The numbers behind the spin
Finance Minister Nicola Willis has been selling Investment Boost as proof the government is serious about productivity. At the New Zealand Economics Forum in February, she highlighted that 40% of aware investors reported increased spending and challenged Labour to commit to retaining the policy. The framing was deliberate: any weakness in uptake is the opposition’s fault for refusing to guarantee bipartisan support.
The problem is the data underneath that headline figure. Inland Revenue’s early monitoring survey, published in March 2026, surveyed over 800 businesses. A third had limited or no awareness of the scheme at all. Among those who did know about it and had invested, only 11% said the impact was significant. And roughly 42% of eligible, aware investors did not even claim the deduction.
This is a policy that costs an estimated $1.5 billion per year. Treasury projected it would lift GDP by 1%, wages by 1.5%, and capital stock by 1.6% over 20 years. On the evidence so far, those projections look optimistic.
Deferred maintenance, not new ambition
The pattern that emerged early has not changed. In August 2025, Kiwibank surveyed its business bankers and found only one third of clients were taking up the scheme. Kiwibank economist Sabrina Delgado said at the time that for those who were using it, the spending was “mostly in the case of catching up on deferred spending over the past couple of years.” It was not pulling businesses off the sidelines.
Troy Sutherland, then a general manager at Kiwibank, put it bluntly in August 2025: “The majority of customers I have talked to are planning to meet deferred capex from the last two years. I haven’t heard much about customers thinking about growth capex with the Investment Boost.”
That distinction matters. A tax break that accelerates spending businesses were already planning is not the same as one that unlocks new investment. The former is a windfall for firms already in motion. The latter is what Treasury modelled.
A supply-side fix for a demand-side problem
The IRD survey data makes the core tension clear. Economic conditions were cited by 38% of firms as a reason to increase spending, while 30% said conditions led them to decrease investment. The macro environment is doing more work than the tax incentive, in both directions.
A Treasury report from October 2025, cited at the Economics Forum, acknowledged that Investment Boost “added momentum” to forecasts but conceded that “the vast majority of firms we have spoken to have noted that Investment Boost is not changing their investment intentions.”
Kiwibank chief economist Jarrod Kerr offered the most generous interpretation at the same event, saying uptake was “very low at the moment, because confidence is low” but that the scheme would work once confidence lifted. That is the bull case. It is also an admission that Investment Boost cannot create the conditions it needs to succeed.
Small firms are subsidising the scheme without using it
Deloitte’s May 2026 review identified awareness as the single biggest drag on uptake, with firms under 20 employees disproportionately unaware. Among those who did know about it, common reasons for not claiming included the incentive not being large enough and administrative complexity.
This is a structural problem. The 20% immediate deduction on new depreciable assets is most valuable to profitable, capital-intensive, tax-paying firms with the accounting infrastructure to manage the claim. A small business replacing a van does not get the same proportional benefit as a large manufacturer commissioning a new production line. The compliance cost of updating accounting systems, as Kiwibank’s Will Warren noted in August 2025, can eat into the benefit for smaller operators.
The result is a $1.5 billion annual programme where the fiscal cost is borne by all taxpayers but the benefit flows disproportionately to a subset of already well-capitalised firms.
The political certainty argument is a distraction
Willis’s challenge to Labour, that firms won’t invest in long-lived assets “if they think the tax rules may change at the change of an election”, is politically astute but analytically weak. Bipartisan support would help at the margins. But the IRD’s own data shows that policy uncertainty is not the primary barrier. Weak demand, cashflow constraints, low awareness, and compliance friction are all doing more damage.
Looking five years ahead, only 14% of firms with investment intentions anticipated a large increase because of the scheme. That is the forward-looking number that matters, and it is not a number that justifies $1.5 billion a year without serious redesign. If the government wants Investment Boost to be more than an expensive signal of intent, it needs to fix the awareness gap, simplify the claiming process, and stop pretending the opposition is the problem.
Sources
- Inland Revenue: Investment Boost – Early monitoring of business awareness and investment response (2026-03-31)
- Deloitte: Investment Boost one year on (2026-05)
- Newsroom: ‘Frustrating’: Economic leaders’ impatience at slow results and policy inertia (2026-02-13)
- Kiwibank: Investment Boost – Just a cherry on top for well-placed businesses? (2025-08-28)
- IRD: What you can claim with Investment Boost (2026-03-31)