A blunt verdict from The Terrace
New Zealand’s central economic adviser has just been told, in writing, that it is losing the confidence of the people it advises. An independent Performance Improvement Review, conducted by the Public Service Commission and released on 30 June, rated Treasury’s economic policy advice as ‘weak’ and its core Budget and fiscal management functions as only ‘developing’. It is the first such review in a decade.
The review describes a self-reinforcing spiral: ministers grew less confident in the advice, Treasury’s influence shrank, talented people left, and the department became more risk-averse and less ambitious. That matters well beyond Wellington. When the institution that costs every major policy and signs off the fiscal forecasts is operating at reduced credibility, every number it produces carries a discount.
The errors that did the damage
The review names specifics. Treasury failed to monitor and escalate ACC’s emerging performance issues, and ministers received incorrect advice on ACC deficits. Its monitoring role also missed the spending blowouts at Health New Zealand.
Then there is the ferry programme. Ministers did not regard Treasury’s commercial advice on replacement Interislander ferries as robust, which the review says eroded confidence in its commercial transaction capability more broadly. Some interviewees questioned whether Treasury has enough senior leaders with deep commercial expertise at all.
The ferry saga shows the dynamic in action
The Cook Strait replacement is a $1.867 billion programme including contingency, funded within a $1.7 billion Crown envelope agreed by Cabinet in March 2025 for two rail-enabled ferries due in 2029. Treasury had advised against rail-enabled vessels. The government overruled it.
The defence may well have merit. But the episode is precisely the governance failure the review flags. Once ministers stop trusting their adviser’s commercial analysis, they stop using it, and the checks on multi-billion-dollar spending decisions weaken. The ferry call may prove correct. The process that produced it, over Treasury objections with Treasury’s credibility already in doubt, is the warning sign.
The numbers nobody can fully trust
Treasury is fighting this credibility battle at an awkward moment. Its Budget update published on 28 May 2026 projects GDP growth of just 1.2% in 2025/26, recovering to 3.2% by 2027/28, with inflation peaking at 4.0% in the June 2026 quarter on the back of a Middle East oil shock it treats as transitory. For the year to 30 June 2025 the government ran an operating deficit of $4.4 billion, with net core Crown debt at $182.2 billion, or 41.8% of GDP.
Those are the outputs of the institution just rated ‘weak’ on economic advice. The market noticed. S&P Global Ratings was underwhelmed by the government’s efforts to return to surplus, and BNZ head of research Stephen Toplis asked publicly whether ‘the economic forecasts on which this analysis is based… are credible’, warning there was a clear risk the outlook was too rosy.
Business wants a watchdog
The distrust is now showing up in the boardroom. A June 2026 report found 61 percent of executives in the NZ Herald’s Mood of the Boardroom survey backed an independent institution to oversee government spending. Auckland Airport chief executive Carrie Hurihanganui said such a body, set up correctly, ‘would add value’, while Deloitte chairman Thomas Pippos argued ‘the more we can depoliticise the articulation of facts, the better we will be.’ Australia, the UK and Canada already have independent fiscal institutions. New Zealand does not.
What happens next
Finance Minister Nicola Willis acknowledged the problems but stopped short of structural change, praising Treasury’s costing and Budget process while pointing to weak economic debate. Secretary Iain Rennie, who commissioned the review himself, committed to deepening economic advice and improving engagement.
That self-awareness counts for something. But credibility is not rebuilt by improvement plans. It is rebuilt by producing advice that proves correct over time. Until it does, the surplus timeline, the debt trajectory and every infrastructure cost estimate carries a discount that did not exist five years ago. For boards assessing sovereign risk and businesses planning investment around government numbers, that discount is a real, ongoing cost.
Sources
- Treasury ‘losing ministers’ trust’, independent review finds (2026-06-30)
- Ministers losing confidence in Treasury advice, review finds (2026-06-30)
- Treasury Performance Improvement Review finds ministers losing confidence
- Cook Strait Ferry Replacement programme – key decisions (2025-11-06)
- Budget Economic and Fiscal Update 2026 (2026-05-28)
- Calls grow for an independent budget watchdog as election year spending fights heat up (2026-06-15)