Finance Minister Nicola Willis has conceded she won’t be able to get the Government’s finances back in shape as quickly as expected, while delivering tax cuts, which may not end up looking as attractive as National promised before the election.

Releasing her Budget Policy Statement this afternoon - a preview of the May 30 Budget - she emphasised the extent to which economic growth is expected to be slower than expected in December.

Consequently, the Government’s tax take is likely to underperform, meaning the Government won’t get its books back in surplus by 2026/27 as expected in December, and as National campaigned on ahead of the election. In fact, the books are still likely to be in the red in 2027/28.

While Willis highlighted her commitment to being a prudent manager of the country’s finances, she said she wouldn’t chase a surplus at any cost - particularly if that cost was borne by frontline public services.

Willis didn’t do what finance ministers tend to do during Budget Policy Statements and unveil the likely size of the upcoming Budget.

She didn’t include her expected operating allowance in the statement - the figure that’s typically seen to be the centrepiece of a Budget Policy Statement.

Rather, she kept things broad, saying her operating allowance would be less than the $3.5 billion figure pencilled in by the previous government.

In other words, she will increase expenditure on day-to-day operating costs by less than $3.5b (net) in Budget 2024.

As for capital expenditure, on things like infrastructure, Willis said the Government will top up the multi-year capital allowance by up to $7b, with the final number to be confirmed at the Budget.

Coming back to the income tax cuts, Willis avoided confirming whether these would look the same as what National campaigned on ahead of the election.

She said they would be targeted at lower and middle-income earners and take effect on July 1 - as previously signalled.

Act Party leader David Seymour said the income tax changes hadn’t gone through Cabinet yet.

“We’re always jostling with our coalition partners, but on the tax issue, I think we’re at a reasonable place,” he said.

Willis assured the Government wouldn’t need to borrow more to deliver tax cuts.

“Tax reductions will be funded by reprioritisation, savings and new revenue measures, and this package will not add to debt,” the Budget Policy Statement said.

Willis didn’t believe the “new revenue measures” (which could include taxes, levies, fees, etc) would surprise the public.

Taking a step back, the Budget Policy Statement said the Government aimed to put net core Crown debt on a “downward trajectory towards 40 per cent [of GDP]” over the next four years.

In the year to June 2023, net core Crown debt was worth 39 per cent of GDP. In December, the Treasury forecast it rising to a peak of 44 per cent of GDP this year.

Longer term, Willis said her goal was to ensure net core Crown debt sits between 20 and 40 per cent of GDP - a fairly wide range.

Former Finance Minister Grant Robertson got net core Crown debt to below 20 per cent before Covid-19.

Jenee Tibshraeny is the Herald’s Wellington business editor, based in the parliamentary press gallery. She specialises in government and Reserve Bank policymaking, economics and banking.