The Government is ploughing $7 billion into building and re-developing hospitals, schools, roads and other infrastructure in a Budget that’s as much about what they’re building, as where they’re spending.
The capital injection is part of a Budget that prioritises funding boosts for health, education and defence, as well as funding increases for corrections services, courts and transport.
“Our fiscal plan set out to deliver a surplus in the 2028-2029 fiscal year. And today, I’m able to provide forecasts that show we will achieve that,” Finance Minister Nicola Willis said.
“An earlier surplus means not only less debt and lower interest costs than would otherwise be the case. It means we are actively rebuilding our resilience in an uncertain world.”
The Budget includes a net operating package of $2.1 billion. This incorporates an average $3.8 billion of new spending a year, enabled by $1.7 billion of savings and revenue measures.
Infrastructure injection
Building and re-building infrastructure is a key focus of Willis’ fiscal package; the third and final Budget of this parliamentary term.
The single biggest capital boost is handed to transport.
It provides a $1.8b capital contribution for the Cambridge to Piarere Expressway – a road of national significance – and puts aside just over $1b for KiwiRail’s network improvement programme, which while heavy on funding, is scant on detail.
The Government is earmarking capital funding of $100m for the construction of a new High Court, District Court and Maori Land Court in Rotorua, with new police stations in Greymouth and Whanganui.
The infrastructure boost for law and order is paired with $1.1b for frontline services, with the uplift going to Corrections, Customs, Police and the Ministry of Justice.
The health and education sectors are similarly set to receive shiny new buildings.
A capital investment of $682m for the health industry includes a new tower block for Whangārei Hospital.
Up to 10 new schools will receive an injection of $470m, which will deliver up to 232 additional classrooms.
It’s part of a hefty education funding package.
Schools and early childhood education are receiving a $1.6 b boost and the Government is doubling the number of Trades Academy places, from 10,000 to 20,000, in a boost for year 11 to 13 school students looking for an alternative pathway to university.
In a year of geopolitical volatility, the Budget includes funding for the second year of the coalition Government’s Defence Capability plan, to the tune of a pre-committed $1.6b. In practice this will involve extending the operational life of the Anzac-class frigates and building modern housing on military bases.
The Government is banking on the building boom to, in turn, help address New Zealand’s unemployment rate, which latest Stats NZ figures highlighted as sitting at 5.4 percent.
The Infrastructure Commission estimated that every billion dollars of infrastructure funding supports about 4500 jobs.
Cost-of-living relief scant
Responding to a question about the lack of immediate relief for cash-strapped New Zealanders, Willis acknowledges “many Kiwis are doing it tough right now”.
“I would love to be able to give them the immediate relief that so many want.
“But what I know is that their future selves would be paying for that, with interest. I would be doing more harm to New Zealanders in the long run and it’s my responsibility to be careful and prudent now and to protect New Zealand’s future.”
The minister addresses the elephant in the room – fuel prices – which over the next 12 months are expected to contribute to higher inflation and act as a spanner in the Government’s road to increasing real GDP growth.
Financial support for households grappling with rising costs at the pump are limited to the previously announced temporary $50-a-week in-work tax credit, aimed at supporting up to 157,000 lower income working families.
Included in the Budget however is a boost to the Government’s own strategy for building and protecting reserves; $150m has been set aside to increase fuel reserves while another $450m is reserved for a time-limited contingency in case further fuel-related support is needed.
Tracking the money
A new source of income for the Government comes in the form of a new tax imposed on banks, non-bank deposit takers, insurers and other financial market bodies.
The levy, similar to those seen in Australia, Canada and the UK, will help cover the cost of services provided by the Reserve Bank, such as licensing entities to operate in New Zealand and acting as watchdog and regulator of these organisations.
Willis reiterates the main sources of her savings – all announced before the Budget – while presenting a PowerPoint slide entitled ‘tough choices enable spending on priorities’.
Public service cuts will create an annual $600m-a-year, while scrapping the “failed” fees-free programme will save $245m per annum
The coalition Government plans to save close to $190m across housing and urban development – predominantly from a heavily criticised social housing shake-up that will increase weekly support for 110,000 families by almost $15 but leave another 80,000 households worse off by $30 a week.
Speaking to the absence of a typical election year ‘lolly scramble’, Willis says she “didn’t want to bribe New Zealanders with their own money”.
“We know that we have to be responsible at this time, otherwise we will put every New Zealander and their family at risk.”
