Nicola Willis has ruled out changes to the 2025 Budget, despite global uncertainty over Trump's tariffs. Photo: RNZ / Marika Khabazi
Finance Minister Nicola Willis has urged Kiwis to be "resilient" in the face of the global economic turmoil brought on by hard-hitting US trade tariffs this week.
Last week, President Donald Trump announced a range of tariffs that have sent markets reeling, doubling-down with a threat of an additional 50 percent against China.
The Reserve Bank will consider its next move when it addresses the official cash rate (OCR) on Wednesday afternoon, but Willis is adamant the government will not overreact to world events outside its control.
"Of course, we are monitoring international developments very carefully and studying the implications for New Zealand," Willis told Morning Report.
"We are well-placed as a country, compared to many other countries, because we have such a broad range of trading relationships around the world. And our exporters, in a relative sense, are facing tariffs lower than that by many other countries.
"There's no escaping the fact we are globally connected - the countries we trade with are being buffeted by these events that will affect their growth prospects, their inflation prospects and that will, in turn, affect New Zealand."
The government will make its annual Budget announcement on 22 May, and Willis indicated it would not greatly deviate from its course towards a projected surplus by 2027/28.
"We still have the right plan," she said. "This is a time to be careful about our finances, to be backing our exporters and to have plans in place to continue to make New Zealand a good place to invest and do business."
Willis hinted the government would not cushion the blow by injecting extra cash to stimulate the economy.
"At this stage we are sticking to our fiscal strategy, and that strategy says 'let's do gradual consolidation of very unbalanced books'," she said. "We have a goal to return the books to surplus by the 2027/28 financial year, so still some time away.
"We need New Zealand to be resilient - this volatility in the world could persist for some time, so New Zealand needs to be in a position to withstand that.
"We will be spending - there's no question about that - but there are two aspects. The global events that are unfolding and growth rates internationally, we can't control that, so there's no response New Zealand can make that will impact those things.
"The second thing is what we can do at home and, for New Zealand, we need to continue to make investments where they are required - that's infrastructure, that's capital investment, that's education and health systems, and police.
"We will keep doing that, but actually now more than ever, we need to prioritise resources effectively and not being wasteful in the way we spend."
Westpac chief economist Kelly Eckhold told Morning Report the Reserve Bank should avoid alarming people with an unexpected big rate cut.
The central bank will update the official cash rate Wednesday afternoon, with broad expectations of a 25 basis-point cut to 3.5 percent, after three 50-point cuts between last August and February.
Eckhold said the risks to the economic outlook had been raised by the US slapping tariffs on countries, but at this time, the Reserve Bank needed to stick to the signalled smaller cut and not lurch higher, which might cause anxiety.
"I think ultimately [world markets] will adapt, but it could be a long time. So I don't think you want to underplay the downside risks there could be to global demand here.
"In the short-term, it's really hard to know how much this will impact on New Zealand. The shock has come at not a terrible time for us - given there have already been quite a few rate cuts, we already had relatively high commodity expert prices."
Eckhold expected further cuts to the cash rate to 3 percent, but said, depending on circumstances, it might go lower.
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