction

By Lucy Craymer

WELLINGTON (Reuters) – New Zealand’s Finance Minister, Nicola Willis, announced on Wednesday that the central bank’s operating budget will be reduced by approximately 25% for the upcoming fiscal year. The budget will be set at about NZ$150 million (approximately $88.50 million) for each of the next five years.

According to the Reserve Bank of New Zealand funding agreement, the bank is set to receive a total operating expenditure of NZ$750 million ($443 million) for the five-year period concluding on June 30, 2030.

Willis indicated that this allocation translates to an average annual operating budget of NZ$150 million, down from the current fiscal year’s budget of NZ$200 million.

The total five-year spending of NZ$750 million exceeds the prior budget of NZ$718.8 million. However, the RBNZ’s annual report reveals that spending has increased by nearly 70% in the four years leading to June 30, 2024.

The government has also allocated capital expenditures of NZ$25.6 million over the five years ending June 30, 2030, a decrease from about NZ$29 million for the five years ending June 30, 2025.

Willis stated, “The new agreement will ensure that the Reserve Bank has adequate resources to fulfill its legal responsibilities while promoting heightened cost efficiency.”

Both the Reserve Bank board and the Treasury believe that the new expenditure limits are appropriate.

Since its election at the end of 2023, the conservative government has made significant cuts across the public sector as part of a strategy to restore a surplus to government accounts. A cabinet paper released alongside the budget cut announcement indicated that the Treasury reviewed the central bank’s funding request of NZ$1.03 billion for the five-year period and deemed it to lack good value for money.

The central bank’s growth has been considerable since 2018, with staff numbers nearly doubling to 660 as of January this year, partly due to its expanded regulatory role and staffing needs to implement various reforms.

Central Bank Board Chair, Neil Quigley, mentioned that the bank will collaborate with staff over the coming months to redesign operations to optimize resources while continuing to fulfill its mandate.

($1 = 1.6949 New Zealand dollars)