Finance Minister Nicola Willis delivered Budget 2025 today with a clear message: discipline is back. Branded by Prime Minister Christopher Luxon as “The Growth Budget” and touted by Willis as a “No BS Budget”, this year’s fiscal blueprint prioritises economic expansion while enforcing the tightest new spending limits in over a decade.
With an operating allowance of just $1.3 billion—the lowest since 2014—the Budget is framed around a strategy of reallocation over largesse. A total of $6.7 billion in new spending is offset by $5.3 billion in savings and revenue initiatives, marking a decisive pivot from previous years’ debt-driven pandemic-era stimulus.
Big Ticket: ‘Investment Boost’ to Drive Growth
At the heart of the Budget is a major new tax incentive called Investment Boost, allowing businesses to immediately deduct 20% of the cost of new capital assets from their taxable income. The government projects the policy will increase GDP by 1% and wages by 1.5% over the next two decades.
The scheme, expected to cost $1.66 billion annually, is aimed squarely at encouraging business investment in sectors like manufacturing, infrastructure, and technology. It forms part of a broader pro-growth legislative agenda, including new bills targeting international investment, housing development, and gene technology reform.
ACT leader David Seymour claimed the credit for anchoring government spending and hailed the investment approach, saying the Budget “grows the economy instead of Government spending.”
KiwiSaver Reshaped: Broader Base, Leaner Incentives
Budget 2025 significantly overhauls the KiwiSaver scheme. The government’s contribution will be halved to 25 cents per dollar saved—up to a maximum of $261—starting July 2025. High earners (over $180,000) will no longer receive the government match at all.
In a move to expand participation, 16 and 17-year-olds will become eligible for both government contributions and employer matches, while default employee and employer contributions will rise from 3% to 4% over three years. Critics argue these changes dilute long-term savings incentives, particularly for middle-income earners, but the government says the reforms will ensure sustainability and greater equity.
Savings and Cuts
Savings of $5.3 billion annually underpin the Budget’s modest new spending. The single largest cut—worth $2.7 billion—is the rollback of industrial pay equity claims, halting 33 existing processes and reshaping the government’s approach to sector-wide wage comparisons.
Other savings include the income-testing of the Best Start child payment from its first year and means-testing of Jobseeker benefits for 18 and 19-year-olds based on parental income—a move expected to save $163 million over four years.
While Willis defended the cuts as necessary prioritisation, unions and advocacy groups have raised concerns over equity impacts, particularly for women and young people.
Frontline Spending: Health, Education, and Security
Despite the overall restraint, core public services received substantial boosts. Health tops the list, with $5.5 billion in new funding for hospitals, primary care, aged care, and mental health. Pharmac will receive over $1 billion for new cancer and chronic condition medications, and 12-month prescriptions will be introduced to cut GP costs.
Education received $1.5 billion in operating funding over four years. Initiatives include $646 million for learning support, increased subsidies, and over $100 million for maths and attendance programmes. The axing of the Kāhui Ako school cluster initiative was confirmed, with funds redirected to targeted support measures.
Law and order measures total $1.05 billion in operating funding, including expansions to police, courts, prisons, and youth justice facilities. Corrections alone will receive $400 million to address prison capacity amid an expected surge to nearly 11,000 inmates by 2026.
Targeted Relief, Not Universal Welfare
The Budget continues the government’s trend toward conditional support rather than universal entitlements. Adjustments to Working for Families will deliver an average of $14 extra per fortnight to 142,000 low- to middle-income families. The SuperGold card rates rebate will also be expanded to 66,000 more households.
Meanwhile, most government departments received no new funding and will have to absorb rising costs internally.
Fiscal Outlook
Originally aiming for a surplus in 2027, the government’s forecast now projects a slim $200 million surplus by 2029 under its preferred fiscal measure (excluding ACC). By traditional accounting methods, New Zealand would still face a $3 billion deficit in that year.
Public debt, currently just below 44% of GDP, is expected to peak at 46% by 2028—close to the Treasury’s “unwise” threshold of 50%.