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Budget 2025 (NZ) and leading through uncertainty in the Public Sector

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Emily Rust

Navigating Budget Cuts: Leading Through Uncertainty in the Public Sector

New Zealand’s 2025 budget marks a major turning point for public sector organisations.

The government has halved the annual operating allowance — from NZ$2.4 billion to NZ$1.3 billion — with job cuts and operational tightening rippling across ministries and agencies (MPA New Zealand, 2025).

In Wellington alone, public sector jobs have fallen 4.2%, and property prices have slumped by nearly 7% (Reuters, 2025).

Behind these headlines? Human impact. And another kind of leadership challenge.

The Challenge: Leading Through Lean Times

Budget cuts test more than operational strategy - they test values, trust, and resilience. In times of uncertainty, leaders play a pivotal role in holding space for both clarity and compassion.

Since late 2023, the government has been rolling out major cost-cutting measures, resulting in the steepest decline in public sector jobs in decades. From housing market dips to widespread restructure announcements across ministries, it’s clear: the impact is not just financial - it’s human.

And while economists debate the long-term effects, one thing is certain in the short-term: leadership matters more than ever.

The Hidden Cost of Cuts: Trust and Talent

Behind every “efficiency drive” is a very human toll.

Uncertainty fuels anxiety. Restructures fracture team cohesion.

And without clear, empathetic leadership, organisations risk losing not only people, but the institutional knowledge, trust, and energy that drive performance.

It’s a testing ground for every leader. And how you show up now sets the tone for years to come.

The Old Way: Keep Calm and Carry On

Too often, leaders default to silence or corporate spin:

  • “There’s nothing I can confirm just yet…”

  • “Let’s focus on what we can control…”

  • “It’s business as usual…”

But this kind of communication - or lack of it - only heightens uncertainty. When people are worried about their livelihoods, they don’t need slogans. They need clarity, context, and care.

The Shift: Transparent, Grounded, Human

Great leaders don’t pretend everything’s fine. They acknowledge reality, provide timely updates (even if incomplete), and offer steady support. Here’s how:

1. Be Proactively Transparent

Even when you don’t have all the answers - communicate.

  • Hold weekly team check-ins, even if just to say “we’re waiting on updates.”

  • Use clear language, not vague spin. Trust grows when people feel informed, not managed.

  • Explain the “why” behind decisions (not just the “what”).

2. Acknowledge the Impact

Don’t gloss over the stress.

  • Say: “I know this is unsettling,” or “I recognise how this might be affecting morale.”

  • Validate emotions. You don’t need to fix everything - just be present and real.

  • Offer personal and professional support - in the form of office hours, EAP services or internal networks or functions for confidential support.

3. Refocus on Core Priorities

Cuts demand ruthless prioritisation.

  • Ask your team: “What are the 3 most valuable things we do?” Build around those.

  • Pause non-essential work, defer projects, or simplify processes.

  • Focus on what you can control, to enhance a sense of purpose and agency.

  • Build in regular reflection and recalibration check-ins, to keep everyone grounded, connected and purposeful. 

4. Protect Connection and Culture

In tough times, relationships matter more.

  • Keep team rituals alive, even if scaled down - morning huddles, shoutouts, or coffee chats.

  • Celebrate small wins. When big successes feel out of reach, the little ones matter.

  • Set up a “buddy system” for weekly one-to-one check-ins to build connection and offer an ear of support - a problem shared is a problem halved, after all.

5. Coach Through, Not Over

Support others to lead through change.

  • Coach managers and team leaders on how to communicate change with empathy.

  • Offer frameworks or talking points they can adapt.

A Final Word: Don’t Wait for Certainty

In uncertain times, leadership isn’t about having perfect answers.

It’s about how you hold the uncertainty - visibly, humanely, and with steady hands.