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Like many countries around the world, New Zealand has been feeling the economic effects of global instability, inflation and external conflict. This budget was closely watched to not only understand how New Zealand would be responding to these pressures, but how it would address the country’s underlying fiscal position and whether there would be any sweeteners in the lead up to the General Election on November 7th.
The Government’s fiscal strategy remains unchanged from that set out most recently in the Budget Policy Statement — limit new spending, find savings and reprioritisations within existing spending, and maintain a deliberate and medium-term approach to fiscal consolidation, reducing core Crown expenses towards 30% of GDP.
At a glance, the budget outlines:
$3.8b of new spending less $1.7b in savings and reprioritisations, providing a net operating allowance of $2.1b. Net operating allowances for Budgets 2027-2029 remain at $2.4b on average.
Total Crown revenue on 30 June is forecast to hit $172b (38% of GDP) and grow to $217.7b (39.3% of GDP) by 2030, while total Crown expenses will decrease from 41.3% of GDP ($186.8b) on 30 June to 38.6% of GDP ($214.2b) by 2030.
Net core Crown debt is projected to peak at approximately 46.9% of GDP, higher than the 45.6% projected in HYEFU, before gradually declining.
OBEGALx is forecast to return to surplus in 2028/29 – a year earlier than the 2029/30 surplus forecast in December’s Half Year Economic and Fiscal Update (HYEFU)
Headline announcements include:
$5.5b increase in spending for frontline health services and $682m for health infrastructure.
$2.94b in infrastructure spending to upgrade the Waikato expressway, the NZ rail network and to fund resilience upgrades for highways.
$470m to redevelop 10 schools and deliver 232 new classrooms.
$2.3b in capital funding and $1.2b in operational funding for defence and intelligence capabilities.
Support for business
MYOB data shows New Zealand businesses largely entered 2026 with steady revenue and plans for growth. However, concerns lingered about the growing cost of doing business, the cost of living and inflation, consumer confidence, and securing supply chains.
In the lead-up to today’s budget, the Government had been careful to signal a restrained approach with spending cuts and reprioritisations designed to reduce pressure on the balance sheet and position New Zealand for future growth.
A range of initiatives were released ahead of budget day, including a new $1.2 billion loan guarantee scheme designed to help eligible, gas-reliant businesses access lower-cost finance to reduce their dependence on gas and switch to other energy options.
Fuel supply remains high on the radar. $150m will be invested in securing additional strategic fuel reserves for New Zealand, and $450m has been set aside as a contingency (should conditions worsen), which will provide reassurance to businesses across the country, many of whom rely heavily on fuel in their day-to-day business operations.
The budget also includes some initiatives aimed at reducing red tape and complexity. Fringe Benefit Tax rules for private motor-vehicle use will be simplified, removing the requirement for detailed logbooks, which will save time and costs for businesses.
Changes were also announced to R&D, with RDTI tax credits now able to be paid in-year, rather than waiting until the end of the year under the previous system (although cap on non-administrative internal software for R&D will decrease from $25m to $3m). This will support cash flow management and ease some of the time-specific compliance pressure faced by businesses.
Other measures announced today include:
$69m in additional funding for Trades Academies, doubling free trades training for Year 11-13 students.
$15m for Industry Skills Boards to develop at least 8 new industry-led subjects matched to real-world demands
$1.77b to extend the Waikato Expressway to support freight and logistics between Auckland, Bay of Plenty and Waikato.
Winners and losers
One of the big winners out of today’s budget are charities and not-for-profits with a substantial increase in the amount of net income an NFP can earn without paying tax increased from $1,000 to $10,000. Memberships and levies received by NFPs will also remain non-taxable.
On the flip side, banks, non-bank deposit takers, insurers and other financial market infrastructure providers will see the introduction of a new prudential levy, subject to consultation. This levy (which is expected to amount to less than 1% of the total profits of the Big Four banks) will see around $209m paid to the Reserve Bank over the next four years and mirrors approaches taken in other countries, like Australia. Businesses will be watching carefully to see if and how these levies might be passed onto consumers.
MYOB’s verdict
In the lead up to today’s budget, New Zealand businesses told us they wanted to see more cost-of-living relief along with specific announcements like reinstating the ACC No Claims Discount for small businesses, a permanent increase in the low-value asset write-off threshold (currently $1,000), and a permanent increase to provisional tax thresholds.
While there’s little targeted relief for SMEs in the list of budget announcements that alleviates some of their bigger pressure points, the Government’s investment in future talent pipelines and infrastructure resilience to keep communities and businesses connected is a positive step. The more restrained approach to fiscal management is also to be expected, as caution continues to be exercised in response to growing global instability and uncertainty.
Focus will now turn to the General Election and what policies the various political parties will come forward with that help New Zealand businesses start, survive and succeed.
Information provided in this article is of a general nature and does not consider your personal situation. It does not constitute legal, financial, or other professional advice and should not be relied upon as a statement of law, policy or advice. You should consider whether this information is appropriate to your needs and, if necessary, seek independent advice. This information is only accurate at the time of publication. Although every effort has been made to verify the accuracy of the information contained on this webpage, MYOB disclaims, to the extent permitted by law, all liability for the information contained on this webpage or any loss or damage suffered by any person directly or indirectly through relying on this information.
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