# Treasury — Changing Patterns of Government Expenditure 2006-2025 (TP 25/01)

**Source:** The Treasury New Zealand, Treasury Paper TP 25/01  
**Author:** Tim Hughes  
**Published:** 31 October 2025  
**Category:** Economics / Government Finance / Ageing  
**KB Location:** `05_Funding_and_Subsidies`

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## Summary

This Treasury paper analyses 20 years of government expenditure patterns (2006–2025) to reveal the structural fiscal pressures facing New Zealand — most critically, the **Population Ageing Trilemma** and its implications for health, superannuation, and other spending.

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## Key Finding: The Population Ageing Trilemma

> _"Population ageing creates a fundamental trilemma for long‑term fiscal sustainability."_

The trilemma means NZ cannot simultaneously:

1. Increase health and retirement spending (driven by ageing)
2. Increase taxes
3. Cut other spending

Without increasing public debt. **All three cannot be done together.**

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## Critical Data Points

### Revenue

- Core Crown revenue: **36.3% of GDP (2006) → 31.6% (2025)** — a significant decline
- Tax and other revenue has not grown relative to GDP over 20 years

### New Zealand Superannuation (NZS)

- **2006: 4.1% of GDP**
- **2024: 5.4% of GDP** (+1.3 ppts)
- Increase more limited than anticipated in 2006 because:
  1. GDP grew faster than expected (high net migration, increased labour force participation, improved terms of trade)
  2. Offsets from reduced KiwiSaver subsidies, NZSF contributions, and Government Superannuation Fund (combined: 2.1% of GDP in 2006 → 0.7% in 2025)

### Health Expenditure

- **2006: 5.5% of GDP**
- Rose to 6.2% in 2010, fell to 5.5% in 2018 (post-GFC consolidation)
- **Since 2018: 6.7% of GDP** (+1.2 ppts)
- Now the single largest category of core Crown spending

### Combined Health + Retirement

- Grew by **1.2% of GDP** since 2006 (including NZSF contributions)
- Grew by **2.4% of GDP** (excluding NZSF contributions)
- Structural deficit is the direct result

### Other Expenditure

- Number of children declined relative to population, but spending on early childhood education and family supports increased
- Corrections, climate‑related spend, and housing‑related spend all growing faster than GDP
- Natural disasters (2023 NIWE, COVID‑19) had material fiscal impacts

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## Why This Matters for Older New Zealanders

1. **NZS cost pressure:** As population ageing accelerates (baby boomers entering retirement, fertility rates declining), NZS will consume an increasing share of GDP — potentially reaching 7–8% by 2050s under current settings.
2. **Health cost pressure:** Older people are the highest users of healthcare. The shift from 5.5% to 6.7% of GDP in health spending over 20 years will continue accelerating as the population ages.
3. **Trilemma trade‑offs:** If the Government cannot cut other spending or raise taxes, debt increases — which constrains future capacity to respond to shocks and maintain services.
4. **Mitigating factor:** High net migration among working‑age people has slowed the ageing effect — this is a temporary buffer, not a permanent solution.

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## Relationship to Other Treasury Work

| Document                          | Relationship                                                                            |
| --------------------------------- | --------------------------------------------------------------------------------------- |
| He Tirohanga Mokopuna 2025 (LTFS) | Takes the trilemma and projects it 40 years forward                                     |
| WP 26/01 (OLG Model)              | Models the fiscal implications of ageing with more detail on intergenerational effects  |
| Te Ara Mokopuna 2025 (LTIB)       | Examines fiscal resilience and capacity to respond to shocks given structural pressures |

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## Source

- Full PDF: https://www.treasury.govt.nz/sites/default/files/2025-10/tp-25-01-changing-patterns-government-expenditure-2006-2025.pdf (accessed 9 Jun 2026)
- HTML page: https://www.treasury.govt.nz/publications/tp/tp-25-01 (accessed 9 Jun 2026)
- Power BI visualisation: https://app.powerbi.com/view?r=eyJrIjoiMjRhNzY1MWQtZWU5MC00NjgzLWI1ZWItY2RlNWFiNWY3MmE1IiwidCI6ImVlYTYwNTMzLTA5ZWYtNGI3YS05NDA2LTBmMzg1NTFjYzYxMyJ9 (accessed 9 Jun 2026)