New Zealand’s 2025 Growth Budget: Key Takeaways for Your Financial Future
- lucindaterry5
- May 24
- 5 min read
The New Zealand government has unveiled its 2025 Budget, titled "The Growth Budget," with a strong focus on productivity, investment, and fiscal discipline. This year’s budget introduces significant changes across key sectors including business incentives, KiwiSaver reforms, cost-of-living relief, and investments in health, education, and infrastructure.
For individuals and businesses alike, understanding these changes is crucial for financial planning. In this blog, we break down the key initiatives, sector-specific funding, and economic outlook to help you navigate what this budget means for your financial future.
Key Financial & Economic Initiatives
To try and stimulate business growth, the government is introducing a 20% immediate tax deduction on new productive assets like machinery, tools, and equipment. The remaining 80% will be depreciated over the asset’s useful life (as per standard tax rules).
This measure is projected to:
Increase GDP by 1% over 20 years (as businesses invest more, leading to higher productivity).
Boost wage growth by 1.5% in the same period (as businesses grow, they can pay employees more).
This incentive is designed to encourage businesses to invest in productivity-enhancing assets, fostering long-term economic growth.
KiwiSaver Reforms
Significant changes are coming to KiwiSaver, affecting contributions and eligibility:
Default contribution rates will rise from 3% to 4% by 2028.
The amount the government adds to KiwiSaver accounts is being halved to 25c for every dollar that savers deposit, to a maximum $261 a year. Government contributions will be removed entirely for those earning over $180,000.
Extended coverage to 16-17-year-olds, encouraging early retirement savings. How many 16 and 17 year olds will take up this new opportunity is still up for debate.
Jamie discusses these changes in a bit more detail here:
These changes mean Kiwis may need to adjust their retirement planning strategies to account for shifting government support. Don’t forget to reach out to the team here at Naked Finance if you want to strategise your KiwiSaver.
Cost-of-Living Relief
Several measures aim to ease financial pressures on households:
12-month prescription coverage for medications. Currently, prescriptions are typically dispensed in 3-month supplies, requiring multiple trips to the pharmacy and co-payments. The new policy allows 12-month prescriptions for stable, long-term medications (e.g., blood pressure pills, diabetes medication, asthma inhalers).
Higher rates rebates for SuperGold cardholders. The rates rebate threshold (income limit to qualify) is being increased for SuperGold cardholders. Exact figures TBC, but it’s expected to help more pensioners get partial refunds on their rates.
Working for Families increases, providing ~$7 more per week for 142,000 families.
Teacher fees waived for three years, saving up to $550. Annual teacher registration fees ($220/year) will be covered by the government for 3 years. This applies to all state-school teachers (early childhood to secondary).
These adjustments aim to provide targeted relief, particularly for low- and middle-income families.
Health: A $5.5 Billion Investment
The 2025 Growth Budget makes significant investments in New Zealand’s healthcare system, targeting long-standing challenges in infrastructure, medicine access, emergency care, and mental health support.
$1 billion+ for hospital infrastructure. Nelson Hospital will receive a major redevelopment to replace aging buildings, expand emergency departments, and modernize surgical facilities. Wellington Regional Hospital will receive critical seismic upgrades and expanded ICU capacity to meet growing demand.
$1 billion+ for Pharmac, covering new cancer treatments like new immunotherapy and targeted treatments currently unavailable in NZ.
$447 million to improve urgent and after-hours care access.
A shift to health-based responses for 111 mental health calls.
These investments aim to strengthen New Zealand’s healthcare system, ensuring better access and outcomes.
Education: Supporting Future Generations
The education sector receives $646 million making significant strides in addressing critical challenges across New Zealand's education system.
$646 million for children with learning needs meaning that 30,000 additional students will receive specialist support for dyslexia, autism and other learning differences
$140 million attendance initiative to break the cycle of non-attendance with things like daily text alerts when students are marked absent, attendance officers in high-needs areas and transport solutions for rural students.
Operational Funding Increases. The chart below shows where the Money Flows:
Sector | Increase | Impact |
Primary Schools | +4.2% per student | New books, tech, maintenance |
ECE Centres | +6.1% | Higher wages to retain staff |
Universities | +3.9% | Frozen tuition fees for 2026 |
$100 million for maths support to address NZ’s maths crisis.
These measures focus on improving educational equity and outcomes for all students.
Law & Order: Strengthening Safety
To enhance public safety and justice, the budget allocates sweeping investments in New Zealand's justice system, targeting everything from street-level policing to long-term youth rehabilitation.
$480 million for frontline policing to fund 700 new frontline officers over 3 years, 200 new police vehicles, body-worn cameras for all frontline staff by 2026 and new tactical units for gang-related crimes.
$246 million to reduce court backlogs. The approach includes night courts operating until 10pm for straightforward cases, digital remand hearings for minor offenses, 50 new judges specializing in family and district court matters and Māori Land Court expansion to handle Treaty settlement cases.
$472 million for prison management, including 240 new beds at Rimutaka and Christchurch Men's prisons. It will also include mental health wings with 24/7 clinical staff and drug rehabilitation programs in all facilities.
Youth justice reforms, including military academies and 12-month residential programs for repeat youth offenders.
These investments aim to create a safer, more efficient justice system.
Defence & Foreign Affairs: Modernising Security
Key defence and foreign policy investments intending to modernize New Zealand's defence capabilities while deepening our Pacific partnerships and global commitments.
$660 million for air, sea, land, and cyber upgrades.
Replacement of ageing aircraft and maritime helicopters.
$368 million in Pacific-focused development aid.
Continued support for Ukraine training deployments.
These commitments reinforce New Zealand’s security and international partnerships.
Social Investment: Supporting Vulnerable Communities
The government is prioritising social welfare with one of the most significant overhaul of New Zealand's social support systems in a generation. These targeted investments aim to break cycles of disadvantage while modernizing how assistance is delivered.
$774 million for Abuse in Care redress and system reform.
$760 million for Disability Support Services.
$275 million for a new Social Investment Fund.
Tech upgrades for a fairer welfare system.
These measures aim to create a more inclusive and responsive support network.
Building for the Future – the budget recap
The 2025 Growth Budget makes generational investments in New Zealand's infrastructure, targeting everything from healthcare facilities to transport networks. As the current government has proclaimed, these projects aren't just about concrete and steel - they're about creating jobs, improving services, and future-proofing our communities.
$1 Billion+ for Health Infrastructure. Wellington Regional Hospital with $450m seismic strengthening and new ICU, Nelson Hospital with $320m full rebuild starting 2026, Middlemore with $150m emergency department expansion and Dunedin with $80m mental health facility upgrade.
Defence Force Modernisation: $2.7 Billion Infrastructure Spend.
Location | Project | Budget | Timeline |
Ohakea | New pilot training facilities | $800m | 2026-2029 |
Devonport | Naval base upgrades | $650m | 2025-2028 |
Burnham | Cyber warfare center | $300m | 2025-2027 |
Waiouru | Live-fire training range | $450m | 2026-2030 |
Education Revolution: $700 Million+ for Schools. New Classrooms for 300+ nationwide schools (with a focus on growth areas). Specialist Facilities including 40 new tech workshops and 30 science lab upgrades. And natural disaster resilience with 150 schools getting flood protections and 80 getting seismic upgrades.
Housing Fund: Social and Affordable Rentals with some ambitious targets of 3,000 new homes by 2027 with a mix of: 50% social housing, 30% affordable rentals and 20% supported living. Innovative designs with modular construction, Passive house standards and community gardens. And a location Strategy for new housing with 60% within 800m of public transport, 30% near major employment hubs and 10% in regional centres.
At Naked Finance, we’re here to help you navigate these updates and optimise your financial strategy. Need advice? Contact us today to discuss how these changes impact you.
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