22 May 2025
The Government has today presented Budget 2025, a comprehensive economic plan that focuses on securing New Zealand’s future by promoting economic recovery, supporting essential public services, and addressing long-term challenges. In a time of global economic uncertainty, including high inflation and interest rates, the Government has taken a responsible approach to ensure fiscal sustainability while fostering growth.
This Budget prioritises key areas such as business investment, health, education, and infrastructure, while maintaining fiscal discipline and avoiding new broad-based taxes. The objective is to lay a solid foundation for continued recovery and future prosperity.
Economic Recovery and Fiscal Responsibility
Budget 2025 comes at a critical time, as New Zealand navigates the challenges of inflation, high interest rates, and economic slowdowns. Despite these pressures, Treasury forecasts a return to growth, with 240,000 new jobs expected to be created and a reduction in government debt. The Budget highlights a path toward balanced government books over the next four years, with growth projections pointing to stable inflation and lower interest rates.
The Government has focused on maintaining fiscal responsibility, with significant savings made across various government sectors. These savings have been used to fund high-priority initiatives without increasing the overall debt burden.
Key Budget 2025 Initiatives
- Investment Boost Tax Incentive
One of the key initiatives in Budget 2025 is the introduction of the Investment Boost Tax Incentive. This policy allows businesses (including commercial property but excluding land and residential property) to immediately deduct 20% of the cost of new assets from taxable income, in addition to regular depreciation. The aim is to stimulate business investment and increase productivity, which is expected to lift wages and capital stock over time, contributing to a stronger economy. - KiwiSaver Enhancements
The Government is implementing several reforms to improve KiwiSaver’s sustainability and increase savings for New Zealanders:
- Increased Contributions: The default employer and employee contribution rates will be gradually raised to 4%, helping New Zealanders build more substantial retirement savings.
- Expanding Eligibility: The scheme will now extend to include 16 and 17 year olds, providing more young people with the opportunity to save for retirement.
- Government Contributions: The Government will reduce and better target its contributions to ensure the long-term sustainability of KiwiSaver. Those with income over $180,000 will no longer receive a Government contribution.
- Cost of Living Support
To assist households facing the rising cost of living, the Budget introduces a range of support measures:
- Increased Working for Families Support: 142,000 low to middle income families will receive an average of $14 extra per fortnight.
- Rates Rebates: Up to 66,000 SuperGold cardholders will benefit from rebates to help reduce living costs.
- Health Savings: Additional funding will reduce prescription costs for patients on long-term medications, along with support for community food banks.
- Health Funding
A $7 billion operating funding increase over the forecast period is earmarked for New Zealand’s health sector. Key areas of focus include:
- GP and After-Hours Care: Investments to improve access to primary healthcare services.
- Cancer Treatments: More funding for cancer care and other critical medical treatments.
- Health Infrastructure: $1 billion in capital funding to replace and upgrade health facilities, including Nelson Hospital and Wellington Emergency Department.
- Education Investments
A $1.5 billion investment will be made in New Zealand’s education sector to support student achievement, including:
- Learning Support: $646 million for initiatives to better identify and support students with additional needs.
- School Infrastructure: Over $700 million to fund new schools and classrooms to accommodate growing student numbers.
- Law and Order
Budget 2025 includes an additional $1.1 billion in funding for law enforcement and justice reforms. This will support:
- Frontline Policing: Enhanced resources for police services to address crime and improve public safety.
- Youth Offending and Organised Crime: Increased funding for targeted initiatives to reduce youth offending and combat organised crime.
- Prison Capacity: Investments in expanding prison capacity, including the Christchurch Men’s Prison expansion through a Public-Private Partnership.
- Defence and Foreign Affairs
The Government has allocated $1.9 billion in operating funding and $1.1 billion in capital funding to strengthen New Zealand’s defence and foreign affairs capabilities. This reflects the evolving global geopolitical context and New Zealand’s role in ensuring peace and stability in the Pacific region.
Capital Infrastructure Investments
Budget 2025 also outlines $6.8 billion in capital funding to improve New Zealand’s infrastructure. This includes investments in transport infrastructure, health facilities, and educational facilities, all aimed at ensuring sustainable growth and enhancing the country’s essential services.
Fiscal Discipline and Savings
The Government has emphasised its commitment to maintaining fiscal discipline. Budget 2025 makes use of $21.4 billion in operating savings achieved through 116 initiatives, ensuring that new investments can be made without resorting to additional borrowing or introducing new taxes. This careful balancing of savings and strategic investments supports long-term economic growth while safeguarding fiscal sustainability.
A Balanced Approach to Future Growth
Budget 2025 is designed to foster a balanced, sustainable future for New Zealand. By investing in areas that are crucial for growth, including business investment, infrastructure, and public services, the Government is laying the groundwork for a stronger economy in the years to come. The Budget focuses on improving the lives of New Zealanders, addressing long-term challenges, and ensuring that the country is well-positioned to navigate future uncertainties.
With these initiatives, the Government aims to create a more prosperous and stable future for all New Zealanders.
The full Budget 2025 is available here.