What did Budget 2025 deliver for businesses?
Budget 2025 delivered some extra funding for hospitals, schools, housing and roads, but there was little in there to inject immediate confidence into the sector. Business owners or managers will need to take note of the changes to KiwiSaver, and the Investment Boost that offers tax incentives for new assets.
Infrastructure investment but no injection of confidence
Major investments in new and upgraded hospitals, mental health facilities, school buildings, rail and roads received funding in Budget 2025, as Infrastructure Minister Chris Bishop announced a total capital expenditure of $6.8 billion.
He said key infrastructure investments provided funding certainty for the capital pipeline, including funding over the forecast period for programmes already in delivery.
ACE Chief Executive Helen Davidson says that while investment announcements are welcome, what she hears most from members is the need for these funding decisions to translate into work into market.
"There's not much in the Budget that can inject immediate confidence into businesses in our sector."
Davidson says in the longer term, it's not just what we're doing but how we're doing it, and understanding the trade-offs we are making to support a thriving Aotearoa in a world where we are facing some significant challenges not just around our infrastructure deficit, but also in respect of climate change, technology and skills.
"We can only hope that future budgets bring a little more inspiration and innovation into how as a country we will build a prosperous economy in the face of significant challenges."
More funding for post-cyclone local road recovery
North Island communities still building back after the 2023 weather events will get extra funding to complete recovery works on local roads. To help get roads repaired as quickly as possible, Budget 2025 provides $219 million additional funding to be distributed by the New Zealand Transport Agency Waka Kotahi.
Five councils will likely receive a share of the $219 million, across a three-year period from 2026/27: Central Hawke’s Bay District Council, Gisborne District Council, Hastings District Council, Napier City Council and Wairoa District Council.
Hastings Mayor Sandra Hazlehurst called the decision a “promising signal” but said the council would need to look at the details.
Billion-dollar investment in hospitals
Nelson’s new 128-bed inpatient building is expected to be built by 2029, two years earlier than planned, and the hospital’s two main buildings will be refurbished and seismically strengthened, Health Minister Simeon Brown announced.
The Budget also provides funding for a new emergency department at Wellington Regional Hospital, critical infrastructure at Auckland City Hospital and Greenlane Clinical Centre, remediation work at Palmerston North Hospital and more interim inpatient beds at hospitals across New Zealand.
It was mostly a "no surprises" Budget for health infrastructure, after Health Minister Simeon Brown laid out the Building Hospitals Better plan with detail about project timings at the Infrastructure Investment Summit earlier this year.
Flexible Fund part of new social housing approach
The Government is aiming to get new social homes built faster with $128 million to deliver at least 550 more social homes in Auckland in the 2025/26 year. That’s on top of the 1,500 new social homes funded through Budget 2024, to be delivered from 1 July 2025.
Ministers said they wanted to fix the "confusing and often duplicative tangle of housing funds" by establishing a new contestable Flexible Fund, replacing previous programmes like the Affordable Housing Fund, the Progressive Home Ownership Fund, and remaining Whai Kāinga Whai Oranga funding. The fund will also allow for Government-subsidised affordable rentals as a permanent part of the housing system.
Some have welcomed the changes, but a Wellington MP said the Government's policy of putting housing developments on hold or under review had "turned off the pipeline for new healthy state houses" and was leaving dozens of people in dire need of a healthy home.
Investment Boost offers tax incentive for new assets
The Government's Investment Boost policy would allow a business to immediately deduct 20 per cent of the cost of a new asset on top of depreciation, leading to a lower tax bill in the year of purchase. This applies to most new assets that are depreciable for tax purposes, for example machinery, equipment and work vehicles.
Finance Minister Nicola Willis said this would improve cash flow and make more potential investments stack up financially.
However critics have pointed out that, unlike the international schemes it was based on, there is no cap, with one referring to it as a ticking fiscal time bomb and another suggesting ministers don't know the scale of the tax break they've signed up to.
KiwiSaver changes kick in for employers next year
The default KiwiSaver contribution rate will increase to 4 per cent for employees and employers in a bid to encourage Kiwis to save more for their first home and retirement.
Take note of the key dates – from 1 April 2026 it will increase to 3.5 per cent and then on 1 April 2028 it will increase to 4 per cent. The maximum Government contribution will reduce from $521.43 this year to $260.72 from 2026, and those earning more than $180,000 would now miss out altogether.
Retirement Commissioner Jane Wrightson says the increase in default contributions could result in retirement funds lasting about 30% longer for many people, however low-income earners, Māori, women and self-employed people would be hit hardest by the reduction in Government contributions.
Sole trader tax platform Hnry has criticised the reduction in Government contributions, and some sole traders have reported feeling "ripped off".