Budget 2025
A Budget with Big Cuts and Bold Moves.
The New Zealand Government has unveiled its 2025 Budget, aiming to reduce government spending by an average of $5.3 billion annually over the next four years.
Despite these cuts, through reprioritisations and revenue raising, the Budget introduces $6.7 billion in new spending, focusing on health, education, law and order, and defence. A notable feature is the $1.7 billion "Investment Boost" tax incentive, allowing businesses to deduct 20% of new asset costs from taxable income, aiming to stimulate economic growth and increase wages over the next two decades. This covers commercial buildings but not land or residential buildings. The balance of 80% of the fixed asset purchase will be subject to the depreciation rules for the class of asset that it pertains to.
Another change is targeted cost-of-living support for families, with an increase to Working for Families abatement thresholds and rate, meaning an extra $14 per fortnight on average for 142,000 families (majority earning less than $100,000 per year). The cost of the extra support will be met by income testing the first year of the Best Start tax credit in the same way the second and third years are.
The income abatement threshold to be eligible for the maximum rebate for SuperGold Cardholders and their households will be lifted from $31,510 to $45,000 – about the rate for a couple receiving superannuation. The maximum rebate for the scheme will also increase from $790 to $805. There is also an extension to the rates rebate, whereby every SuperGold Cardholder earning only NZ Superannuation, with rates higher than $2000, will be eligible for the full rebate. SuperGold Cardholders earning more than $45,000 may also be entitled to a smaller rebate.
These two measures are fiscally neutral so there will be winners and losers. Families on higher incomes will receive less support and families on lower incomes will receive more support.
Over the next three years, the threshold for employer and employee contributions to Kiwisaver will increase from 3% to 4% (3.5% from 1 April 2026, then to 4% from 1 April 2028). Kiwisaver also expands to include 16 and 17 year olds.
The Government will be reducing their maximum annual contribution to 25 cents (or $260.72 per year) instead of 50 cents (or $521 per year), and no contribution to employees earning over $180,000 per annum.
Finance Minister Nicola Willis describes the Budget as "responsible," asserting that it avoids austerity by making strategic savings and investments. However, it has been argued that the cuts to social programs and the pay equity system disproportionately affect vulnerable populations, including women and low-income families.
As the nation assesses the implications of these fiscal decisions, the debate continues over the balance between economic prudence and social equity.