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 upston.sthwaikato@parliament.govt.nz

Taupō

Wednesday 28 May 2025, 7:30–9am

Dixie Browns (upstairs)

38 Roberts Street, Taupō

RSVP to upston.taupo@parliament.govt.nz

More Information

If you're interested in learning more, click here. If you have any questions, please email mp4taupo@parliament.govt.nz