Government is going for growth with Budget 2025
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Dear John,


BUDGET 2025

This year's budget is about growing the economy to ensure we have more to spend
on public services like health, education, defence, and law and order.





Budget 2025 includes new spending, savings and reprioritisation of resources to
frontline services, all within an operating allowance of $1.3 billion per annum.

This is the lowest allowance in a decade, and ensures the Government remains on
track to get our books back in order.

After a tough few years, New Zealand’s economy is starting to recover, thanks to
the Government’s careful management.  Inflation and interest rates are down,
wages are growing faster than inflation, and growth is expected to average 2.7%,
creating 240,000 new jobs over the next four years.

However, we cannot take that recovery for granted, which is why we’ve delivered
a responsible Budget firmly focused on economic growth.

A key part of that is Investment Boost, which gives tradies, farmers, and other
businesses a tax incentive to invest in new tools and equipment to boost
productivity and lift wages.

We’re also driving growth through investment in new infrastructure such as roads
and schools, growing tourism, improving KiwiSaver to lift savings, and
supporting tech startups and the film sector.

Just like Kiwi households, we have to live within our means and make tough
choices about where we spend money. 

By finding savings we’re able to invest in frontline services, with a major
boost to learning support for children with additional needs, more maths
teachers and tutoring, new and improved access for urgent medical care, $1
billion for hospital upgrades, and more support for Police. 

Targeted cost of living support is also being delivered. Rates rebates for
seniors will increase and be extended to up to 66,000 more SuperGold Card
holders. Working for Families payments will increase for 142,000 families. And
we’re extending prescriptions to 12 months to save time and money at the
doctor’s.

Budget 2025 is focused on making the careful investments Kiwis need now in order
to bed-in an economic recovery that will help New Zealanders get ahead.

Read on for more detail on Budget 25 announcements.



TAX INCENTIVE TO LIFT GROWTH

To encourage businesses to invest, hire more workers, lift wages and grow the
economy, tradies, farmers and other businesses will be able to access a major
new tax incentive to invest in new tools and equipment to boost productivity and
lift wages.

Investment Boost allows a business to immediately (from Budget Day) deduct 20%
of the cost of a new asset (on top of depreciation) meaning a much lower tax
bill in the year of purchase. You claim it in your tax return. It applies to
assets purchased new in NZ or new and used imported assets.

Includes:

* commercial buildings

Excludes:

* land

* residential buildings (dwellings)

* assets already in use/used in NZ

* assets held as trading stock

* fixed-life intangible assets (e.g. patents)

Treasury and Inland Revenue estimate Investment Boost will lift GDP by 1.0%,
wages by 1.5% and capital stock by 1.6% over the next 20 years, with around half
the gains expected in the first five years.

The policy is expected to cost $1.7 billion a year in reduced revenue across the
forecast period.

Assets under construction prior to the Budget may be eligible if they are to be
used, or be available for use, for the first time after the Budget (22 May).

Economic growth is how we raise living standards, create higher-paying jobs and
fund the growing cost of the public services.



GLOBAL INVESTMENT

We're focused on making it easier to do business in New Zealand and more
attractive to invest here.

With a budget of $85 million, Government has established an autonomous Crown
entity – Invest New Zealand – a dedicated agency to attract global businesses
and talent into New Zealand’s high-value industries and help drive long-term
economic growth.



HEALTH


IMPROVED URGENT AND AFTER-HOURS CARE

This National-led Government is investing more in health than ever before, with
a record $16.68 billion across three Budgets to improve health outcomes for New
Zealanders.

Everyone should have access to urgent and after-hours healthcare, so we've
invested $164 million over four years to expand it across the country.

In the Midland region, two extended after-hours services have been identified
for Taupō and Tokoroa, with new weekend services to improve access to urgent
care seven days a week.

Improved urgent and after-hours healthcare is also on the way for rural and
remote communities, with services identified for Mangakino and Tūrangi. These
services include 24/7 on-call in-person clinical support and better access to
tests and checks and urgent medicines.

The new and improved services will be introduced over the next two years,
alongside continued support for existing providers and targeted improvements to
rural access.


12-MONTH PRESCRIPTIONS

I've heard from many constituents that it is both inconvenient and expensive to
keep returning to the doctor to get repeat prescriptions for stable long-term
medications. From the beginning of next year, prescribers will be able to issue
12-month subscriptions where it is clinically appropriate and safe to do so.

This saves patients the cost of extra doctor's visits, and also frees
prescribers to see other patients.


ELDERLY CARE

Some of our elderly are in hospitals because they are frail and there are
limited options for their care. We want them to be cared for in the best place.

New funding of $24 million over four years will give our elderly greater access
to aged residential care and longer care outside of hospitals.

We are working on large-scale and long-term improvements in aged care, but this
provides some immediate support and also frees up spaces for those requiring
hospital and specialist services.


111 MENTAL DISTRESS CALLS

Government is funding $28 million over four years to transition from a
Police-led response, to a mental health response to 111 mental distress calls.
Mental health and addiction workers are often more effective in this space, and
10 new co-response teams will see fewer people taken straight to a police
station or emergency department.

We have also:

* Allocated $50 million to improve safety, privacy and dignity of mentally
distressed people at fit-for-purpose mental health facilities.

* Significantly boosted the capacity of mental health telehealth services.

* Increased funding for psychology internships, stage one psychiatry registrars
and peer training. Funds have also been set aside for security for up to 12
smaller emergency departments that require security and support.

* Put more than $9 million towards stronger protections for people receiving
compulsory assessment and treatment and to improve complaints and
investigation processes for people under compulsory care.

Our initiatives are expected to improve the experience of state care for people
with high and complex mental health, addiction and intellectual disability
needs; reduce the number of incidents and deaths in state care; and improve
working conditions for mental health staff. Police will be able to concentrate
on core policing.



EDUCATION


BOOST TO LEARNING SUPPORT

Parents and schools will be relieved that help is on the way for children
needing extra learning support.

In the most significant investment in learning support in a generation, we are
funding $646 million to support children with additional learning needs to
provide:

* Over 2 million additional teacher aide hours each year from 2028

* Learning Support Co-ordinators for all schools with Year 1–8 students

* Early intervention services expanded to the end of Year 1

* An overhaul of the Ongoing Resources Scheme (ORS)


EXTRA MATHS HELP

More maths teachers and tutors to help lift achievement of students who need it,
with $100 million of new funding for early intervention and support.


NEW SCHOOLS AND CLASSROOMS

Funding has been allocated for new schools and hundreds of new classrooms across
New Zealand, and there will be increases to schools' operational grants.


RAISING SCHOOL ATTENDANCE

A $140 million package has been dedicated to services which lift school
attendance.


BOOST TO TERTIARY STUDY PRIORITY SUBJECTS

An extra $398 million will be invested in tertiary education over four years to
grow our domestic pipeline of skilled workers – particularly in sectors like
health, energy, infrastructure and digital technology.



LAW AND ORDER


POLICE FRONTLINE

We are investing $480 million over four years to support the Police frontline
and keep people safe in their communities.

New funding of $60 million will be invested over four years for the Police
Prosecutions Uplift Programme of targeted interventions including improving
prosecutions to support court efficiencies and more timely case resolutions, as
well as reducing the administrative load of Police. This funding will also
update the Police payroll, human resources and workforce management systems.


FRONTLINE CORRECTIONS STAFF

Because our Government has restored proper consequences for crime, there has
been an increase in the prison population. More than $472 million will be
invested in the next four years to ensure Corrections can safely and securely
manage the growing prison population. We are delivering 580 new frontline
Corrections staff and more prison beds.


REFORMING YOUTH OFFENDERS

Our initiatives have already led to a 13% reduction in young people with serious
and persistent offending behaviour.

More than $103 million is being invested over four years in upgrading facilities
and funding ways to address recidivism amongst young people – to help young
offenders turn their lives around.

We are upgrading Youth Justice facilities and funding programmes like
military-style academies and the Young Serious Offenders regime to address
repeat youth offending.


CUTTING COURT CASE BACKLOGS

Waiting months or years for court cases to be resolved is frustrating and
traumatising – especially for victims. Courts will receive an additional $246
million funding over the next four years to ensure they're more efficient and
minimise delays.



CARE FOR DISABLED

More than $1 billion is funded annually for Disability Support Services (DSS).
Beginning 1 July, a $240 million funding boost over four years will provide
improved residential care for around 7200 disabled New Zealanders in 89
residential facilities across New Zealand.

DSS provides essential services and supports to more than 52,000 disabled
people. About half of the DSS operating budget is allocated to residential care.

We are stabilising the disability support system to make it consistent,
transparent, sustainable and fair.

The new funding model is nationally consistent while recognising regional
variations in costs such as housing prices, and will include more flexibility.
From 1 July we’re beginning to lift funding constraints we had to implement last
year.

Importantly, the new model enables DSS to forecast expenditure which will help
Government make informed budget decisions in future.

Other new funding for DSS includes:

* $1 billion over four years to meet increasing costs of disability support
services (including $240 million for residential care as above), and
supporting more people to access those services.

* $10 billion over two years to address increasing costs for services and
support for people with intellectual disabilities and complex care needs who
live in secure or supervised care under the High and Complex Framework. It
will also fund critical workforce training initiatives and essential
infrastructure, including repairs and maintenance upgrades.

* $9.5 billion over four years to recognise and respond to the Abuse in Care
Royal Commission of Enquiry, which includes work to strengthen how DSS audits
the quality of its services, critical incident and complaints management
processes and systems, and to contribute to other cross-agency work to
improve recordkeeping and the capability of the disability workforce.



TACKLING RISING TAX DEBT

New Zealand's tax debt rose to $85 billion at the end of 2024. Government is
going to spend $35 million a year for Inland Revenue to monitor tax compliance
and collect overdue revenue.

Inland Revenue has already collected $3 billion overdue debt in the year to
March and is on track to collect $4 billion by 30 June.

Every dollar we recover can be spent on public services like schools, hospitals,
and law and order.



KIWISAVER

The default rate of matched employee/employer KiwiSaver contributions will
increase from 3% to 4% of salary and wages.

It will be phased in in two steps: 

* 1 April 2026 – up to 3.5%

* 1 April 2028 – up to 4.0%

Earners can choose to remain on the 3% rate, matched by their employer.

Contributions will automatically reset to the default 4% after 12 months, but
employees can opt to reset it to the lower rate.

From 1 July 2025, Government’s annual contribution (currently to a maximum of
$521.43 per year) will be halved to $260.72.

Members with incomes over $180,000 will no longer receive a Government
contribution.

The changes will not affect the current year. Government contributions will be
paid out in July and August.

At 31 March last year 3,334,654 Kiwis had a combined total of $111.8 billion in
managed funds and an average balance of $33,514 per member.

The KiwiSaver balance grows the pool of funds available to invest in New
Zealand. The Reserve Bank estimates 40% of managed KiwiSaver funds are currently
invested in New Zealand assets. Government is looking to reduce barriers
preventing KiwiSaver funds being invested in more New Zealand businesses, assets
and infrastructure.



COST-OF-LIVING SUPPORT

Changes to Working with Families means around 142,000 low- and middle-income
families with children, most of which have an annual family income of less than
$100,000, will receive on average an extra $14 a fortnight.

From 1 April 2026 the Working for Families abatement threshold will be raised
from $42,700 to $44,900 and the abatement rate will rise from 27% to 27.5%.



RATES RELIEF FOR SUPERGOLD CARD HOLDERS

SuperGold Card holders on fixed incomes struggling with rates increases will be
pleased to learn that from 1 July the income abatement threshold for the rates
rebate scheme will be lifted from $31,510 to $45,000. The maximum rebate will
increase from $790 to $805.

The Rates Rebate Scheme is administered by councils.



ENERGY SECURITY

We need secure, affordable energy to grow the economy, create jobs and increase
prosperity and resilience. We currently rely on imported coal to get us through
winter.

We can’t afford our industries and manufacturing to dwindle due to lack of
energy.

Finding and developing gas fields to production stage can cost $1 billion
dollars. We need offshore investment, but we need to demonstrate to investors
(by having skin in the game) that their investment won’t be wasted.

The Crown is willing to take a 10–15% commercial stake in new gas field
developments that feed the domestic market to avoid sovereign risk.



DEFENCE

Defence affects us all. The world is increasingly volatile. We need to pull our
weight globally, and we need to recognise the people who protect us and our
interests and provide them with the right tools to do their jobs.

We’re aiming to take Defence spending to 2% of GDP by 2032/33.

The Defence Capability Plan outlines planned commitments of $12 billion over the
next four years – including $9 billion of new spending – subject to future
Budget decisions and Cabinet approving business cases.

Budget 2025's total investment in defence is $4.2 billion to be spent on:

* Replacing two Boeing 757s

* Replacing maritime helicopters

* Replacing Javelin anti-armour missile system launch units to co-operate with
military partners and fire longer range missiles

* Encrypted radios

* A counter-UAS to disable drones/UAS

* Redesign of Devonport Naval Base

* Defence force accommodation, defence infrastructure, modernising Defence
vehicle fleet, digital information management projects

If any of you are in the business of developing the tools and capability that
our Defence Force needs, we will be looking to use New Zealand businesses where
it makes sense to do so.

There will be economic benefits to New Zealanders and their businesses if we can
design or build products (especially advanced technology), develop
infrastructure, or provide high-value military procurement.



PARENTS TO TAKE RESPONSIBILITY FOR UNEMPLOYED TEENAGERS

Recent forecasts show people under the age of 25 on Jobseeker Support will spend
and average of 18 or more years on a benefit over their lifetimes – an increase
of 49% since 2017.

This is a human tragedy. We are not willing to let our young people get stuck on
a benefit.

Parents will become responsible for unemployed 18- and 19-year-olds who are not
in work or study and can't support themselves financially. Some exceptions
apply.

From July 2027, eligibility for Jobseeker Support and the Emergency Benefit in
this age group will include a parental assistance test.



BACKING FOOD BANKS

A $15 million investment in the community food sector for 2025/26 will support
and maintain:

* food distribution infrastructure to distribute purchased and rescued bulk
food to community providers at low or no cost and during emergencies and
disruptive events

* food security initiatives which increase community food resilience and
self-sufficiency

* food providers and hubs to purchase and/or distribute food through foodbanks
and community centres to meet the increased demand for food support



HOUSING

Government is replacing previous housing programmes with a new contestable
Flexible Fund consisting of $41 million operating funding over four years and
$250 million capital funding over the next 10 years for additional houses (from
1 July 2027).

The Flexible Fund will use a variety of providers to deliver different housing
types, including social houses and affordable rentals built by community housing
providers, Kāinga Ora and Māori providers.



POST-BUDGET BUSINESS BREAKFASTS

This week I'm attending a series of post-Budget events to give locals some more
insight into Budget 2025. The first was hosted by the Cambridge Chamber of
Commerce this morning (pictured below).



I'm also going to be in South Waikato and Taupō this week:


TOKOROA

Tuesday 27 May 2025, 5–6:30pm

South Waikato Sport and Events Centre

25 Mossop Road, Tokoroa

RSVP to [email protected]
[email protected]


TAUPŌ

Wednesday 28 May 2025, 7:30–9am

Dixie Browns (upstairs)

38 Roberts Street, Taupō

RSVP to [email protected] [email protected]



MORE INFORMATION

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