Assorted budget bits

A few minor bits I noted in looking through the budget - won't bother going through the headline stuff that will have been well covered elsewhere.

• They expect to save $1.97 billion by 2029/2030 through the public sector transformation project reducing staffing numbers. There will be pressure on that figure despite the substantial increase in public sector staffing, both in absolute numbers and as fraction of population, over the past six years. 
• Statistics New Zealand gets a large budget increase, both opex and capex, to modernise the IDI. At the same time, it will be held to baseline savings like the rest of the public sector. The Minister for Statistics might want to watch that SNZ doesn't siphon IDI money out for other activities. 
• They're fixing part of the FIF regime as it faces domestic investors, to match the fixes made for those moving to NZ. Taxing unrealised gains was always dumb; good that they're fixing this.
• The Proposal for Reducing the Risk of Online Harm to Children puts $30.75m over four years "to develop policy and possible regulatory options to improve children's online safety, subject to future policy and funding decisions". This is just for the policy development work. It seems like far more money than necessary for a project that shouldn't be being undertaken in the first place.
• They've set a Defence Technology Accelerator as part of the Defence Capability Plan. Sounds neat; only gets $16.1m over 4 years. Maybe if its first year looks promising, funds from the online harm thing could be shunted over here.
• Customs is getting $15.3m opex and $19.5m capex to respond to "increased smuggling", text says it's aimed at illicit drugs. And $35.9m in third-party levy revenue. Could affect tobacco excise too.
• A whole page of the BEFU Supplementary Materials goes through the weaker outlook for tobacco excise. They've sharply reduced forecast tobacco excise revenue as compared to the HYEFU forecast: $1.58 billion over the forecast period. They note a weakened demand profile - but they don't get into whether it's a drop in smoking or a shift to illicit markets. It's a drop in demand for excised tobacco in either case. But they do note an offsetting minor increase in forecast tobacco revenue over the same period. And this is kinda funny.
  

  "The excise rates for heated tobacco products (HTPs) were reduced by 50% on 1 July 2024. Recent data show that the decline in duty from the lower HTP duty rates has not been as large as was expected. Furthermore, subsequent research suggests that future HTP take-up will not be as large as was previously assumed."

  Remember the giant beat-up on Casey Costello in 2024 for the "Tax break for big tobacco"? It was all based on that very stupid estimate that Treasury stuck in the forecasts. Nobody should have believed the figure at the time - it was ludicrous. I don't know whether Hon Verrell actually believed it, or whether it just gave her a convenient line to beat up on the government for its changes to tobacco policy. Neither's great. My column on the stupidity of that figure is here.

• I think Treasury is likely overestimating alcohol excise returns. Recall that SNZ reports very sharp reductions in per capita alcohol available for consumption - those figures are based on excise returns. Treasury has applied a one-off drop to current levels, but then a reversion to prior pre-Covid trend growth in excise. I think Covid and GLP-1 inhibitors and general trends in youth risk-aversion have caused a structural break. Total alcohol available for consumption, on the SNZ figures, peaked in 2021 at 36.3 million litres and have declined since despite population growth - 2025 was only 31.3 million litres.  

• Overall, it'll take a heroic effort to stick to the plan they have, and that'll only get us to structural surplus by 2029.