Government lifts lid on Budget: Government got advice on $8b GST hike

Author: Thomas Coughlan, Adam Pearse, Jamie Ensor, Julia Gabel, Derek Cheng, Jenée Tibshraeny,
Publish Date: Thu, 10 Sep 2026, 2:55pm

Finance Minister Nicola Willis during her presentation at the Budget 2026 lock-up. Photo / Mark Mitchell

Today, the Government lifted the lid on its 2026 Budget, publishing hundreds of pages of advice ministers received before Budget Day. The Herald’s team of political reporters scoured those pages for the inside story on the decisions behind Nicola Willis’ election-year Budget.

Budget expected to increase public service numbers by 1300 – kind of

An aide-memoire to Finance Minister Nicola Willis said the Budget was expected to increase public service numbers, with a net increase of 1300 personnel in the core public service and about 350 in the wider public sector.

However, the figure did not include the Budget decision to reduce public sector baselines during the next term of Parliament, cutting the public service by $2.4 billion over four years, which is estimated to reduce public service numbers by about 9000.

The document said the driver of the increase in workforce would be:

Frontline corrections officers, support workers and psychologists to address volume pressures at Corrections and Oranga Tamariki, which account for two-thirds of the public service workforce change.
Personnel uplifts to deliver major Government priorities, including tranche two of the Defence Capability Plan and resource management reform.
Delivering invest-to-save initiatives at the Ministry of Social Development and Inland Revenue through a temporary uplift in case managers and inspectors.

1% GST hike, sugar tax, proposed as “back-up”

In January, a Treasury paper gave Finance Minister Nicola Willis a list of “back-up” savings ideas to help the Budget add up. It is not clear from the paper how seriously these were taken.

The list includes a number of ideas popular at Treasury but unpopular at the political level of the coalition.

The paper noted that the ideas were not necessarily endorsed by Treasury or the Government.

“As signalled last year, we have also attached at Annex Two a list of backup savings to this report to seek your indication on if you wish to invite any of these options into the budget process.

“We have had an initial conversation with your office on these options. Many of these cover savings options that you may have previously discounted. These options are intended to give you optionality in putting together your preferred budget package, and do not represent Treasury advice to support savings from these areas,” the paper said.

This advice included hiking GST by 1 percentage point raising $8 billion over the four-year forecast period.

Other ideas looked at hiking “corrective taxes” like tobacco and alcohol excise. The advice included a sugary drink tax.

The Government also got advice on axing what was left of the Government contribution to KiwiSaver, which would have saved $2.4b.

Stamp duty on houses bought by foreigners considered

The Government considered taxing non-tax residents who bought houses in New Zealand.

It sought advice on applying a 15% stamp duty to all residential property purchases by non-tax residents.

The change was expected to have raised between $100 million and $200m a year.

While the Government was considering the policy at least up until February this year, it didn’t end up pursuing it in the May Budget.

Act leader David Seymour, a couple of days ago, took credit for the idea being canned, saying National would have forged ahead with the stamp duty if it had its way.