New Zealand's central bank will cut its operating budget by about 25% next fiscal year and set its operating budget at about NZ$150 million ($88.5 million) per year for the next five years, Finance Minister Nicola Willis said on Wednesday.

Under the RBNZ funding agreement, the bank will receive a total of NZ$750 million ($443 million) for operating expenses over a five-year period to June 30, 2030.

Willis said in a statement the funding was equivalent to an average annual operating budget of NZ$150 million, down from the NZ$200 million budget for this financial year.

Total five-year operating expenditure is NZ$750 million, up from the previous five-year operating budget of NZ$718.8 million. However, the Reserve Bank of New Zealand's annual report shows that annual spending grew by nearly 70% in the four years to June 30, 2024.

The Government has allocated a total of $25.6 million in capital expenditure for the five-year period to June 30, 2030, down from about $29 million for the five-year period to June 30, 2025.

"The new agreement will ensure the Reserve Bank has adequate resources to meet its legal responsibilities while also being more cost-efficient," Willis said.

"Both the Reserve Bank board and Treasury agree that the new spending limits are appropriate."

The Conservative government has imposed deep cuts to the public sector since being elected in late 2023 as part of its efforts to return government accounts to surplus. Cabinet papers released alongside the statement said Treasury reviewed the central bank's request for NZ$1.03 billion in five-year funding and found it "did not offer good value for money".

The central bank has expanded significantly since 2018, with staff numbers almost doubling to 660 in January this year. This is partly due to the central bank's enhanced supervisory role, which requires staff to implement various reforms.

Neil Quigley, chairman of the central bank's board, said the central bank would work with staff in the coming months to redesign the way they work to optimise resources while continuing to deliver on its mandate.