Published in Insights, The New Zealand Initiative’s newsletter, 29 May 2026
This week’s Budget confirmed what most New Zealanders already suspected. The government’s finances are tight, the deficit persists, and there is no pot of money waiting to be spent on the country’s problems.
Just as well, because government spending never delivers growth or prosperity. The question is, what will?
While the reformers of the mid-1980s faced an enormous task, their challenge was concentrated. There were few but large structural changes. Floating the dollar, removing subsidies and opening the economy did most of the heavy lifting.
Today, the reform challenge is different. New Zealand is not crippled only by one or two catastrophic distortions. It is held back by dozens of smaller ones, such as planning rules that restrict housing supply, funding models that punish councils for approving development and regulatory barriers that discourage business investment.
Each would be manageable in isolation, but together, they strangle the economy.
The current government has made genuine advances, among them liberalising overseas investment, reforming school education and beginning the replacement of the Resource Management Act.
But structural problems remain, and the world is less forgiving. The closure of the Strait of Hormuz has delivered a fuel price shock that further compresses an already tight fiscal room, strains household budgets and cuts New Zealand’s growth prospects.
This week, The New Zealand Initiative published Prescription for Prosperity 2026, our fourth briefing to the incoming government. It makes 235 recommendations across 26 chapters, from housing and health to trade, defence and local government reform.
We did not set out to write a long document, but the list kept growing because the problems are spread across almost every portfolio.
No single recommendation would transform the country. But the cumulative effect of implementing even half of them would be substantial. These problems were made in Wellington and can be unmade there.
Selling one big reform is one thing. Selling dozens of small ones across every portfolio at once is another.
Reform demands a state apparatus capable of processing multiple policy changes simultaneously. That is why our Prescription proposes restructuring the public service itself as an enabling reform that would make all the other reforms deliverable.
New Zealand does not need a silver bullet. It needs capable government, willing to do the unglamorous, sustained work of fixing what is broken, one policy at a time.
Explore our research report “Prescription for Prosperity 2026” here.
