New Zealand

The Government has unveiled its so-called ‘no-frills’ Budget 2023, focused on the cost of living and building better infrastructure in the face of climate change.

The Budget has four overarching themes:

  • Supporting New Zealanders with the cost of living
  • Delivering the services New Zealanders rely on
  • Recovery and resilience
  • Fiscal sustainability.

Here is a list of the major spending and projects:

The Cost of Living Package targets families with young children. It is designed to ease pressure on New Zealanders in the face of global inflation and the challenges of rebuilding from extreme weather events. It provides practical cost of living relief across some of the core expenses facing Kiwis – childcare, healthcare, transport, and power bills.

The Cost of Living Package provides the following:

  • $1.2 billion for extending the 20 hours of free childhood education cover to include two-year-olds (it currently covers ages 3-5), starting in March 2024. This provides savings of approximately $133.2 per week for eligible parents.
  • $339.3 million for pay parity for teachers in education and care services and $260 million for ECE services, including a one-off $3 million grant for Playcentre Aotearoa.
  • $35.2 million to improve access and take up of childcare assistance by delivering a new online application process for parents and making administrative changes to create a more efficient service for parents and providers.
  • $19.6 million to match KiwiSaver ‘employer’ contribution to paid parental leave recipients.
  • $618.6 million to scrap the $5 prescription co-payment from July this year. This will support an estimated 3 million New Zealanders each year to access cheaper medicines.
  • $327.4 million to reduce the cost of public transportation. This investment will extend the Community Connect programme to offer free public transportation to children under 13, and half-price transportation to Total Mobility passengers and passengers aged 13 to 24.
  • $323.4 million to continue delivering free lunches in schools, estimated to save a family with two school-age children $60 per week on average.

As announced by Prime Minister Chris Hipkins and Education Minister Jan Tinetti, Budget 2023 builds on the Government’s record of investing in schools and improving the lives of young people right across New Zealand. Budget 2023 will be investing $3.6 billion total operating and $1.3 billion total capital in education initiatives to boost skills, improve achievement and attendance, and lift pay to attract and retain teachers. It is expected Budget 2023 will build 300 new classrooms and up to four new schools to create space for 6,600 more students.

Key education related spend from Budget 2023 includes:

  • $400 million total capital and $55.4 million total operating to continue the National Education Growth Plan, which will add approximately 6,600 student places to the school network and four new schools.
  • $50 million total capital and $13.1 million total operating to extend the Ngā Iti Kahurangi school infrastructure programme to 175 more schools, which will deliver property improvements to small, isolated schools across New Zealand.
  • $120 million total capital and $27 million total operating to modify school buildings, with modifications such as automatic doors, lifts and bathroom refits, to support the needs of students.
  • $112.5 million total capital and $21.9 million total operating to expand Māori medium education infrastructure across kura, which will support meeting the Government’s objective of 30 percent of ākonga Māori learning in Māori medium education environments by 2040.
  • $157.4 million total capital and $41.3 million total operating to support 33 school projects that require funding as part of the Christchurch Schools’ Rebuild programme following the 2010 and 2011 earthquakes.
  • $233.9 million total operating for schools’ operational grants and $521 million total operating for tertiary tuition and training subsidies.
  • $41.1 million total operating to support students at risk of disengagement to better engage with learning.
  • $23.6 million to boost teacher training enrolments and incentivise overseas teachers to move to New Zealand, targeting an increase of 1,700 new teachers to enter or return to the profession.

Science and technology is one of the key focuses of Budget 2023, with significant investment to support the Te Ara Paerangi Future Pathways. Budget 2023 demonstrates a commitment to increase research and development expenditures to 2 percent of GDP.

Budget 2023 provides the following:

  • $160 million to the gaming sector, providing a 20% rebate for video game developers. This initiative aims to foster growth in the sector and create high-skill, high-wage jobs.
  • An investment of $451 million to create three multi-institution research hubs in Wellington. These hubs will promote collaboration among scientists, optimise the utilisation of expensive equipment and facilities, and position New Zealand to tackle complex challenges in areas such as health and wellbeing, climate change, advanced manufacturing and technology.
  • $38 million for building international research partnerships, specifically to support New Zealand’s participation in the European Union’s Horizon Europe Initiative. This collaboration will facilitate close cooperation between New Zealand and European researchers, working together to address pressing global issues including climate change, energy and global health.
  • $75 million for Industry Transformation Plans. This includes $30 million dedicated to the horticulture technology sector, $27 million to support businesses in upskilling to address digital gaps, and $18 million for the implementation of an accreditation system for tourism employers. These initiatives aim to drive growth, enhance skills and promote sustainable practices in these respective industries.

Health is another crucial area of focus in Budget 2023.

Budget 2023 will provide:

  • more than $1 billion to increase pay rates and boost staff numbers.
  • $20 million to lift COVID-19 immunisation and screening coverage for Māori and Pacific peoples.
  • $864 million to support tangata whaikaha and disabled people and their whanau, carers and supporters.

Budget 2023 includes a range of investments in the education and housing sectors to support the wellbeing of Māori and Pacific communities.

Some of the initiatives include:

  • $23 million for an extension to the Te Ringa Hāpai Whenua Fund.
  • $200 million to increase the supply of Māori housing and repair Māori properties.
  • $410 million for funding Māori medium school infrastructure and providing support for whānau Māori.
  • $60 million in funding to repair 250 whānau Māori homes affected by the North Island weather events.
  • $143 million investment in Māori and Pacific language and culture.
  • $28 million to support Pacific workers into employment and training and build the capability of this workforce.

The Government has announced a $1 billion flood and cyclone recovery package. This new package is in addition to the $889 million the Government has already announced for repair works and business support for those affected by the recent floods and cyclones.

The flood and cyclone recovery package consists of the following:

  • $100 million to improve flood protection in the affected regions.
  • $275 million for Waka Kotahi and local Council to repair affected roads.
  • $200 million to repair North Island rail connections.

Budget 2023 is committed to enhancing the resilience of New Zealand’s critical infrastructure while concurrently driving forward a more productive economy.

Budget 2023 will provide:

  • $71 billion for new and existing infrastructure projects over the next five years.
  • $6 billion for the National Resilience Plan, encompassing initiatives to rebuild and enhance infrastructure following recent weather events, alongside the establishment of a reliable pipeline to support the Infrastructure Action Plan.

Housing is one of key areas of focus for the New Zealand Government. As part of this commitment, Budget 2023 will provide:

  • $3.1 billion to create 3,000 more public housing units by June 2025.
  • $3.6 billion to deliver the current public housing build programme.

Budget 2023 follows the trend of previous years in allocating $1.9 billion to fighting climate change. This year, however, the money also goes towards adapting to the impacts of climate change, rather than just reducing greenhouse gas emission.

Climate spending primarily comes from the Climate Emergency Response Fund (CERF), which takes proceeds from polluters through the Emissions Trading Scheme (ETS) and reallocates it to green initiatives. Quantified abatement of initiatives funded through the CERF in Budget 2023 has been estimated to drive emissions reduction by 4.3Mt CO2e in the first two emissions budgets.

Key climate related initiatives from Budget 2023 include:

  • Providing $402.6 million for expansion of the Warmer Kiwi Homes programme to allow for 26,500 homes to be retrofitted and insulated each year for the next four years. The scope of the programme is also being extended to cover LED lighting upgrades, more efficient water heating appliances and some basic home repairs.
  • The National Adaptation Plan (released in August 2022) outlines how the Government plans to manage the risks caused by the changing climate, as a first step towards meeting the longer-term goal of building a more climate-resilient New Zealand. Budget 2023 invests $167.4 million in building our resilience to future climate events.
  • Providing $300 million to recapitalise New Zealand Green Investment Finance Limited and ensure it can fund a pipeline of low-emissions projects.
  • Investing $120 million to expand charging infrastructure for electric vehicles.
  • Providing $32.5 million to accelerate the adoption of green hydrogen as a means to decarbonise energy in hard-to-abate sectors.
  • Investing $38 million to design and implement a new regulatory regime for the New Zealand ETS and a centralised exchange for New Zealand Unit trading.
  • Providing $50 million for distributed renewable energy projects that will enhance the energy resilience of low-income and energy-insecure communities.
  • Supporting a $10.7 million investment to reduce diesel generation and establish a renewable energy system on the Chatham Islands.
  • Providing $22.9 million to increase Westport’s resilience to future flooding.
  • Providing $24.7 million to improve our data on both the impacts of climate change and adaptation and mitigation responses taken in New Zealand.
  • Providing $19.9 million to support resilience to climate change for iwi, hapū and the wider hapori whānui by expanding both data quality and access.
  • Investing $39.2 million in improving the mapping of New Zealand’s coastline and identifying coastal areas at significant risk of climate-related hazards and natural disasters.
  • New Zealand has successfully navigated various challenges posed by the COVID-19 pandemic and has emerged with a strong economy. In 2022, the economy expanded by 2.4%, and steady growth is anticipated in 2023. However, global uncertainties like the ongoing war in Ukraine and high inflation rates worldwide continue to create volatility in New Zealand’s growth.
  • To ensure the economy is prepared for unforeseen events and future shocks, the Government has implemented a fiscal strategy that allows for timely responses and strategic planning.
  • In terms of inflation, the annual Consumer Price Index (CPI) reached its peak at 7.3% in June 2022 but has since eased to 6.7% at the beginning of 2023. It is projected to further decline, reaching 3% in the September 2024 quarter. Over the next four years, wages are expected to grow at a faster rate than inflation, with an average annual increase of 2.2%.
  • The Treasury no longer predicts a recession in 2023, as the economy is bolstered by the ongoing recovery from the North Island weather events and an increase in international tourism. However, certain sectors and regions will continue to feel the lingering effects of extreme weather for some time.
  • The Government is actively funding employment programs to assist New Zealanders in developing their skills and finding job opportunities. In Budget 2023, a total operating investment of $190.1 million and a total capital investment of $47.5 million have been allocated to continue, pilot, or expand various programs and services. The Training Incentive Allowance, which supports sole parents, disabled individuals, and their caregivers in pursuing studies by assisting with associated costs, will be permanently reinstated. This initiative will receive a total operating funding of $80.1 million and a total capital funding of $47.5 million.
  • Disabled individuals in New Zealand will also receive support in entering the workforce through six trial health and employment services as part of the Oranga Mahi programme. As part of Budget 2023, a total operating funding of $36.3 million has been allocated to the programme.
  • With the introduction of the top personal tax rate to 39% in recent years, Budget 2023 will increase the trustee tax rate to 39% (with limited exceptions). It will come into force on 1 April 2024, after enabling legislation has been through a select committee process. The change includes an exemption for deceased estates and trusts dedicated to supporting people with disabilities. The Government aims to raise revenue efficiently and fairly to maintain public trust and compliance.


Grant Robertson has delivered a bigger than expected Budget 2023, characterised by more borrowing rather than reprioritised spending. That means more will be spent on the day-to-day running of the country, as well as on longer-term infrastructure investments. The magnitude of this additional expenditure will require the Treasury to issue a lot more debt than was expected and threatens to undermine the Reserve Bank’s attempts to tackle inflation. However, Grant Robertson said he did not believe the Reserve Bank would need to hike interest rates to deal with his increased spending – “I don’t think this is the impact of what is in that Budget,” he said.

Despite the Budget 2023 being larger than Grant Robertson foreshadowed in December, the Treasury doesn’t expect inflation to be much worse than forecast in December. It sees the rate dropping to 3.3% next year and 2.6% (within the Reserve Bank’s target range) in 2025.

Pulling it all together, the books are forecast to sink further into the red and take a year longer to get back to surplus than was expected in the Treasury’s half-year update, released in December. In other words, the books will be in deficit until 2026, one year longer than previously forecast.

The Treasury forecasts a $7 billion deficit in the current year, and a $7.6 billion deficit next year. Thereafter, it sees the deficit narrowing until the books get back to surplus by 2026.

The Reserve Bank suggested in its last Monetary Policy Statement it would lift the Official Cash Rate one more time next week, from 5.25% to 5.5%. But some bank economists earlier this week adjusted forecasts, saying stronger immigration and the likelihood of more Budget expenditure could push this peak up to 5.75% or 6%.

The Treasury noted higher interest rates will continue dampening inflationary pressures, which will continue driving house prices lower. Prices were expected to decline a further 4.6% to mid-2024, making a total peak-to-trough decline of 21.3%. This forecast for house prices will be a bitter pill for homeowners who have watched the nominal value of their property, or properties, decline since mid-2021.

The headline tax change in Budget 2023 is the raising of the trustee tax rate from 33% to 39% — effectively bringing the trustee rate in line with the top marginal tax rate. The increased rate takes effect from the 2024–25 income year. The legislation will contain measures to ensure that deceased estates and trusts for disabled persons are not subject to the 39% rate.

Noting that some taxpayers had taken advantage of the misalignment in tax rates once the top tax was raised in 2021, the Minister of Revenue pointed to the Inland Revenue’s recent High Wealth Individuals research:

“New information from Inland Revenue has shown an almost 50% spike in income subject to the trustee rate, from $11.4 billion in the 2020 tax year to $17.1 billion in the 2021 tax year.”

This begs the question whether the trustees will still be required to comply with the additional reporting requirements for New Zealand domestic trusts that came into effect from 2021–22 income year. While it’s being framed as ‘aligning’ the tax rate or closing a tax loophole, it is an increase which opponents are likely to describe as a tax hike. Grant Robertson said prior to Budget 2023 there wouldn’t be any ‘major’ tax changes.

Tax cuts, and any moves to change the tax thresholds, have been firmly ruled out on the grounds that any relaxation of tax rates would fuel inflation.

Generally, the adoption of a ‘no-frills’ budget represents a pragmatic approach to fiscal management in an era of economic uncertainty. By prioritising essential expenditures and minimising unnecessary expenses, governments can achieve financial prudence and efficiency. While a no-frills budget may require difficult choices and adjustments, it offers the potential for long-term stability and sustainability. However, it is crucial to strike a balance between necessary cost-cutting measures and maintaining essential services to ensure the well-being of citizens. Ultimately, the success of a no-frills budget depends on effective planning, transparent decision-making, and ongoing evaluation of its impact. One can hope that as the government continues to navigate complex financial landscapes, the no-frills budgeting philosophy serves as a valuable tool to guide responsible resource allocation and foster fiscal discipline. It’s likely that Labour will be hoping the additional spending is enough to win them an election, and this Budget, which is an election year budget, appears to be full of hand-outs.