While there are no major reforms, several targeted changes have been introduced: 

1. Simplified Fringe Benefit Tax (FBT) rules to reduce compliance burden
2. Changes to the R&D tax incentive, allowing earlier access to credits
3. Adjustments to Foreign Investment Fund (FIF) rules to simplify offshore investment
4. Introduction of a prudential levy on banks

Inflation and interest rates remain key concerns

Businesses have spent the past several years absorbing higher financing costs, increased wages, rising insurance premiums, increased supplier costs and reduced consumer demand. 

One of the Government’s main objectives is to reduce inflationary pressure within the economy to help lower borrowing costs, improve consumer confidence, and provide greater investment certainty. 

The Government’s approach suggests that economic recovery may be gradual rather than rapid. 

Government spending restraint

The Budget includes continued efforts to reduce public spending growth and improve Government financial performance. 

This creates both opportunities and risks: 

• businesses supplying efficiency solutions or productivity improvements may benefit 

• infrastructure-related sectors may continue seeing opportunities 

• industries reliant on public sector contracts may face reduced spending in some areas 

Public sector restructuring may also impact employment conditions in certain sectors and regions. 

Consumer spending environment

As households continue to face cost-of-living pressures, this will continue to impact businesses in discretionary spending sectors such as retail, hospitality, tourism and entertainment. 

We are advising businesses to therefore focus on margin protection, inventory management, pricing strategy, customer retention and operational efficiency. 

Practical business considerations

For businesses, the message from Budget 2026 is clear. Managing cash flow, controlling costs and reviewing debt exposure remain fundamental priorities, while those that invest selectively in productivity, automation and their people will be best placed to benefit as conditions improve.

The economic outlook remains one of the most important aspects of Budget 2026 and the Government’s strategy is to keep spending tight today while investing in long-term growth.

Although the Government acknowledges New Zealand continues to face economic pressures including slow economic growth, global uncertainty, elevated living and business operational costs, weak consumer confidence and geopolitical risks, they remain focused on tighter fiscal management to return the country’s finances to a stronger position. 

The Budget’s economic goals:

• Return to surplus by 2028/29 

• Reduce Government debt over time 

• Additional spending limited to about $2.1 billion  

The Budget’s major spending commitments focus on Infrastructure – including roads, rail, hospitals and schools – and on core public services such as health and education.

These investments are intended to lift productivity and enable long-term economic growth, rather than deliver immediate stimulus.  

The Government announced additional funding to strengthen educational outcomes and improve long-term workforce readiness, repeatedly stating that improving educational achievement is directly linked to improving productivity and economic growth over the long–term. 

The Budget shows a shift in education funding towards practical, job-ready skills:  

• Providing around $2 billion in additional education funding overall 
• Ending the final year of free university fees
• Increasing investment in Trades Academies for secondary school students and Youth Guarantee programmes to support school leavers into training or work  

The Government’s goal is to get more young people into the workforce earlier, address ongoing skills shortages and align education more closely with industry needs.

Why education matters to businesses

In our experience, many New Zealand businesses are struggling with skills shortages and recruitment difficulties, while labour costs remain one of their highest operational expenses.  

The 2026 Budget’s focus on improving educational outcomes to help strengthen the quality and capability of New Zealand’s workforce over time andreduce some of these long-term workforce pressures. 

Potential opportunities for businesses 

Businesses operating in the following sectors may benefit directly or indirectly: 

• education technology 

• training providers 

• vocational education 

• trades and apprenticeships 

• digital learning platforms 

• tutoring and educational support services 

• software and technology providers servicing schools 

There may also be future opportunities for businesses involved in: 

• school infrastructure projects
• educational consulting
• curriculum support services
• workforce development programmes

Long-term economic impact

Although education investment does not usually create immediate economic returns, it is an important long-term productivity driver, contributing to improved labour productivity, higher innovation, reduced unemployment pressures, stronger business competitiveness and better long-term economic growth. 

Energy costs continue to affect almost every sector of the economy, placing pressure on business profitability and contributing to higher costs for consumers. Energy security is a major focus in this year’s Budget, reflecting concerns about rising fuel costs, reliance on global energy markets, and the need for a more resilient and reliable energy system.

Energy initiatives announced:

• Investment to increase domestic electricity generation capacity
• A loan guarantee scheme to help businesses transition away from gas
• Increased funding to build strategic fuel reserves
• Temporary support to manage the impact of fuel price pressures

Together, these measures aim to improve energy security and reliability, reduce exposure to volatile global fuel markets, and support a gradual transition to alternative energy sources.

Infrastructure and investment opportunities

The Government’s focus on energy resilience is likely to support future investment in:

• electricity generation
• transmission infrastructure & grid upgrades
• renewable energy & battery storage
• energy efficiency projects

This may create business opportunities for:

• electrical contractors
• engineers
• infrastructure businesses
• renewable energy providers
• technology companies
• equipment suppliers

The government has announced a wide range of tax changes that will affect almost everyone, from families and individuals to businesses, charities and those with overseas investments. The initiatives aim to provide cost-of-living relief, make the tax system simpler, and attract more investment to New Zealand. 

For businesses, several rules are being updated. The Research and Development (R&D) tax incentive, a tax break for innovative companies, is being tweaked to allow businesses to get their payments during the year instead of waiting. The rules for calculating fringe benefit tax on the personal use of work vehicles are also being simplified. To ensure fairness, any outstanding shareholder loans from companies facing closure will now be taxed if not repaid within six months. 

Significant changes are being made to international tax rules to make New Zealand a more attractive place to invest and work. The rules for how New Zealanders are taxed on their foreign investments are being relaxed, with the amount you can invest overseas doubling to $100,000. Tax rules for contractors who are not New Zealand residents are also being modernised, allowing them to earn significantly more ($75,000) before being taxed. New migrants, particularly those on the Active Investor Plus visa, will also benefit from changes designed to reduce the financial impact of currency fluctuations. 

The charities and not-for-profit sector will see a major overhaul. The amount of profit these organisations can earn tax-free is increasing from $1,000 to $10,000 and membership fees they receive will continue to be non-taxable. The system for donation tax credits is also becoming more flexible, giving people the option to get their refund during the year or even gift it directly to the charity they donated to. However, a new annual cap of $100,000 has been placed on donations for which you can claim a tax credit. Furthermore, charities based overseas will no longer get a New Zealand tax exemption. 

To support families with the rising cost of living, the Working for Families scheme is being simplified to make it easier for people to apply and get the correct payments. Working families will receive a temporary boost to their In-Work Tax Credit of $50 per week for one year, starting from 1 April 2026. This extra payment is temporary and may stop earlier if petrol prices fall significantly. 

Finally, to ensure the tax system runs smoothly, Inland Revenue will receive more funding to increase its efforts in collecting overdue tax. There will also be better information sharing between Inland Revenue and the New Zealand Customs Service, which will help simplify processes like checking residency for Working for Families payments.

Despite tight overall government spending, defence and security were prioritised as strategic investments in New Zealand’s resilience and national security. 

The Budget includes a major increase in defence and national security spending, centred on modernising the NZ Defence Force (NZDF) and strengthening maritime security. There is funding to retain existing Defence Force staff and increase numbers in key areas and investments to ensure the Anzac-class frigates and HMNZS Canterbury remain operational. 

The largest initiative is a NZ$1.58 billion maritime security package focused on upgrading naval capability. This includes maintaining and modernising existing ships, planning for future fleet replacements and investing in new offensive and defensive systems. A key feature is the increased use of drones and autonomous technologies for surveillance and operational support, reflecting a shift toward more flexible and cost-effective military capability. 

The Budget also continues the government’s wider Defence Capability Plan launched in 2025. The aim is to make the NZDF more combat capable, improve interoperability with allies, increase operational readiness and strengthen New Zealand’s ability to respond to regional security challenges and humanitarian operations in the Pacific. 

In addition to military spending, the Budget includes NZ$81.5 million over four years for customs and border security enhancements. Funding will support upgraded cargo screening systems, improved port and airport security, tactical training and expanded international intelligence cooperation.  

Total health spending rises to $34.2 billion for the 2026/27 financial year, up from $31 billion in 2025 – an increase of about 10 percent. Health is the clear winner of Budget 2026, with $5.8 billion of new spending overall, including a $5.5 billion increase to frontline services over four years. The health initiatives include the following: 

Hospital infrastructure ($682m capital) 

There is $682 million in capital spending for health infrastructure, including a new 158-bed ward at Whangārei Hospital and land acquisition for the new Drury hospital in Auckland.  

There is also money for a temporary intensive care unit at Palmerston North Hospital and the fit-out of an inpatient unit at Tauranga Hospital to relieve immediate pressures.  

A further $180 million (including $128 million operating and $52 million capital) over four years will improve healthcare services in the Otago Central Lakes area, including expanding the emergency department of Lakes District Hospital.  

Clinical equipment & digital upgrades 

$930 million over the next year will go towards new clinical equipment, technology upgrades, and hospital facilities. There is also $153.6 million over four years for Health NZ to expand national cybersecurity monitoring and upgrade IT safety systems across the health system. Health NZ is additionally investing $300 million of its own budget to help deliver the first three years of the Health Digital Investment Plan, covering replacement of ageing devices, modernisation of radiology systems and upgrades to core IT platforms.  

Maternity & child health 

$34 million has been allocated to fund three-day postnatal stays, and $16 million for specialist paediatric palliative care services.  

Ambulance services  

$34 million has been allocated for road ambulance initiatives, including two new Auckland hubs and a digital patient notes system.  

Primary & aged care 

There is no extra funding specifically tagged for primary care. However, Health Minister Simeon Brown said the Budget would support 53,000 additional general practice enrolments and 272,000 additional bed-nights in the residential aged care sector, drawn from Health NZ’s overall funding.  

Mental health 

The Budget includes increased funding for specialist maternal mental health services to better support women and families, as part of broader health and addiction service investment.  

In summary, health is the standout area of Budget 2026, with a record spending commitment focused heavily on hospital infrastructure, digital upgrades, and specific new services in maternity, paediatric palliative care and cancer screening. 

The fuel response measures were driven by ongoing Middle East conflict which caused significant fuel price pressures globally. The Budget includes temporary, timely and targeted funding for households and public services facing fuel pressures.  

Emergency Fuel Reserve Fund — $450 million  

$450 million one-off operating contingency set aside for additional temporary fuel-related measures (if required). 

Strategic fuel reserves — $150 million  

$150 million was allocated for additional strategic fuel reserves to strengthen New Zealand’s fuel resilience.  

In-Work tax credit for families — $373 million  

From 7 April, the Government granted a $50 in-work tax credit to 143,000 working families with children to help with rising fuel costs. Another 14,000 families became eligible for a lower tax credit. The overall tax relief package was estimated to cost NZ$373 million for a year, funded from the Government’s operational allowance.  

Mileage rate increases  

$24.2 million funding for temporary increase in mileage rates for home and community support workers and patients travelling for specialist treatment 

Public transport support and frontline agency fuel funding  

Funding was provided to support public transport authorities to help manage fuel cost pressures and maintain services.  

Government agencies that rely heavily on fuel to deliver frontline services received additional funding to maintain their operations in the face of sustained fuel price increases. This includes additional funding for Fire and Emergency, Corrections, Police, Customs and Education to maintain frontline operational activities in the face of sustained fuel price increases 

Budget 2026 continues the Government’s focus on strengthening law and order and maintaining community safety. There is a strong emphasis on supporting frontline agencies, including Corrections, Police, and the justice system, to manage demand and improve operational capability. Investment is also directed toward justice infrastructure and enforcement systems, alongside measures to combat crime and enhance system effectiveness. The overall objective is to ensure agencies remain responsive and capable in maintaining public confidence and safety. 

Key Investments 

• $503 million for frontline Corrections services, including resources to manage increasing prison volumes. This ensures the corrections system can manage rising demand while maintaining security and operational capacity
• $50 million additional funding for frontline policing
• $215 million capital investment, including new courthouses in Rotorua and new police stations in Whanganui and Greymouth
• Funding to reform the firearms safety system by establishing a new independent firearms regulator
• $21 million for Customs to combat drug smuggling and transnational crime

Infrastructure investment is a key focus, supporting economic growth, improving connectivity and enhancing resilience. The Government is prioritising major transport projects, including roads and rail, alongside continued investment in public assets such as hospitals, schools and justice facilities. There is a strong emphasis on strengthening infrastructure to better withstand increasing weather-related events and disruptions, as well as progressing planning reforms to enable development and support long-term productivity. 

Key Investments 

•  $1.8 billion capital investment to deliver the Cambridge to Piarere Expressway as a Road of National Significance. Aimed to improve regional connectivity, reduce congestion and support efficient freight movement between key economic centres. 
• $705 million capital and $477 million operating to renew and upgrade New Zealand’s rail network.  
• $400 million capital for state highway resilience upgrades. Targeted at strengthening vulnerable transport routes to reduce disruptions from weather-related events. 
• $400 million to introduce financial incentives for councils to support housing growth.  
• $294 million to progress reforms to the resource management system, including replacing the existing framework. This is intended to streamline planning processes, reduce delays in obtaining consents and improve consistency across regions. 

Ongoing investment in hospitals, schools, courthouses, police stations and defence assets all contribute to the broader infrastructure pipeline and support population growth, service delivery and national resilience over the long term. 

Benefits 

Reforms to the resource management system, is expected to improve the efficiency and consistency of resource consent processes. This may reduce delays and uncertainty in obtaining approvals, allowing development projects to proceed with greater certainty. Improved timing can also support more effective planning while reducing costs associated with project delays. 

The government is launching a major overhaul of the public service to improve efficiency, save taxpayer money and improve the services that New Zealanders rely on, like getting a passport or applying for a benefit. This is part of a plan to create a more modern and digitally-focused public service. 

A key part of this plan is to reduce the overall size of the government workforce. The government has set a target to lower the number of core public service jobs to 55,000 by 2029. To get there, most government departments are being asked to find significant savings in their budgets. These savings will come from cutting back on administrative or ‘back-office’ roles, spending less on external consultants and contractors and stopping or shrinking government programmes that are not considered a top priority. 

These budget cuts are being rolled out in stages. Most departments have already found 2% in savings for the coming year. They will face a deeper cut of 5% in 2027, and another 5% the year after that. For many agencies, this will add up to a total budget reduction of around 12% over the next few years. 

However, it is important to know that these cuts will not apply to everyone. Essential frontline services are being protected from this savings exercise. This means that budgets for critical areas like health, education, the police, the defence force, and the child protection agency (Oranga Tamariki) will not be affected by these specific reductions. The government’s stated aim is to ensure that while back-office costs are being trimmed, funding for the services that people depend on most is safeguarded. 

The Budget includes a range of targeted initiatives aimed at improving public services and addressing specific areas of need. This includes environmental investment to strengthen control of wilding pines, as well as enhancements to identification systems to improve access to services for SuperGold cardholders. Funding is also directed toward strengthening emergency management capability, enabling faster and better‑coordinated responses during disasters. Additional funding for Oranga Tamariki will support improved responses to reports of suspected harm and increase assistance for children with high and complex needs. These initiatives reflect a focus on practical, targeted support across key service areas while improving the capability and responsiveness of government systems. 

Key Investments  

• $109 million package to improve control of wilding pines. This will assist in managing environmental impacts and reducing long-term ecological and economic damage. 
• $184 million additional funding for Oranga Tamariki to better protect and support children. 
• $36 million to introduce the SuperGold Card as an accepted form of identification. 
• Investment in new technology to improve New Zealand’s emergency management system.
• Supporting faster and better coordinated responses during disasters, improving overall system capability and resilience.