Budget 2025

Budget 2025 continues the Government’s well-signalled emphasis on fiscal consolidation alongside economic growth. It includes $6.7bn of operating investment in new initiatives - with $4.9bn funded through savings and reprioritisation - and $6.8bn of capital investment in the key areas of defence, education, health, and law and order.

Reflecting the Government’s emphasis on growth, a key focus of today’s announcement was the introduction of Investment Boost – a tax incentive to encourage businesses to invest in productive assets. The initiative allows for an immediate tax deduction of 20% of the cost of eligible new assets. It is forecast to cost $1.7bn per annum and to lift GDP by 1% and wages by 1.5% over the next 20 years. Additional growth measures include $85m to enable the establishment of Invest New Zealand - the new foreign investment agency that was announced by the Government in January 2025.

Alongside this tax incentive, changes to Kiwisaver were announced, focused on: 

• Improving national savings – through increasing the default employer and employee rate from 3% to 4%.

• Increasing the financial sustainability of the scheme – through halving the Government’s contribution level and removing eligibility for this contribution for those earning over $180,000. 

The economic outlook has deteriorated relative to previous forecasts, with real GDP growth expected to be lower and slower, peaking at 3% in FY27 before reducing to 2.6% by the end of the four year forecast period.

The operating balance deficit, using the Government’s headline operating balance OBEGALx measure, is expected to increase in the near term, before returning to a more modest surplus than previously forecast in FY29 (2028/29). Under OBEGAL, there is no return to surplus within the forecast period.

Net core Crown debt is expected to increase over the forecast period due to the additional borrowing required to bridge cash shortfalls, and is forecast to peak at 46.0% of GDP in FY28, before reducing to 45.5% of GDP by the end of the forecast period.

Forecast period: FY25 - FY29