Major cuts and investments unveiled
Finance Minister Nicola Willis (pictured) will deliver the 2025 budget—dubbed the Growth Budget—on Thursday.
It’s Willis’ second annual budget and comes with a clear warning: the government’s books are tight, and global economic conditions are uncertain.
RNZ outlined what we know so far about the key announcements.
Pay equity changes could save billions
The government passed new pay equity legislation under urgency earlier this month, halting all 33 current claims.
Prime Minister Christopher Luxon said the law change, which raises the threshold for proving historical undervaluation in pay equity claims, could result in major fiscal savings.
“Billions of dollars,” Luxon said, could be saved.
He also confirmed the budget would include funds to address claims under the new rules.
$6.8 billion capital investment boost
Capital expenditure in budget 2025 will be higher than originally forecast, totalling $6.8 billion
The spending will target core infrastructure like health, education, defence, and transport.
The increase lifts the net capital allowance from the previously signalled $3.6 billion to $4 billion, after factoring in savings.
Operating allowance slashed to $1.3 billion
The government is halving its operating allowance from $2.4 billion to $1.3 billion.
Willis characterised next month’s budget as “no lolly scramble”, with only a few departments likely to receive new funding. Savings from public sector cuts are being redirected to “New Zealand’s most pressing priorities.”
No new redress scheme, but $774m for abuse survivors
Despite recommendations from the Royal Commission and Redress Design Group, the government will not create a new compensation scheme for abuse survivors in state care.
Instead, Minister Erica Stanford confirmed that $774 million would be allocated to improve the existing system.
Pharmac gets $600m to fund new medicines
Pharmac will receive $604 million over four years to fund up to 54 new medicines—including 26 cancer treatments.
Former Health Minister Shane Reti said this funding ensures delivery of all 13 cancer drugs promised during the election or equivalent alternatives that are “as good or better”. Reti estimated it would benefit around 175,000 people in the first year.
Film subsidy doubled with $577m boost
The government is injecting $577 million into the International Screen Production Rebate over this year and the next four, raising the total to $1.09 billion.
Willis said the increase is necessary as the New Zealand film industry could not survive without the rebates. Funding for 2024/25 will be $250 million, with $210 million allocated annually from 2025/26.
$190M social investment fund launched
A new $190 million Social Investment Fund will drive change in social services, targeting vulnerable New Zealanders. It is the centrepiece of a $275 million commitment over four years.
The fund will be overseen by the new Social Investment Agency and is expected to support at least 20 initiatives in its first year.
$164m to expand after-hours healthcare
The government is investing $164 million over four years to expand urgent and after-hours healthcare services.
New 24-hour clinics are planned in Counties Manukau, Whangārei, Palmerston North, Tauranga and Dunedin, with additional funding for extended daytime services in Lower Hutt, Invercargill and Timaru.
$140m to fight truancy with new school attendance service
To tackle student absenteeism, the government is investing $140 million into a new school attendance initiative.
David Seymour said the funds from this year’s budget included about $123m for the delivery of a new attendance service and almost $17m to support and strengthen front-line attendance services.
Kāhui Ako Programme set for disestablishment
Leaked Ministry of Education documents suggest the government is moving to disestablish the $118 million Kāhui Ako school programme.
The move aims to redirect funding toward support for disabled learners. The change is expected, but not yet formally announced.
$100M for maths teachers and tutoring
The budget will allocate $100 million over four years to improve maths education.
Erica Stanford said $56 million will fund 143 full-time intervention teachers, while $40 million will support small group tutoring for up to 34,000 Year 7-8 students annually.
$35m to strengthen customs and fight drug crime
Customs Minister Casey Costello announced a $35 million four-year plan to boost border security and combat organised crime.
“New Zealand was being increasingly targeted,” she said, with the funds supporting up to 60 new roles and expanded technology.
$1.5m for Māori wardens
The Māori Wardens will receive a $1.5 million budget boost to support their community safety work.
Māori Development Minister Tama Potaka said the move recognises the Wardens' "seriously remarkable" responsibilities, including emergency response and youth programmes.
Where the money comes from
The government brings in around $120 billion a year—about $22,613 per person—in tax revenue. It also earns about $7833 per person from other sources like ACC levies and emissions trading.
Half the tax take comes from income tax on individuals. GST makes up 22%, corporate tax 13%, and taxes on alcohol, tobacco, and dividends make up the rest.
“We are a bit unique in that our taxes are heavily paid by workers,” Simplicity chief economist Shamubeel Eaqub told RNZ.
Where the money goes
Social security and welfare (excluding NZ Super) top the list at $6486 per person. Health follows at $5804, then NZ Super at $4352, and education at $4197.
Other big spends include $3061 on transport, $3153 on economic services, $1400 on law and order, and smaller amounts on defence and environmental protection.
Why the government borrows
The government collects $30,446 per person but spends $37,480. To cover the shortfall, it borrows—half for operational costs and nearly half for infrastructure.
“It’s not that debt is bad. Debt for stupid things is bad. Debt for high-quality infrastructure is good,” Eaqub said.
He added that all new budget spending comes from cuts elsewhere: “We can’t have it all, we’ve got to choose... What are you going to stop, what are you going to start, what are you going to keep?”
