New Zealand plans to cut 14% of public sector jobs to slash spending

New Zealand Finance Minister Nicola Willis [AP Photo]

New Zealand’s government will lay off nearly 9,000 workers, amounting to 14% of public sector jobs, by mid-2029 as part of a bid to slash billions in spending, Finance Minister Nicola Willis said yesterday.

Willis said her administration would also enact three consecutive years of budget cuts for most public agencies, “significantly reduce” the number of departments, and demand faster uptake of AI technology across the sector. The cutbacks would save 2.4 billion New Zealand dollars ($1.4 billion) during that period, the minister told a business audience in New Zealand’s biggest city, Auckland.

Many public servants live and work in the capital city, Wellington. Their numbers would be cut to 55,000, a drop of 8,700 from December 2025 figures, Willis said.

That would reduce the number of public servants to 1% of New Zealand’s population of 5.3 million people, she added, down from 1.2%.

“That’s unsustainable, it’s unaffordable and it’s out of step with international trends,” she said. The military, teachers and doctors would be among those exempt from the job losses, Willis said.

The measures would also reduce the number of government departments and agencies from the current 39 to an unspecified figure.

The layoffs won’t happen right away, however, and Willis didn’t detail a plan for deciding who would lose their jobs. Her center-right government, which has been in power since 2023 and campaigned then on downsizing the public sector, faces a fresh election in November.

Unions and opposition political parties decried yesterday’s announcement.

“There is no way you can reduce that many people working for our public service without reducing front-line services,” said Labour Party and opposition leader Chris Hipkins. Duane Leo, spokesperson for the union representing thousands of public servants, said the measures were “an act of willful destruction.”

The government, led by the National Party, blames what it says was fiscal recklessness by the previous center-left administration led by Labour for growing public servant numbers, which increased from 48,000 to 63,000 during Labour’s time in office. In 2018, Labour had revoked a cap on public sector jobs imposed by the last National government, saying that had prompted ballooning spending on contractors and consultants by agencies avoiding new full-time hires.

Most government agencies will have their funding trimmed by 2% in the government’s budget at the end of May, Willis said. Cuts of 5% per year would follow for each of the next two years if the government was reelected.

The public sector “hasn’t been keeping pace” with advances in AI and digital technology and would be required to adopt them, Willis said.

The pledge of public sector cutbacks comes as growth in New Zealand’s economy remains sluggish and Prime Minister Christopher Luxon, who sold himself as a better fiscal manager than his opponents, seeks to show evidence of economic recovery before November’s vote. Luxon said that the prospect of a more efficient public sector was “exciting.”

“The public service is not a make-work function,” he said. CHARLOTTE GRAHAM-McLAY, WELLINGTON, MDT/AP