Editors’ note: all figures in the article can be found in the Summary of Initiatives document on the Treasury’s Budget2025 website.
Written by Daniel Blundell
The Government recently released their 2025 Budget, outlining where it will be spending New Zealanders’ money for the next fiscal year. For 2025/26, key aspects of the Budget include an ‘Investment Boost’, KiwiSaver changes, additional investment in health, education, law and order, and social services, as well as increased defence spending. This article will detail the larger allocations that have been made in the 2025 Budget and explore its reception by industry professionals, including their critiques and praises for what the Budget falls short on, and what it achieves.
Budget Overview
Investment Boost
The Investment Boost is described by the Government as their ‘centrepiece of Budget 2025’, and is essentially a form of tax relief for business owners who are looking to further invest in productive assets such as machinery, vehicles, tools, and equipment. With this boost, businesses can deduct 20% of a new asset’s value from that year’s taxable income. The Government’s goal is for this to ultimately drive economic growth, increase the productivity of workers and lift incomes. The Investment Boost is predicted to lift GDP (Gross Domestic Product) by 1% and wages by 1.5% over the next twenty years, with half of that increase predicted to occur within the next five years.
KiwiSaver Changes
The default rate of employee and employer contributions is rising from the minimum 3% to 3.5% from 1 April 2026, and then finally to 4% from 1 April 2028. Furthermore, the Government contribution is being extended to apply to 16 and 17-year-olds. To account for this increased cost, however, the Government has decided to reduce its annual contribution from 50 cents per dollar contributed (with a maximum of $521.43) to 25 cents per dollar contributed, with a maximum of $260.72. Those who earn more than $180,000 per year will not receive the annual government contributions from 1 July 2025. The Government says that with these changes, the KiwiSaver balances of employees contributing at the new default rate will grow faster than they do at the current default rate of 3% (The Treasury New Zealand, 2025b).
Health and Education investment
Overall, the Government has committed to a funding increase of $5.5 billion for hospital and specialist services, primary care, and public health, with $1 billion being allocated to redeveloping Nelson Hospital, the Wellington Emergency Department, and upgrading Auckland hospitals. A further $447 million is being used to expand access to urgent care and after-hours services, and $1 billion is being allocated to providing new, additional treatments and medicines that Pharmac have announced over the last 12 months.
In the education sector, the Government is aiming to lift school achievement by investing $646 million to support children with additional learning needs, and $100 million to support kids who need extra maths help. A further $140 million is being used to lift falling school attendance.
Law and order and social services
Larger investments in the law-and-order sector include $480 million of additional funding to frontline policing, $472 million to manage prison growth, and $246 million to reduce court delays and improve access to justice for victims. Additionally, $774 million has been allocated to respond to the Royal Commission of Inquiry into Abuse in Care, and $760 million is being provided to support the provision of Disability Support Services.
Increased Defence Spending
The Government says it has increased defence and foreign affairs spending to enhance security in the Pacific region and to promote New Zealand’s interests internationally. Overall, $2.7 billion is being used to boost capability in the New Zealand Defence Force. Included in this is $660 million being funded to improve Defence Force capabilities across air, sea, land and cyberspace sectors, and $368 million is being used to deliver overseas development assistance focused on the Pacific. Additionally, funding is being provided to support troop deployment and training in countries such as Ukraine, and to fund new aircraft and replace older ones. The Government is also spending $84 million to improve New Zealand’s relations in Asia to support its goal of doubling exports in that region.
Reception of the 2025 Budget
Responses to the Government’s budget have been mixed, with some viewing it as positive and others believing that it is lacking in some areas or has neglected pressing issues. Phil O’Reilly, former Business NZ boss, in correspondence with the NZ Herald, said that the budget did a reasonable job of balancing fiscal consolidation and staying true to the goal of growth (NZ Herald, 2025). He supports the investment boost, saying that a 100% reduction like is offered in other countries may not incentivise growth, and instead prompt unnecessary spending for tax breaks.
Craig Renney, economist and director of policy at the Council of Trade Unions, said he was disappointed that the $12 billion saved from the recent changes to pay equity claims (Satherley, 2025) wouldn’t be going towards things that would benefit those affected. He also explained that the KiwiSaver contribution changes would affect low-income workers the most, though he supported the extension of KiwiSaver to 16 and 17-year-olds. Overall, he had a largely negative view of this year’s Budget, saying that “this is a Budget with all its priorities wrong – and working people will be paying the price” (NZ Herald, 2025). Economist Shamubeel Eaqub seems to agree, saying that middle-income earners will be hit by the KiwiSaver changes, as once they are fully implemented, an average worker earning $75,000 would end up paying more employer superannuation contribution tax (ESCT), and combining this with the reduced Government annual contribution, “the Government will claw back about $500 from you per year” (Ricketts, 2025).
The Policy and Public Affairs Manager for the NZ Taxpayers’ Union, James Ross, described the Budget as being bad for everyone and a lot worse for young people, and agreed with Renney that middle-income workers would feel the pain of stagnant wages, which is outlined in the Government’s Economic and Fiscal Update (Ricketts, 2025). However, Ross, as well as former Conservative Party CEO Christine Rankin, thought the decision to rescind the benefit for 18 and 19-year-olds who have just left school was a good idea, with Ross saying that if parents can support their school leavers, they should.
In Parliament, the opposition has condemned the budget, with Leader of the Opposition Chris Hipkins saying “this budget is nothing but bad news” and that it would be remembered as “the budget that left women out” (Lardies, 2025). Green Party Co-leader Chlöe Swarbrick called it the “trickle-down budget, the no ambition budget, the child poverty budget”(Lardies, 2025). Whereas David Seymour, leader of the ACT Party, claimed on Facebook that it was a budget that “represents another year of stable government” (Lardies, 2025).
References
Lardies, G. (2025, May 22). A Guide to the 2025 Growth Budget for people who hate budgets. The Spinoff. https://thespinoff.co.nz/politics/22-05-2025/a-guide-to-the-2025-growth-budget-for-people-that-hate-budgets
NZ Herald. (2025, May 22). Budget 2025 live updates: What’s in it for you. The New Zealand Herald. https://www.nzherald.co.nz/nz/budget-2025-live-updates-whats-in-it-for-you/WTDRICR2LNGU3IZBAV7JWW2LPE/
Ricketts, E. (2025, May 24). The everyday New Zealanders who will lose out on Budget 2025. Stuff. https://www.stuff.co.nz/nz-news/360699451/growth-budget-yeah-right-more-losers-winners-budget-2025
Satherley, D. (2025, May 13). Pay equity claims: What they are and how they’re changing. Radio New Zealand. https://www.rnz.co.nz/news/political/560849/pay-equity-claims-what-they-are-and-how-they-re-changing
The Treasury New Zealand. (2025a). Budget Economic and Fiscal Update 2025. https://www.treasury.govt.nz/publications/efu/budget-economic-and-fiscal-update-2025
The Treasury New Zealand. (2025b). Budget at a Glance. https://budget.govt.nz/budget/2025/at-a-glance/kiwisaver.htm
