Finance Minister Nicola Willis will use a pre Budget speech in Auckland on Tuesday afternoon to argue that New Zealand has too many government departments, too many public servants and too little use of artificial intelligence, and that she intends to fix all three before the 2029 election.
Willis has signalled to the public service that she wants to compress the current spread of roughly 42 departments down to about 12, using Finland as her reference point, and to shrink the core public service workforce from 63,600 at the end of December 2025 back to about 1 percent of the population, which she put at 55,000 by 2029. That implies a net reduction of around 8,000 roles over the next three and a half years on top of cuts already made since she took the portfolio.
She told RNZ ahead of the speech that the question she wanted the public service to answer for her was “what actually would make more sense to come together under one umbrella and one agency, and would actually lead to a better service to the customers it’s trying to serve, and would be more efficient”. She also said it was “time to double down and make even more progress” and that the workforce needed to “get down below 60,000”.
The first practical test of the doctrine is already in flight. Cabinet has agreed to create a new super ministry called the Ministry for Cities, Environment, Regions and Transport, which will fold the Ministry for the Environment, the Ministry of Housing and Urban Development, the Ministry of Transport and the local government functions of the Department of Internal Affairs into a single agency. Willis described the merger as a case study, with further consolidations to follow if it works. According to the NZ Herald, she wants individual chief executives to come back with their own proposals for logical groupings rather than have Treasury or the Public Service Commission impose a map from above.
The second leg of the plan is artificial intelligence and digitisation. Willis wants every department to push automation into back office tasks such as case management, document processing, payroll, procurement and routine compliance work. The argument the government has been making in private to chief executives is that AI tools can absorb low complexity work that would otherwise require thousands of new hires as demand grows, so a shrinking workforce does not necessarily mean a shrinking output of services.
The third leg is the population linked headcount target. Willis pointed out that in 2017, the year before Labour came into office, the core public service was about 48,000 roles, or roughly 1 percent of the population at the time. Under Labour it climbed past 65,000. She wants to return to the 1 percent benchmark by 2029, which on Treasury’s population projection of around 5.5 million people works out to about 55,000 roles. The government has already cut several thousand jobs since the 2024 Budget through baseline reductions and hiring restraint, so a further 8,000 will mean structural disestablishments rather than attrition alone.
The Public Service Association, which represents most of the affected workforce, has argued that across the board spending cuts of between 6.5 and 7.5 percent combined with hiring freezes will hit the services New Zealanders rely on, and that the approach amounts to the blunt instrument the Public Service Commission itself had advised against. The PSA has also questioned whether the Finland comparison holds up, given that Finland has a much larger local government layer that delivers services centralised in Wellington under the New Zealand model.
Labour has so far declined to spell out which departments it would reinstate or which jobs it would restore if it wins next year’s election. Leader Chris Hipkins told 1News at the weekend that he was deliberately holding back major policy commitments until after the 28 May Budget, on the basis that the fiscal picture would not be clear until the books were opened. That leaves the opposition in the awkward position of criticising the reforms in principle while not committing to reverse them, a posture National exploited at length during the 2023 campaign and that Labour now appears to be repeating in reverse.
The new MCERT super ministry is also a political signal. Folding environment, housing, transport and local government under one minister moves the centre of gravity of urban policy away from the Resource Management Act tradition, which treats environment, planning and housing as adversaries, and towards a single delivery agency oriented around growth corridors, congestion pricing and infrastructure pipelines. ACT has been pushing for that consolidation for several years, and the new ministry shape closely matches what David Seymour proposed during the 2023 coalition talks. National sources have suggested that the next case studies could group together social policy agencies such as Oranga Tamariki, the Ministry of Social Development and parts of Health New Zealand into a single human services portfolio, though Willis has not confirmed that.
Willis will deliver the formal speech to Business North Harbour on Tuesday afternoon, with the full Budget to follow on 28 May. Treasury has already signalled a reduced operating allowance and further savings drives across health, education and welfare, so the public service reforms announced this week are likely to be the first of several structural changes unveiled over the next ten days.
Voters get a clearer picture of where each party stands on the size of the state and on department mergers later this year. Use the Newswire voting tool to compare party positions on public service spending, taxation, infrastructure and welfare before the 2026 election.
What do you think of the plan to shrink the public service back to 1 percent of the population, and which mergers would actually deliver better services? Have your say in the comments below.
This article was written by AI, briefed to report the facts, hopefully without some of the bias people bring to the job π
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