Govt books to return to surplus after three years
By Giles Dexter of RNZ
An uncertain economic outlook and slower recovery will keep government finances in deficit for the next three years before a return to surplus.
The Budget forecasts a $3 billion a year lower tax take, while expenses are about $1 billion higher than forecast in the December update, resulting in the budget deficit peaking at $12 billion in the coming year and staying higher than expected before a surplus of $200 million in 2029.
Finance Minister Nicola Willis said today the Budget was aimed at securing and enhancing economic recovery.
"Budget 2025 responds to New Zealand's long term challenges with initiatives to boost growth, investment, and savings.
"There are targeted investments in essential services and infrastructure... And reforms fix financial holes in the government books."
Treasury forecast this year's deficit, using the newly introduced calculation excluding ACC costs, to the end of June would be $10.2 billion, about $2.7 billion lower than forecasted.
The deficit will peak in the coming year at $12.1 billion, nearly $2 billion more than the December forecast, with the 2027 forecast nearly double the previous forecast at $8.1 billion.
Willis said she was proud to get deficits lower and reduce debt levels.
The Budget has used close to $13 billion from the now-revamped pay equity scheme. Economic outlook
Treasury economic forecasts were pulled back in the near term because of uncertainty about the global outlook and a slower economic rebound after last year's recession.
Growth was forecast to be slower for the rest of this year before picking up and sitting near three percent a year for the next three years.
Unemployment is forecast to be near the peak and is expected to fall below five percent in the next two years, while inflation is forecast to stay close to the Reserve Bank's two percent target point for the next few years. Business tax breaks
Businesses were offered a tax break for new machinery and plants through a larger and quicker depreciation of assets.
The Investment Boost incentive will allow businesses to claim 20 percent of the cost of the asset immediately, compared to the current 10.5 percent rate.
Willis said the enhanced tax break would help drive growth.
"Investment Boost delivers more bang for buck than a company tax cut because it only applies to new investments, not those in the past."
The policy was forecast to cost the tax take about $1.7 billion a year in foregone tax, but was said to be likely left economic growth by one percent and wagers by 1.5 percent over the next 20 years, with much of that in the first five years.
Net debt is forecast to peak at 43.5 percent of GDP in 2025 and is forecast to remain above the government's 40 percent ceiling for the following three years. KiwiSaver changes
The KiwiSaver retirement scheme was given a makeover with a staggered increase over the next two years in the minimum default contribution rates to four percent from the current three percent, with 16-18 year olds also to be eligible for contributions.
Willis said the changes would make KiwiSaver more sustainable and encourage people to save more for their houses.
However, the government halved its own annual contribution to $260 a year, and withdrawing that from anyone earning over $180,000 a year.
The move was expected to save the government about $400 million, while it was assumed that employers would offset their contribution through lower wages.
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$170m promised for EV chargers yet to materialise
In a windswept car park during the 2023 election campaign, Christopher Luxon vowed to tackle a major barrier to electric vehicle buyers. The National Party leader, and soon-to-be Prime Minister, was in Christchurch to unveil a $257 million pledge to 'supercharge' EV infrastructure through seed funding to private firms. 'National will deliver a comprehensive, nationwide network of 10,000 public electric vehicle chargers by 2030,' the policy document said. Flanked by future ministers Simeon Brown and Simon Watts, Luxon said: 'We've got to get our emissions down, and the way we do that is we accelerate the transition to EVs.' National was walking a fine line. Luxon said range anxiety was a major barrier to potential EV buyers, and New Zealand had the worst rate for public chargers among developed countries – which was true. At the same time, however, it was scrapping the EV-subsidising clean car discount (and associated 'ute tax'), which had cost hundreds of millions of dollars but encouraged the purchase of thousands of battery electric and plug-in hybrid cars. (Since then EV owners have been slapped with road user charges and a hike in ACC levies.) The supercharged part of National's EV infrastructure promise was an extra $170m. Now, more than halfway through the National-led coalition Government's term, how much new money has it spent, or earmarked, for EV-charging infrastructure? Zero. This situation is confirmed by Budget documents, and by Energy and Climate Change Minister Watts, who says there's $69m remaining from the original appropriation (under the previous Labour government) for building more EV chargers but none set aside in subsequent years. 'Any future funding will be sought in the context of future Budget cycles,' Watts says. Barring an electoral surprise, the next Budget will be delivered in election year. Kirsten Corson, chair of lobby group Drive Electric, says the Government isn't on track to meet the 10,000 charger target, it has 'decelerated' the electric vehicle sector, and is missing a massive economic opportunity to decarbonise transport. 'We're far from supercharging,' she says, adding later the Government's 'definitely trickle charging'. Transport Minister Chris Bishop says the 10,000 figure is an ambitious stretch goal. 'EVs are an important part of New Zealand's transport future and the Government is backing them through a cost-effective scheme to roll out a charging network around the country.' His National Party colleague Watts, meanwhile, says EV charging infrastructure remains a high priority, and the Government is committed to the 2030 target. 'As we have less than six years, we have taken the time to ensure that we have a structured, effective scheme that will be successful in getting the infrastructure built.' Officials aren't as bullish, however, as revealed by comments in more than 200 pages of advice and Cabinet papers released to Newsroom by Bishop's office under official information laws. The transport minister has been warned more money will be needed to hit National's goal – and there might still be a need for grants, or suspensory loans. It's not clear how much more needs to be added because estimates were redacted. In April, Bishop said it would be less than $100m. The final amount will depend on the proportion of AC chargers built, which are much cheaper than DC ones but charge at a slower rate. There's also ongoing work to lower electricity network connection costs, and simplify consenting. Certainly, the pace needs to speed up. Chart: EECA In September 2023, when Luxon made the 10,000-charger pledge, the number of EV chargers around the country was estimated to be about 1200. At the end of last year it was 1378. Energy Efficiency and Conservation Authority (EECA) figures, released to Newsroom, state a further 136 charge points have been completed so far this year. If the 10,000 charger goal is to be met by 2030, 157 chargers will need to be finished every month for the next 54 months. A 'request for proposals' for public EV-charging infrastructure loans was only issued this month. EECA's general manager of delivery and partnerships Richard Briggs says the initial focus was having at least one fast charger every 75km across the State highway network. 'The momentum of charger installations, and charging providers in the market, has accelerated rapidly in recent years.' Corson, Drive Electric's chair, says the Government has over-promised and under-delivered. 'This is National's KiwiBuild project.' Relative go-slow While the Government is adept at using urgency to pursue its legislative priorities, the EV charger policy has been on a relative go-slow. A Cabinet paper from April last year noted the next update would be in October, after which the industry was consulted. But it appears decisions had already been made. In April this year, Bishop (who replaced Brown as transport minister in January) and Watts announced the Government would change the way its funds EV infrastructure, using concessionary loans instead of grants. A Ministry of Transport briefing paper from last July said: 'You have indicated that a concessional loan approach is your preferred way of financing co-investment in charging infrastructure.' Grants are the dominant approach for funding EV chargers internationally. A transport ministry paper from June last year said: 'The use of grant funding (at least when used on its own) is inconsistent with your objective to recycle Crown capital to support further investment over time.' Recycling capital is shorthand for loan repayments, which could be used to fund more EV chargers – should Cabinet decide that's the best use of funds. Transport officials said last July: 'The move from grant funding to concessional loans will be a significant shift, and the response from the market is uncertain.' A switch to loans fulfils the National-Act Party coalition agreement, which mandated the programme 'specifically take into account Act's concern that there be robust cost-benefit analysis to ensure maximum benefit for government investment'. A paper to Cabinet's economic policy committee, from last September, said cost-benefit analysis principles and a value-for-money approach, used in procurement design and criteria for assessing proposals, were developed with Act's Simon Court, the parliamentary under-secretary for infrastructure. Loan applicants have to demonstrate the benefits outweigh the costs. The value-for-money approach will 'favour applications requesting low percentage Crown contributions, shorter loan tenures, and earlier repayments', a Cabinet paper from April last year said. We asked Act's Court if his party, and the coalition agreement, was a handbrake on the EV infrastructure scheme. 'Act is proud to have pulled the plug on Labour's 'climate change ATM',' Court says. 'We've insisted on robust cost-benefit analysis before any further taxpayer funds are committed. If something stacks up, great, but the default should not be subsidies.' The Government is shifting management of the EV-charging infrastructure programme from EECA to National Infrastructure Funding and Financing, the successor organisation to Crown Infrastructure partners, which managed the rollout of ultra-fast broadband. Court says the broadband programme is an example of disciplined public investment. 'A small amount of Crown capital helped crowd in massive private investment, delivered huge gains for New Zealanders, and is now being fully recycled for other infrastructure priorities. That's what a sound business case looks like and it's the kind of approach Act could support.' Transport Minister Bishop says: 'Concessionary loans will bring forward private investment in public EV-charging infrastructure by lowering the cost of capital. They will also provide better value for money by maximising private sector investment while keeping the taxpayers' contribution to a minimum.' Hitting the 10,000 charger target would require 'regular refinement of the co-investment model', officials said, including the 'limited use of grants or suspensory loans' to build chargers in remote or rural locations, and holiday hotspots. (Given the expanding range of new electric cars, it's fair to assume the target might be re-assessed.) A hypercharger for electric cars – New Zealand's fastest – south of Auckland in the Bombay Hills. Photo: ChargeNet Luxon's lament in that Christchurch car park in 2023 was that New Zealand languished at the bottom of the OECD table, with one public charger for every 95 EVs. That was based on the International Energy Agency's Global EV Outlook 2023. There's good news and bad from the 2025 edition. It says New Zealand's ratio has improved to 82 EVs per charger – but we've maintained our bottom rank. (Australia is second on 76, while third-placed Mexico's ratio is 41.) Fundamentally, though, will the 'rapid rollout' of EV charging stations make any difference to EV sales? According to April's Cabinet paper, access to public EV charging is a 'key factor' in enabling faster uptake and while more chargers will give 'greater confidence', any surge in EV sales is 'difficult to quantify'. In 2024, EVs were 6.7 percent of new light vehicle registrations, and 2.6 percent of the total light vehicles. 'Ministry of Transport modelling suggests that by 2030 the share of light EVs could be expected to be around 7.2-11.2 percent of the fleet.' What about Luxon's comment, two years ago, that the way to reduce the country's emissions was to 'accelerate the transition to EVs'? Climate assessments state the EV charger policy doesn't meet the 'threshold for significance', and is expected to deliver only 0.21 million tonnes of emissions reductions between 2026 and 2035. In 2023, New Zealand's gross emissions were 76.4 million tonnes of carbon dioxide-equivalent gases. Without a drastic reduction in emissions, the country will likely have to buy billions of dollars' worth of overseas carbon credits to meet our Paris Agreement targets. New Zealand's rating on Climate Action Tracker is 'highly insufficient', and the Government's approach is being challenged in a world-first legal challenge.
Scoop
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How Would An Escalation In Conflict In The Middle East Impact New Zealand
Article – RNZ Explainer – America jumped into the war between Israel and Iran over the weekend, as US President Donald Trump announced air strikes on Iran's three principal nuclear sites. The intervention of the US in the conflict has raised concerns worldwide about what's next, including how it might affect New Zealand, from citizens overseas to the price of petrol. Here's a look at what you need to know so far. What's NZ's role in the conflict? Are we going to war? New Zealand has maintained a cautious stance politically as the conflict between Iran and Israel has ramped up in recent weeks. That remains the case today, with the prime minister urging that diplomatic talks resume. Prime Minister Christopher Luxon, who is overseas for a NATO summit, told RNZ's Morning Report that New Zealand wanted to see a peaceful stable and secure Middle East. 'The way to get there is a political solution rather than military action, it's actually through dialogue and diplomacy.' As a small country that is thousands of miles away from the conflict, all New Zealand could do was to advocate for what it thought should happen, he said. 'What we don't need is more military action, we need a political solution to all of these issues in the Middle East.' On Sunday, Foreign Minister Winston Peters said ongoing military action in the Middle East was 'extremely worrying'. Peters previously said before the weekend escalation that the provocative behaviour by both Israel and Iran was to be criticised, and New Zealand would not take sides in a conflict of this nature. 'There are no innocent parties in this conflict,' he said. Will this latest Middle East conflict affect the price of petrol – and everything else? The escalation poses a major threat to New Zealand's economy, RNZ's Susan Edmunds reports. Infometrics chief executive Brad Olsen said if there were attacks on US shipping, or attempts to limit access through the Strait of Hormuz, oil prices could spike. Iran's parliament reportedly voted on Monday morning (NZ time) to close the Strait of Hormuz, which around 20 percent of the world's oil travels through. 'If [Iran] do ratchet up the tension further, if this starts to broaden out into shipping attacks, I think market expectations and worries about oil supply will increase substantially. The question is, just to what degree do you price this and how do markets look at that?' Koura KiwiSaver founder Rupert Carlyon said the biggest risk was to inflation. 'If it does turn into a broader Middle East war and potentially shutting down the Strait of Hormuz, then we are likely to see higher oil prices, which will flow through to everything and shipping delays making it harder and more expensive to import things here in New Zealand.' What about Kiwis who are in Iran or Israel? Nearly 250 New Zealanders are now registered as being in Iran and Israel as a Defence Force Hercules makes its way to the region to help. New figures provided to RNZ and recorded on SafeTravel show 119 New Zealanders in Iran and 117 in Israel. RNZ understands some of those people may have managed to flee somewhere safer, but have not yet updated their status with SafeTravel. The Defence Force announced on Sunday it is sending a plane to the Middle East to assist any New Zealanders stranded in Iran or Israel. The plane is not part of any military combat operations. The C-130J Hercules, along with government personnel, left Auckland on Monday morning. It will take several days for it to arrive. Peters said New Zealanders should do everything they can to leave now, if they can find a safe route. 'We know it will not be safe for everyone to leave Iran or Israel, and many people may not have access to transport or fuel supplies,' he said. 'If you are in this situation, you should shelter in place, follow appropriate advice from local authorities and stay in touch with family and friends where possible.' Peters earlier said the number of New Zealanders registered in Iran had jumped since the escalation of the crisis. 'We thought, at a certain time, we had them all counted out at 46,' he said. 'It's far more closer to 80 now, because they're coming out of the woodwork, despite the fact that, for months, we said, 'look, this is a danger zone', and for a number of days we've said, 'get out if you possibly can'.' There were 101 New Zealanders registered in Israel. Again, Peters said the figure had risen recently. New Zealanders in Iran and Israel needing urgent consular assistance should call the Ministry's Emergency Consular Call Centre on +64 99 20 20 20. How are New Zealanders with ties to the region coping? Elham Salari, an Iranian in New Zealand told RNZ on Sunday she was deeply worried for her family members back home. 'I'm so scared. I'm so stressed… all I'm thinking is 'What's going to happen next?' Trump said he wants peace… but Iran's regime will not let it go easily. There will be a bigger war. It's going to destroy our country and our people are going to die.' Salari said she had woken up to messages from her family on Sunday who confirmed they were safe, but she had not been able to get back in contact with them since. Meanwhile, New Zealand Jewish Council spokesperson Ben Kepes said people should not conflate the actions of the Israeli government and the Israeli military with Jews worldwide. Iran has said multiple times that it does not believe Israel has a right to exist, he said. 'Most New Zealanders when they understand the issues would say that regardless of whether they support the actions of the Israeli government, that Israel has a right to exist as a sovereign nation.' Kepes said he was a Jew in New Zealand and did not hold an Israeli passport, nor vote for the government in Israel. 'I have zero control over Israel, so holding me responsible of the actions of the government is not only absurd, but it's a stereotype that is really dangerous.'
Scoop
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How Would An Escalation In Conflict In The Middle East Impact New Zealand
Explainer – As the US joins the conflict between Israel and Iran, how will New Zealand be affected? Here's what you need to know so far as the situation continues to unfold. RNZ Online Explainer – America jumped into the war between Israel and Iran over the weekend, as US President Donald Trump announced air strikes on Iran's three principal nuclear sites. The intervention of the US in the conflict has raised concerns worldwide about what's next, including how it might affect New Zealand, from citizens overseas to the price of petrol. Here's a look at what you need to know so far. What's NZ's role in the conflict? Are we going to war? New Zealand has maintained a cautious stance politically as the conflict between Iran and Israel has ramped up in recent weeks. That remains the case today, with the prime minister urging that diplomatic talks resume. Prime Minister Christopher Luxon, who is overseas for a NATO summit, told RNZ's Morning Report that New Zealand wanted to see a peaceful stable and secure Middle East. 'The way to get there is a political solution rather than military action, it's actually through dialogue and diplomacy.' As a small country that is thousands of miles away from the conflict, all New Zealand could do was to advocate for what it thought should happen, he said. 'What we don't need is more military action, we need a political solution to all of these issues in the Middle East.' On Sunday, Foreign Minister Winston Peters said ongoing military action in the Middle East was 'extremely worrying'. Peters previously said before the weekend escalation that the provocative behaviour by both Israel and Iran was to be criticised, and New Zealand would not take sides in a conflict of this nature. 'There are no innocent parties in this conflict,' he said. Will this latest Middle East conflict affect the price of petrol – and everything else? The escalation poses a major threat to New Zealand's economy, RNZ's Susan Edmunds reports. Infometrics chief executive Brad Olsen said if there were attacks on US shipping, or attempts to limit access through the Strait of Hormuz, oil prices could spike. Iran's parliament reportedly voted on Monday morning (NZ time) to close the Strait of Hormuz, which around 20 percent of the world's oil travels through. 'If [Iran] do ratchet up the tension further, if this starts to broaden out into shipping attacks, I think market expectations and worries about oil supply will increase substantially. The question is, just to what degree do you price this and how do markets look at that?' Koura KiwiSaver founder Rupert Carlyon said the biggest risk was to inflation. 'If it does turn into a broader Middle East war and potentially shutting down the Strait of Hormuz, then we are likely to see higher oil prices, which will flow through to everything and shipping delays making it harder and more expensive to import things here in New Zealand.' What about Kiwis who are in Iran or Israel? Nearly 250 New Zealanders are now registered as being in Iran and Israel as a Defence Force Hercules makes its way to the region to help. New figures provided to RNZ and recorded on SafeTravel show 119 New Zealanders in Iran and 117 in Israel. RNZ understands some of those people may have managed to flee somewhere safer, but have not yet updated their status with SafeTravel. The Defence Force announced on Sunday it is sending a plane to the Middle East to assist any New Zealanders stranded in Iran or Israel. The plane is not part of any military combat operations. The C-130J Hercules, along with government personnel, left Auckland on Monday morning. It will take several days for it to arrive. Peters said New Zealanders should do everything they can to leave now, if they can find a safe route. 'We know it will not be safe for everyone to leave Iran or Israel, and many people may not have access to transport or fuel supplies,' he said. 'If you are in this situation, you should shelter in place, follow appropriate advice from local authorities and stay in touch with family and friends where possible.' Peters earlier said the number of New Zealanders registered in Iran had jumped since the escalation of the crisis. 'We thought, at a certain time, we had them all counted out at 46,' he said. 'It's far more closer to 80 now, because they're coming out of the woodwork, despite the fact that, for months, we said, 'look, this is a danger zone', and for a number of days we've said, 'get out if you possibly can'.' There were 101 New Zealanders registered in Israel. Again, Peters said the figure had risen recently. New Zealanders in Iran and Israel needing urgent consular assistance should call the Ministry's Emergency Consular Call Centre on +64 99 20 20 20. How are New Zealanders with ties to the region coping? Elham Salari, an Iranian in New Zealand told RNZ on Sunday she was deeply worried for her family members back home. 'I'm so scared. I'm so stressed… all I'm thinking is 'What's going to happen next?' Trump said he wants peace… but Iran's regime will not let it go easily. There will be a bigger war. It's going to destroy our country and our people are going to die.' Salari said she had woken up to messages from her family on Sunday who confirmed they were safe, but she had not been able to get back in contact with them since. Meanwhile, New Zealand Jewish Council spokesperson Ben Kepes said people should not conflate the actions of the Israeli government and the Israeli military with Jews worldwide. Iran has said multiple times that it does not believe Israel has a right to exist, he said. 'Most New Zealanders when they understand the issues would say that regardless of whether they support the actions of the Israeli government, that Israel has a right to exist as a sovereign nation.' Kepes said he was a Jew in New Zealand and did not hold an Israeli passport, nor vote for the government in Israel. 'I have zero control over Israel, so holding me responsible of the actions of the government is not only absurd, but it's a stereotype that is really dangerous.' According to the 2023 Census, about 2700 people living in New Zealand are of Israeli or Jewish background, while about 5600 identify with the Iranian ethnic group.
