Budget 2025: NZ Govt Focuses on Growth, Jobs and Cost of Living Relief

Budget 2025 sets the tone for what Prime Minister Christopher Luxon has described as a pivotal year in New Zealand’s economic recovery and long-term growth strategy. With the government unveiling a package aimed at boosting investment, creating jobs, and easing the cost of living, the overarching goal remains clear: building a strong, productive economy to help Kiwis move ahead.

Luxon emphasized that the government’s approach is working. Inflation has declined sharply—from a high of 7.3% to 2.5%—and there are promising signs that mortgage interest rates are beginning to ease. The government attributes these improvements to strict fiscal discipline and a focus on reducing wasteful expenditure.

Encouraging Business Investment and Productivity

At the heart of Budget 2025 is the Investment Boost initiative, designed to catalyze productivity by providing immediate tax relief for businesses. Under this policy, tradies, farmers, and small business owners can deduct 20% of the cost of new tools, machinery, and equipment from their taxable income. The goal is to stimulate capital investment, which in turn is expected to drive productivity gains and support wage growth.

This incentive is particularly significant for sectors reliant on physical capital, such as agriculture and trades, where upgrading equipment can directly improve efficiency and output.

Strengthening Savings and Financial Security

Another key measure involves changes to KiwiSaver contributions. The government plans to increase both employer and employee contributions, a move aimed at bolstering long-term financial security for workers. While the specifics of the increases are expected to be clarified in coming months, the policy reflects a broader intent to foster a culture of saving and financial preparedness.

Investing in Infrastructure and Innovation

Budget 2025 also earmarks substantial funds for infrastructure. New investments are set to flow into transport, education, and healthcare infrastructure—roads, schools, and hospitals. These projects are not only essential for public service delivery but are also poised to generate thousands of jobs in construction and related industries.

Furthermore, the budget includes support for start-up technology ventures, a step towards diversifying New Zealand’s economic base and encouraging innovation. Alongside this, there are plans to attract foreign investment and grow the tourism sector, both of which are critical for a sustainable, globally competitive economy.

Easing the Cost of Living

With inflation still exerting pressure on household budgets, Budget 2025 introduces targeted cost-of-living support for New Zealanders:

• Working for Families payments will be increased for 142,000 families, providing direct assistance to households with children.

• Rates rebates will benefit up to 66,000 SuperGold Card holders, helping older New Zealanders manage housing costs.

• Extended prescription validity to 12 months will reduce the need for repeat doctor visits, saving both time and money for patients.

These targeted measures aim to provide immediate relief while supporting long-term household resilience.

Frontline Services and Community Wellbeing

The government is also placing a strong emphasis on frontline services. Budget allocations include:

• Additional maths teachers to support educational achievement.

• Increased funding for children with additional learning needs, ensuring inclusive and effective learning environments.

• $1 billion for hospital upgrades, addressing critical infrastructure needs in the health sector.

• Improved access to urgent medical care, reducing wait times and pressure on emergency services.

• Enhanced support for Police, reinforcing public safety efforts across the country.

These investments underscore the government's intent to deliver core public services efficiently, with a focus on outcomes and accountability.

A Responsible, Forward-Looking Fiscal Plan

Despite the new spending, Prime Minister Luxon stressed that the government has made “tough choices” to prioritize high-impact initiatives. “Just like Kiwi households, we’ve had to make difficult decisions. We are confident that we’ve put taxpayers’ money where it will have the greatest impact,” he stated.

Treasury forecasts suggest economic growth will average 2.7% per year, with 240,000 new jobs created over the forecast period. Wages are expected to continue outpacing inflation, sustaining a positive trend that has seen real average wages increase by nearly $1,100 since the last election.

Building a Stronger Future

Budget 2025 reflects a government committed to growth, resilience, and responsibility. With strategic investments in productivity, savings, and essential services, the plan aims to position New Zealand for sustained prosperity while addressing the immediate needs of its people. As Luxon summed it up: “This is a responsible Budget that secures New Zealand’s future.”