Published in The Australian (Sydney), 19 December 2025
Last week, boxes of fudge arrived at New Zealand’s Parliament. Not as a festive treat, but as a political weapon. The New Zealand Taxpayers’ Union, chaired by former Finance Minister Ruth Richardson, had sent them to journalists with a blunt message: Finance Minister Nicola Willis was “fudging” the fiscal accounts.
The stunt was classic Taxpayers’ Union: theatrical, media-savvy and guaranteed to make the evening news. But what came next was a surprise. Willis fired back with a direct challenge: she would debate Richardson “anytime, anywhere.” Richardson accepted.
Suddenly, two figures on the same side of politics were locked in a public clash about the country’s finances.
I should put my cards on the table. Willis served as a director of The New Zealand Initiative, the think-tank I lead, before she entered parliament. I have known her for more than a decade. Richardson and I are both members of the Mont Pelerin Society and have remained friendly since working together at the Centre for Independent Studies in Sydney from 2008 to 2012.
Watching Ruth and Nicola trade accusations through fudge boxes is not something I take pleasure in. But their fight shows just how strained New Zealand’s public finances have become.
The “fudge” accusation is partly about a new metric called OBEGALx. This is the government’s operating balance, but excluding the results of the Accident Compensation Corporation, New Zealand’s universal accident insurer.
ACC’s finances fluctuate because it must continually revise the long-term costs of the injuries it covers.
They are also consequence of decisions to expand scope of ACC coverage to include things that are not accidents. These are serious, long-term issues, not day-to-day spending decisions.
Willis argues these swings (ACC’s liabilities have ballooned past $30 billion) distort the true picture of how the government manages its cash. Her critics counter that inventing a measure which makes the books look better is precisely the kind of accounting trick that erodes trust.
Both sides have a point. However, the deeper problem lies beneath the acronyms.
New Zealand is running a structural deficit of roughly $9 to $10 billion, a deficit that persists even when the economy is operating normally. A surplus is not expected until 2028/29, well beyond this parliamentary term. Government spending continues to rise. The fiscal hawks are not wrong to sound the alarm.
Richardson knows something about fiscal emergencies. When she became Finance Minister in 1990, she inherited books in far worse shape than anyone had admitted. The Bank of New Zealand was on the brink of collapse.
Her response, the 1991 “Mother of All Budgets,” slashed benefits, dismantled collective bargaining and rewrote the social contract between citizens and the state.
The human cost was severe. Unemployment surged past 10 per cent. By some measures, poverty roughly doubled.
But the reforms worked. By 1994, the government was running surpluses. Growth returned. The foundations were laid for the prosperity that was to follow.
Richardson paid an enormous personal price. She needed police protection while in office, faced lasting attacks from parts of the left, and saw her political career cut short. She deserves far more credit than she has received. Her frustration at watching another generation defer hard choices is understandable.
Yet 2025 is not 1991, and Willis operates under constraints Richardson never faced.
New Zealand changed its voting system to MMP in the mid-1990s, partly as a reaction against the unilateral power that enabled Richardson’s reforms (and Roger Douglas’s before her). The system was designed to force compromise. Willis does not have the freedom Richardson had under First Past the Post.
She must negotiate with New Zealand First, a populist partner firmly opposed to asset sales and deep cuts to superannuation. She serves under a prime minister who campaigned on tax relief before Willis even became finance spokesperson, and who has shown little appetite for bold action.
And then there is Treasury itself. Many former senior officials say the organisation is thinner and more stretched than in earlier decades. A finance minister is only as good as the advice she receives.
But institutional limitations are not the whole story.
In my view, the government went too softly in its first two years. The tax cuts delivered in 2024 were the wrong priority because they were not matched by genuine spending reductions.
What was sold as “reprioritisation” often meant shuffling money between buckets rather than shrinking the state, cutting back-office jobs here while funding new regional projects there.
That early caution is coming home to roost. But this was a captain’s call from Prime Minister Christopher Luxon, not Willis. Blaming the finance minister ignores who set the strategy.
The Taxpayers’ Union claims there are $35 billion in savings to be found. If it were that simple, some of that money would already be in the bank.
Yes, there is scope to reduce public service headcounts, to raise the retirement age and to continue welfare reforms. But $35 billion is a number chosen for shock value rather than fiscal precision.
There is a huge gap between what works on a spreadsheet and what works in coalition politics.
Richardson, of all people, would know how brutally the political system punishes those who try to close that gap.
What does this public clash tell us?
Not that one side is right and the other wrong. It tells us that New Zealand’s fiscal predicament is genuinely serious.
When fiscal conservatives are at each other’s throats, when allies trade barbs through fudge boxes and parliamentary challenges, you know the underlying problem has become very hard to fix.
The stoush is the story, a symptom of how messy and politically constrained it has become to get the books back in order, particularly in a country that once prided itself on economic reform.
Treasury’s just-released Half-Year Update confirms what everyone suspected: the books are tight, the deficit is deepening before it narrows, and Willis has had to push back her surplus targets by another year. She has a difficult twelve months ahead, navigating an election year with a coalition partner who would veto Richardson-style surgery.
When she was in charge, Richardson was brave, and her reforms were necessary. Today, Willis is constrained, and she faces a challenging task.
The real lesson from their clash is that New Zealand’s fiscal mess belongs to no single minister and fixing it will require more than boxes of fudge and blame hurled across the political right.
In an ideal world, Nicola and Ruth would have a quiet chat with each other about what could be done.
Since it is Christmas, that would be my wish.
