Every year, taxpayers pay money to the government, but the question remains: where does it all go?
Simplicity chief economist Shamubeel Eaqub said New Zealand is relatively open about how government money is spent. However, a lot of people misunderstand how taxes work.
“The question is actually the other way around. What public services and what quality of public services do you want, and how do you pay for it? And then you can decide how much tax to pay, because that’s the envelope, and who pays that tax.”
“Because we tend to start a conversation on the wrong end, ‘I must never pay tax, but I want all the best services,’ we end up in this standoff.”
Here is a breakdown of government spending across major sectors, showing where taxpayer money is allocated each year.
For the year ending 30 June 2025, total government expenditure came to $183.5 billion.
The single largest area of spending was social security and welfare, which accounted for $57.6 billion. Within this category, NZ Super was the biggest component, at just over $23 billion. This figure had risen from $53.99 billion in the previous year.
Health was the second-largest area, with spending totalling $29.8 billion.
Education ranked third, reaching $22.3 billion, up from $21.18 billion the year before.
Fourth was economic and industrial services, which covers government spending to support and regulate business activity, at $16.2 billion.
Transport and communications came next, at $15.83 billion.
This was followed by law and order at $7.3 billion, heritage, culture and recreation at $3.38 billion, housing and community development at $4.5 billion, defence at $3.23 billion, environmental protection at $2.3 billion, and primary services at $2.53 billion.
Crown departments, offices of Parliament, the New Zealand Superannuation Fund, and the Reserve Bank accounted for $7.77 billion in spending.
Finance costs totalled $10.39 billion, representing the interest paid on government borrowing.
Expenses for the Government Superannuation Fund Authority came to $83 million.
“If you want nice things, you have to pay for them,” Eaqub said.
Eaqub argued that reliance cannot simply be placed on other people to do it for them and that a sense of personal responsibility and self-reliance is considered quite problematic for many, because for a long time, particularly after the Second World War when the welfare state was established, the general idea was that central government should be trusted to take care of these things so that individuals would not have to.