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New Zealand government finances in sorry state


Finance Minister Grant Robertson has sounded the alarm on New Zealand's fiscal collapse, with revenue down by billions of dollars and likely to fall further as global demand softens.

The government has ordered savings of almost $NZ4 billion ($A3.7 billion) to meet the challenge, warning Kiwis the belt-tightening meant there could be no big-spending promises during the election campaign.

Frontline public services have been spared, but otherwise, all agencies will need to shrink by either one or two per cent next year, with spending on consultants and contractors targeted.

Mr Robertson said the latest government books showed a $NZ2 billion ($A1.8 billion) loss in revenue in the 11 months to May.

"Anyone looking at the world will be able to tell you that things have not been getting better ... since May we have seen further deterioration in the global economy, particularly in China," he said.

"This will continue to have a direct impact on the New Zealand economy, and it is important that the government responds to meet our balanced and responsible fiscal goals."

In total, the government has outlined savings worth $NZ3.4 billion ($A3.1 billion) in operating expenditure over the next four years as well as $NZ450 million ($A414 million) in capital expenditure.

A more fulsome financial report will arrive in a fortnight, with the release of the pre-election economic and fiscal update (PREFU).

Monday's announcement suggests PREFU will show a serious decline, setting the stage for an uninspiring election campaign leading up to the October 14 poll.

"We have been clear that this cannot be a big-spending election," Mr Robertson said.

In response, opposition National finance spokeswoman Nicola Willis said the announcement showed up the government's inability to manage the books.

"Today Grant Robertson has reached peak Labour ... today is the day of reckoning," she said.

"After six years of spending New Zealanders' money with reckless abandon he's now finally admitted he has a problem, six weeks out from an election.

"This is far too little far too late."

The government announcement is laced with political difficulty for National, as it has already pledged to deliver income tax cuts at the election - cuts which Labour says are unaffordable.

Ms Willis said National would release its tax plan this week, which will not need new borrowing or spending.

"It will be funded through a careful programme of spending reprioritisation and targeted additional revenue measures so that working people who have been crushed by Labour's cost of living process can keep more of what they earn," she said.