Budget2025
Afocusonfiscaldisciplineandhousing reform,butsupplychallengesremain
The2025–26Budgetcomesasinflationcontinues toease,interestratesbegintofall,andsignsof economicrecoveryemerge Unemploymentis expectedtoriseslightly,andgovernmentdebtis forecasttoreach455%ofGDPby2029 The Budgetfocusesonkeepingspendingtargeted whilesupportinglonger-termgrowth
Economicgrowthisexpectedtopickupoverthe nextfewyears,withTreasuryforecastingGDP growthof29%in2026 Inflationissettoeaseto 22%in2025,sittingcomfortablywithinthe ReserveBank’s1–3%targetrange Interestrates havestartedtocomedown,helpingeasepressure onhouseholdsandbusinesses
Thepropertymarketisshowingearlysignsof recovery Housepricesrose03%inApril,and salesactivityhaspickedup Netmigrationwas strongin2024,addingtopopulationgrowthand demandforhousing Butsupplyisstillstruggling tokeeppace,withhighconstructioncosts, workforceshortages,andplanningdelaysall continuingtoweighonnewhomedelivery.
Budget2025includesarangeofhousing-related measures:anewflexiblehousingfund,funding for550newsocialhomesinAuckland,and supportforcommunityhousingproviders Changestotenancylawsandeffortstostreamline planningapprovalsarealsopartofthebroader housingresponse Thesemeasuresaimto improvedeliveryandaffordability,butshort-term supplyconstraintsremainakeychallenge
Whilethepolicydirectionisshiftingtowardlongtermsolutions,thenear-termoutlookremains tight Demandcontinuestooutstripsupply,and boostinghousingdeliveryatscalewillbecriticalin theyearsahead
Budgetataglance
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Deficitof$111billionin2025/26,withasurplusexpectedby2028/29 Inflationforecasttoeaseto22%in2025,withinthetargetrange Migrationhit70,300in2024,expectedtosettlearound40,000ayear Newtaxbreaktoboostbusinessinvestment
UpdatestoWorkingforFamiliestobettersupporthouseholds
$6.8billionfornewinfrastructure,hospitals,schools,andtransport.
Propertyrelatedbudgetmeasures
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• • $128millionfor550newsocialhomesinAuckland.
$82millioninupfrontsupportforcommunityhousingproviders.
$250millionincapitaland$41millioninoperatingfundingforanewFlexibleHousingFund.
$150millionCrownlendingfacilitytolowerborrowingcostsforhousingproviders. Mortgageinterestdeductionsphasedbackinforpropertyinvestors Tenancylawchanges:90-dayno-causeevictionsreturn,pluspetbondsallowed Affordablerentalsnowapermanentpartofthehousingsystem
Inflationissettoeaseto2.2%in2025,sittingcomfortably withintheReserveBank’s1–3%targetrange.Interest rateshavestartedtocomedown,helpingeasepressure onhouseholdsandbusinesses.
LJHookerBudget2025
Economicforecasts
Keyeconomicandfiscalindicators
Source:wwwtreasurygovtnz
Residentialpropertymarketimpacts
NewZealand’shousingmarketisshowingsigns ofrecovery,withlowerinterestratesand improvedaffordabilitystartingtoliftbuyer confidence Pricesrose03%inApril,the strongestmonthlyresultinnearlyayearand salesareup95%comparedtolastyear CoreLogicandREINZdatapointtoresiliencein regionslikeChristchurch,Hamilton,and Southland
Buthousingsupplyremainsachallenge Constructionactivityhasdropped,andnew homecompletionsarestillfallingshortofwhat’s needed Treasuryexpectsbuildingtopickup from2026,butpopulationgrowthandstrong migrationcontinuetoputpressureonrental markets especiallyinlargercities
Budget2025includesseveralhousingmeasures: $128millionfor550newsocialhomesin Auckland,a$250millionflexiblefundtosupport affordablerentalsfrom2027,and$82millionin upfrontsupportforcommunityhousing providers.Therearealsochangestomortgage interestdeductionsandtenancylawsaimedat improvingmarketsettings.
Whiletheseinitiativesareastepintheright direction,short-termsupplyconstraintsremain Highconstructioncosts,planningdelays,and workforceshortagescontinuetoimpactdelivery, andpricesandrentsareexpectedtoremain underpressurethrough2025–26
Commercialpropertymarketimpacts
NewZealand’scommercialpropertymarketis findingitsfooting,althoughperformancestill variesbysector Industrialremainsthe strongest,supportedbydemandfromlogistics andmanufacturing,andtightvacancyinkey locations.Retailisimprovingonthebackof populationgrowthandstrongerhousehold sentiment,whileofficemarkets,especiallyin Wellington,continuetofeeltheeffectsof publicsectorconsolidation.
Therearenodirectmeasuresforcommercial propertyinBudget2025,butwidersupports willhaveanimpact The$6 8billion infrastructurepackageincludingschools, hospitals,roads,andrail,willboost constructionactivityandbenefitsurrounding
areas.ThenewInvestmentBoosttaxincentive, whichallowsbusinessestoimmediatelydeduct 20%ofeligiblecapitalspending(including commercialbuildings),couldalsoliftoccupierleddevelopment
Healthcareandlogisticsassetsareexpectedto benefitmost Planningreformsandlongerterminfrastructurecertaintymaysupport futuredevelopmentpipelines Overall, commercialpropertyheadsinto2025–26with steadymomentumandcautiousoptimism
Housingrelatedmeasures
Flexiblehousingfund
• • TheGovernmenthasannouncedanew FlexibleHousingFundtoconsolidateand replaceseveralexistingprogrammes.
Thefundincludes$41millioninoperating fundingoverfouryearsand$250millionin capitalfundingovertenyears
• From1July2027,thefundis expectedtodeliver650to900new homes,focusedonbothsocial housingandaffordablerentals
Thefundisdesignedtobe contestable,allowingcommunity housingproviders,KāingaOra,and Māorihousingorganisationsto competeforfundingbasedon regionalanddemographichousing needs
Rentalmarketreforms
Budget 2025 supports previously announced tenancylawreforms,including:
Thereintroductionof90-dayno-cause evictionsforlandlords
Allowingpetbondstogivelandlords confidenceinacceptingtenantswithpets
Aphasedreinstatementofmortgage interestdeductibilityonrentalproperties
Aucklandsocialhousingdelivery
• A$128millioninvestmentwillfund550new socialhomesinAucklandinthe2025/26 financialyear
Theseareinadditiontothe1,500homes fundedinBudget2024,over600ofwhich havealreadybeenallocatedtocommunity housingproviders
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Communityhousingsectorsupport
Affordablerentals–a permanentpolicyfeature
• • Toacceleratedelivery,Budget2025 includesan$82millionUpfrontOperating Supplementforcommunityhousing providers.
Thesepaymentsaredesignedtoprovide upfrontcashflowwhennewsocialhousing contractsaresigned,reducingfinancing riskandspeedingupconstruction
Crownlendingfacilityforcommunity housing
AnewCrownlendingfacilityofupto$150 millionwillbeestablishedviatheCommunity HousingFundingAgency(CHFA)
Thegoalistolowerborrowingcostsfor communityhousingprovidersbyoffering concessionallendingratesandimproving projectviability
• • • TheGovernmenthasforthefirsttime formallyendorsedaffordablerentalsasa corecomponentofthehousingsystem
Thesearedefinedaspropertiesoffered belowmarketrent typically80%orless ofthelocalmedian andwillbesupported underthenewFlexibleHousingFund
Affordablerentalsareseenasacrucial “missingmiddle”betweentraditional socialhousingandfullmarkethousing, helpingtenantstransitiontowardsgreater financialindependence.
Constructionactivityhasdropped,andnewhome completionsarestillfallingshortofwhat’sneeded. Treasuryexpectsbuildingtopickupfrom2026.
LJHookerBudget2025
Otherbudgetmeasures
Taxincentives&investmentsupport
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Education&WorkforceSupport
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InvestmentBoosttaxincentivebegins22 May2025:
Businessescandeduct20%ofthecostof
o eligiblenewassets(includingcommercial buildings)intheyearofpurchase,inaddition tostandarddepreciation
Appliestonewandimportedassets
o (excludingresidentialpropertyandland)
KiwiSaverReforms
• DefaultKiwiSaveremployerandemployee contributionstoincreasefrom3%to4% (phasedin)
KiwiSaveraccessextendedto16and17year-olds
Governmentcontributionstobehalvedand moretightlytargeted,improvinglong-term fiscalsustainability
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Includes4.75%tuitionsubsidyincrease
o forhigh-demandSTEM,health,andteacher educationfields
o growthandtransitionsupportfor polytechnics
Fundingtocoverforecastenrolment
• $15billionforeducation,including:
o $646millionforlearningsupportservices
o classroomsandmaintenance(10,000 studentplaces)
$712millioncapitalfundingfornew
o $140milliontoimproveschoolattendance
Health&hospitals
• $398millioninvestmentintertiary educationoverfouryears
$7billioninoperatingfundingupliftforHealth NZovertheforecastperiod
$1billionincapitalinvestmenttoredevelop NelsonHospital,WellingtonED,andupgrade Aucklandfacilities
$447millionforexpandedGPandafter-hours careaccess
$1billioninfundingforcancertreatmentsand otherPharmac-listedmedicines
ljhookerconz
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Infrastructure
The2025–26Budgetcommits$68billioninnew capitalinfrastructureinvestment
Infrastructureiscentraltounlockingnew housing,improvingserviceaccess,and strengtheningtheresilienceoffreightand logisticsnetworks Budget2025alsooutlines planstoreplacetheResourceManagementAct anddelivera30-YearNationalInfrastructure Plan
KeyinitiativesinthisBudgetalsosignalagreater useofpublic-privatepartnerships(PPPs),value capturetools,andregionalplanningcoordination
Nationalprojects
$1billiontoupgradeandexpandhospitals, includingNelsonHospitalandWellington RegionalED
$464millioncapital+$141millionoperating forrailmaintenanceandassetrenewalin AucklandandWellington
$219milliontocompletelocalroadrecovery worksfollowing2023NorthIslandweather events
$712millioncapitaland$234million operatingforschoolpropertyexpansionand maintenance(10,000newstudentplaces)
InfrastructurePipelineincludes:
o construction $467billionofprojectsunder
o expectedtocommencewithin12months $136billioninprocurementor
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Housing-enablinginfrastructure
Budgetsupportsthepreviouslyannounced “GoingforHousingGrowth”policy,with legislationtobeintroducedlaterin2025
Thisincludesenablingtoolsfor infrastructurefundingandfinancingatthe localgovernmentlevel,designedtospeed uphousingdevelopment
Futureinfrastructureplanningand reform
• Launchofa30-YearNationalInfrastructure Plan,providinglong-termclarityfor investmentandregionaldevelopment
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CommitmenttoreplacingtheResource ManagementAct(RMA)withmodern consentinglegislationtoaccelerateproject delivery
Expandeduseofpublic-private partnerships(PPPs)toleverageprivate capitalforcriticalprojects
Explorationofvaluecapturemechanisms (e.g.tolls,targetedrates)tosupport infrastructurefinancing
LJHookerBudget2025
