Appropriation (2026/27 Estimates) Bill

I move, That the Appropriation (2026/27 Estimates) Bill be now read a second time.

E ngā iwi o Te Ūpoko o te Ika. E te Māngai, ngā mema Pāremata o ngā rohe pōti me ngā mema o ngā Rōpū Tōrangapū. E te motu whānui.  Nei rā te mihi. Anei te Tahua 2026.  Kia ora e te iwi!

[To the home tribes of Wellington.  To the Speaker, electorate, and party list MPs.  To the whole country. I salute you.  Here is Budget 2026.]

This is a responsible Budget. The Government is responding to an increasingly uncertain world with an economic plan and sensible choices that will make New Zealanders more secure in the years ahead. The documents I have tabled in Parliament today show that New Zealanders can look forward to growth, higher wages, and rising employment. They can look forward to better public infrastructure, expanded healthcare services, better schooling for their kids, and safer communities. They can look forward to a much stronger set of Government books.

Despite the chaos in the Middle East, and challenging global events, the Government’s responsible approach means Treasury is now forecasting a return to surplus in 2028/29—that is a year earlier than forecast in December. An earlier surplus means less debt and lower interest costs than would otherwise be the case. The Government is tackling New Zealand’s major challenges, not with shallow quick fixes, but with a responsible and durable approach. Today’s Budget marks further progress towards a more secure future.

I don’t expect New Zealanders to read every page of it. What I really want Kiwis to know is that this Budget is about you. It delivers on the Government’s belief that life can be better in this country, not just for the voters of today but for their kids and grandkids too. I think mums and dads across this Parliament and across the country want the same thing I do. We want this to be a country our kids choose to grow up in and then choose to live in when they grow up, because it’s a place where their achievements will be rewarded and where their dreams can be realised.

Yes, the world has thrown us some curveballs. I recognise that too many Kiwis are doing it tough right now. But New Zealanders listening today should have confidence. They should have confidence that the Government is spending their money wisely, that it is addressing the country’s big problems, and that it’s making investments in the things that really matter. That’s important not just for today but for what lies ahead. The world is more volatile than ever. The rules-based global system is under strain. Countries are boosting their spending on defence. Global competition for growth, jobs, and investment is sharper than ever. And conflict in the Middle East means Kiwi households and businesses are paying more for petrol and diesel.

What is more, New Zealand entered this period in a more fragile state than we would like. New Zealanders have shown real grit to recover from an extended period of runaway price increases, high interest rates, and the weaker economy that emerged as a result. An economic recovery has been unfolding but scars run deep. The Government is also carrying a significant burden of debt—more than twice as heavy as it was seven years ago, and with an annual interest bill of $9 billion. New Zealand’s sovereign credit rating has a negative outlook from ratings agencies Fitch and Moody’s, which is a warning that we must start bending the debt curve down.

New Zealand’s population is getting older, meaning the bill for delivering healthcare, New Zealand Superannuation, and other public services is becoming heftier for our workers to shoulder. The annual cost of superannuation is rising sharply, from less than $20 billion in 2023 to more than $30 billion by 2030. In the next year alone, the cost of super will rise by around $1.8 billion.

At the same time, extreme weather events are becoming more frequent. Economic shocks, which, unfortunately, have happened with some frequency over the past 20 years, will keep happening. And this Government is having to play catch-up on much-needed policy reforms, from housing to energy to resource management. There’s no hiding from these big issues. Yet in an election year, some will choose to ignore this context and instead suggest band-aids and sugar hits, all slapped on Afterpay. Not only does that approach ignore the real challenges New Zealand faces but in the absence of a magic money tree, it’s our future selves who’d have to foot the bill—with interest. So the Government is taking a more responsible approach. We are determined to deliver Kiwis real solutions that last, and to do so within very real financial constraints. Conflict in the Middle East has been a setback but New Zealand can and will bounce back. That is reflected in Treasury’s forecasts.

This responsible Budget makes significant investments in health, education, law and order, and other front-line public services. As a result, New Zealanders will experience more progress towards the Government’s targets, including reducing health waiting times, increases in educational achievement, reductions in violent crime, lower levels of welfare dependency, and a more capable defence force.

The Budget also provides $7 billion worth of new capital investment to help deliver the public infrastructure New Zealand needs. We’re making a funding commitment to construction projects like Whangārei Hospital, 10 school redevelopments, the next stage of the Waikato Expressway, a series of State highway resilience projects, new courthouses for Rotorua, and new police stations in Greymouth and Whanganui. These infrastructure projects will support more jobs for Kiwis, with the Infrastructure Commission estimating that every billion dollars’ worth of infrastructure funding supports around 4,500 jobs.

What’s more, with careful spending choices and ongoing restraint, the Government is set to get the books back to surplus earlier than previously forecast, and we are set to bend the debt curve down. That’s what a responsible Budget looks like.

Let me turn to the economic and fiscal outlook. A broadening export-led economic recovery was under way in New Zealand at the start of 2026, with employment and confidence increasing. In late February, conflict in the Middle East shocked the global and domestic economy. No one really knows for sure how this conflict will unwind or how long its impacts will be felt. We wish it to be over as soon as possible. In the midst of uncertainty, Treasury puts forward its best professional judgment. Its central forecast assumes that the impact of the crisis will be temporary. Over the next 12 months, it expects that fuel prices will contribute to higher inflation and lower real GDP growth than previously expected and would have otherwise been the case. But inflation falls after the current quarter and economic growth then picks up. Annual average growth in the year to June 2026 is forecast to be 1.2 percent, accelerating to 2.3 percent by June 2027, and accelerating again to 3.2 percent by June 2028. That is a healthy rate of growth. That growth will be accompanied by new jobs and higher wages.

Over the next four years, Treasury is forecasting employment to grow by 220,000 jobs, members; our forecasting wage growth to average 3.1 percent. Over this period, core Crown tax revenue is expected to be more than $9 billion higher than was previously forecast. That may be surprising, given the fuel crisis, but a lot of factors feed into tax forecasts, and I’m assured by the Treasury, that over 90 percent of the revisions to tax since the last update have nothing to do with the Middle East. In fact, on balance, that crisis has made the books worse. Instead, as a share of GDP, tax revenue rises over the forecast period, but core Crown expenses go the other way. They are initially steady, then fall to 30.3 percent of GDP in 2029/30.

The Government’s long-term objective, of course, is to get core Crown expenses down to 30 percent of GDP. Reaching 30.3 percent by the end of the forecast period therefore represents extremely good progress on our fiscal plan, and it reflects the Government’s disciplined approach to spending. That disciplined approach is illustrated by the Budget 2026 operating package. Last year, we set an operating allowance for this Budget of $2.4 billion per annum on average, which Treasury duly put in their forecasts, and which various commentators said would go bust in election year. Well, in Budget 2026, we have spent less than this. Yet again, this Government has come in under its allowance. The actual net operating package in Budget 2026 is $2.1 billion. The net package incorporates $3.8 billion of new spending a year, on average. That’s because we’ve topped up our operating allowance with $1.7 billion of savings and revenue, the main sources of which are already known to members of this House: a fundamental overhaul of the Public Service, the end of the final-year Fees Free scheme—which failed—and also, I can share with members today, Kāinga Ora’s reduced construction costs, which while they continue to increase productivity, has resulted in $368 million of lower operating expenses.

This disciplined spending approach, and a forecast improvement in revenue, improves the track for the Government’s headline operating balance indicator, OBEGALx. OBEGALx is now forecast to return to surplus in the 2028/29 fiscal year—that is a year earlier than previously expected. Members, this will be the first time in a decade that the books have been in the black. Now, of course, at every update I am conscious that OBEGALx is the small difference between two very large numbers, and that small differences matter when the balance is close to zero. Forecasts are not set in stone; they can move around, and it takes a lot of work to turn them into reality. That remains true, but it’s heartening to see for the first time that the surplus date is coming forward, not being pushed back, and that, at $2.6 billion, we have some room to move.

The track for net core Crown debt has also improved. Treasury’s forecasts show the debt curve bending down, and they show it bending a year earlier than previously expected. Net core Crown debt is forecast to peak at 46.1 percent of GDP in the 2027/28 year, which is lower than at the Half Year Economic and Fiscal Update in December. It’s then set to decline to 44.4 percent of GDP by the end of the forecast period. This improvement in the books, members, is reflected in the Government’s borrowing programme. New Zealand Debt Management has announced today that it has lowered its forecast issuance of Government bonds by $6 billion over the next four years. This is the first downward revision to the borrowing programme since 2021.

The Budget 2026 operating package is front-loaded, which partly reflects the Government’s decision to provide temporary, timely, and targeted funding to respond to the fuel crisis. As previously announced, the Budget funds a temporary increase to the in-work tax credit of $50 a week, supporting up to 157,000 low to middle income working families. We are making life easier for them and their kids at this difficult time.

Government agencies that rely heavily on fuel to deliver front-line services, including Police, Fire and Emergency, and education, have also received additional funding to maintain their operations and support our front-line services. Funding has also been set aside to help public transport authorities manage fuel cost pressures and keep services running. The Minister of Health has announced a temporary 30 percent increase in mileage rates for home and community support workers and for people travelling for specialist treatment, and $150 million has been set aside to increase New Zealand’s strategic fuel reserves. Some of that will be used to fund the previously announced deal with Z Energy, which has lifted New Zealand’s diesel reserves by nine days. While precise numbers are commercially sensitive, I can assure you that even accounting for this existing deal, the $150 million fund still has room for future increases in strategic fuel reserves, if needed. The Government has also set aside funding of $450 million in a time-limited contingency in case further fuel-related support is required.

We join all Kiwis in the hope that fuel prices and supply pressures won’t increase further and will follow the forecast by Treasury and come back down. However, it is prudent to be ready for a scenario in which fuel prices could spike or stay higher for longer. We have created a reserve—much like some households have an emergency savings account. You hope you don’t have to dip into it, but if you do, it is there. It is also funded from the operating package, which means if we do have to use it, members, it won’t add to forecast debt.

Boosting New Zealand’s security and resilience are major themes in this year’s Budget. New Zealand faces the most adverse and contested geostrategic environment in the past 80 years. While we cannot control the actions of other countries, we can ensure we have the capability to defend and advance New Zealand’s interests. Last year’s Budget funded the first year of the Defence Capability Plan, including a capital pre-commitment of $1.6 billion. Budget 2026 funds the second year of the plan, which includes extending the operational life of the Anzac-class frigates and HMNZS Canterbury, acquiring new drones, building modern housing for our service men and women on military bases—they deserve it—and delivering a new training facility at Linton. We are supporting the men and women who are prepared to put their lives on the line for our country. Our capability plan provides funding to increase defence force numbers in key occupations and to retain existing staff. It provides a $156 million uplift for our intelligence and security services, and it boosts New Zealand’s aid programme, providing $110 million to increase development and humanitarian assistance here in our backyard, in the Pacific and Indo-Pacific regions. It provides $145 million to ensure a resilient, safe, and secure offshore diplomatic network.

New Zealand is subject to severe and unpredictable weather events, alongside other natural hazards. We have seen that play out dramatically in recent months. Budget 2026, therefore, invests in stronger infrastructure, smarter emergency management systems, and better information about natural hazard risks. It sets aside $400 million of capital for State highway resilience projects in regions whose roads are too often closed after major weather events. The Government is making the responsible choice to strengthen roads before they fail, rather than repeatedly paying to rebuild them afterwards. The projects include, members, resilience improvements on State Highway 2 through the Waioweka Gorge, State Highway 3 through the Awakino Gorge, State Highway 25 through the Coromandel, State Highway 60 over Takaka Hill, State Highway 6 between Cromwell and Kingston and between Haast and Hāwea, and State Highway 94 between Milford and Te Ānau. The Budget also provides a capital contribution of $1.8 billion for a new road of national significance, the Cambridge to Piarere Expressway. This critical freight and economic link will extend the Waikato Expressway from Cambridge to the turnoff to Tauranga. This is a project that will support freight, and it will support a growing part of the country in what is often called our golden triangle. The Budget also puts aside just over $1 billion for KiwiRail’s network improvement programme, alongside $107 million to continue the renewal of critical metropolitan rail infrastructure for urban commuters.

The Government is getting better hazard information across the country, including the first New Zealand flood map to help councils, communities, infrastructure providers, and property owners make smarter long-term decisions. The Budget also provides funding to help develop more cost-effective ways for the Crown to manage its own infrastructure risks and reduce costs to taxpayers. The Government has allocated new funding to modernise emergency management systems so that when disasters strike, emergency services can respond faster and coordinate more effectively. Mark Mitchell has been their champion.

Reliable and affordable energy underpins a growing economy. That’s why Budget 2026 includes a gas transition loan scheme to help businesses transition from New Zealand’s shrinking reserves of natural gas. It also provides capital funding for the purchase of around $200 million worth of new shares as part of Genesis Energy’s $400 million capital raise, which they announced in February. Genesis will use the additional capital to bring more flexible capacity to the electricity market to address the risk that we currently face of insufficient electricity supply in years when the hydro lakes run low. That is too big a risk to leave unaddressed. This investment will directly contribute to enhancing New Zealand’s energy security.

Perhaps the most important source of resilience for every Kiwi is their physical and mental health. The single biggest item in the Budget, therefore, is support for front-line health services. Next year, Government spending on the health system is expected to total $34 billion. That translates to $17,000 for every New Zealand household. Additional funding of $5.5 billion from Budget 2026 will help the public health system address front-line pressures and deliver more services, including responding to more emergency department events, delivering more primary healthcare, increasing specialist assessments, boosting elective surgery, and increasing cancer treatments and GP visits.

Simeon Brown has been a champion for a number of targeted health initiatives as well, alongside our coalition partners. They include a nationally coordinated specialist paediatric palliative care service for families facing possibly the hardest thing, a boost for ambulance services, more funding for forensic mental health services, and an ongoing funding increase for Pharmac so they can purchase more medicines. The starting age for free bowel screening will be lowered, once again under this Government, from 58 to 56, and mothers, following the passage of our three-day stay bill, will be given the choice of longer postnatal stays. The Health Digital Investment Plan will receive $300 million for priority projects, critically including strengthening cyber-security across New Zealand’s health system.

Budget 2026 also commits $682 million worth of capital funding for investments in our health infrastructure plan. These include the delivery of a new 158-bed ward tower at Whangārei Hospital. They include the next stage of redevelopment work at hospitals in Tauranga, Hawke’s Bay, and Palmerston North. Our infrastructure plan also funds the purchase of land for a future new hospital south of Auckland, and it funds the establishment cost of the new medical school at the University of Waikato and the redevelopment of the Mason Clinic.

The Budget continues this Government’s critical efforts to boost educational achievement. This is good for young people, who will have better opportunities, and it’s good for the economy as a more educated workforce will boost productivity. Budget 2026, therefore, provides a $1.6 billion boost in operating funding for schooling and early childhood education. Schools will receive increases to their operational grants, alongside funding to cover increased employer contributions to their staff’s KiwiSaver accounts. Early childhood education services will receive a boost to their funding rates. There are targeted new investments to support Erica Stanford’s plan to increase the reading, writing, and maths skills of every child, but, most importantly, this Budget invests in secondary education, including measures to strengthen teaching and learning to raise student performance and to roll-out a refreshed secondary curriculum and new national qualifications. We are leaving NCEA behind us.

The Healthy School Lunches programme will continue to offer affordable, nutritious meals to students in 2027, while ongoing work continues to explore future innovations to the programme. Budget 2026 also allocates a significant $470 million package of capital funding to redevelop up to 10 schools, deliver up to 232 additional classrooms, and purchase land for new school sites in high-growth areas, including Queenstown.

This Budget ends the failed Fees Free scheme for students in tertiary education. Fees Free did not increase enrolments, it did not increase completion rates, and it especially failed those from low-income backgrounds. The money from Fees Free will now be put to better use, delivering front-line public services and strengthening our compulsory education system so that more kids get the chance to participate in tertiary qualifications because they have the reading, writing, and maths skills to do so. This Budget takes initiatives to better prepare young people for trades and other vocational education. I want to acknowledge New Zealand First—particularly Minister Jones—for proposing and championing this policy. The Government will double the number of Trades Academy places, from 10,000 to 20,000, for year 11 to 13 school students. That will allow more kids to get on the path to a successful career in the trades—whether it’s building, carpentry, primary industries. We know that trades academies work, and kids who take part in them are more likely to get good jobs. The Government will also provide 1,000 more Youth Guarantee places. These are places for those kids who have missed out on foundational skills at school. They are kids that are more likely to end up in long-term unemployment, and they are kids who need our support. These Youth Guarantee places will provide wraparound support and training for school leavers with no or low qualifications.

The law and order package in this year’s Budget provides a $1.1 billion uplift in operating funding for Corrections, Customs, Police, and the Ministry of Justice to maintain essential front-line services that are keeping our communities safe. This includes funding of $477 million for Corrections to manage an increasing number of prisoners. We are keeping our communities safer by ensuring that those who committee violence against our fellow citizens are sentenced appropriately. The Budget includes a $50 million funding boost for front-line policing and an investment to replace Police’s end-of-life automated biometric identification system. To advance the Government’s firearms reforms, the Budget provides funding to establish a new independent firearms regulator—Firearms Safety and Education New Zealand. Budget 2026 provides capital funding of $100 million towards the construction of a new High Court, District Court, and Māori Land Court in Rotorua. It funds badly needed new police stations in Greymouth and Whanganui. Customs also receives a funding uplift to disrupt transnational, serious, and organised crime groups and to combat drug smuggling.

This Government has a Going for Housing Growth programme to increase the supply of housing and make it more affordable. We’re making progress. The Treasury’s latest assessment is that there will be a relative improvement in the affordability of new dwellings. House prices are now forecast to grow more moderately, rents have stabilised, and first-home buyers now make up a much larger share of the market. The Budget drives forward the next stages of Going for Housing Growth to build on this success. The first pillar of our programme is freeing up land for urban development and removing unnecessary planning barriers through major reform of the Resource Management Act and changes to national direction. Budget 2026 provides $294 million of funding to begin rolling out this new system. This includes a new, centrally managed platform for planning, consenting, and compliance so that things aren’t still done 78 different ways across 78 different councils.

The second pillar of our housing reforms is improving infrastructure funding and financing tools so councils and developers can better fund the pipes, roads, and other infrastructure needed to support growth. The Budget supports this with $30 million of funding for the regulatory oversight of development levies that are charged by territorial authorities and water organisations to ensure those fees are fair on the people who pay them.

The third pillar is directly improving the incentives for councils to support housing growth by ensuring they share in the economic upside that growth creates. The Budget allocates $400 million to achieve this, by establishing a direct funding stream linked to housing growth. This was a commitment in the National-ACT coalition agreement, and it has been championed by Deputy Prime Minister David Seymour.

The Budget also progresses reforms to improve the fairness of housing support for low-income tenants. Right now, people in similar circumstances but living in different houses—one owned by the Government and one not—can receive very different levels of financial support and security of tenure. Budget 2026 includes a package that reduces, but by no means eliminates, that wide gap in support. It increases the amount social housing tenants pay towards their rent from 25 to 30 percent of their income, and, at the same time, it increases maximum accommodation supplement rates across the country so that lower-income private renters get more help. This package is broadly fiscally neutral. It’s about re-balancing support, not reducing it. At the same time, the Government is providing funding to support the delivery of between 1,800 and 2,250 new social homes over three years, with a $69 million boost to the Flexible Housing Fund. The Budget also continues our efforts to reduce dependency on emergency housing, which was a scourge under the last Government. It includes $22 million invested to reduce reoccurring emerging housing needs. This initiative will more than pay for itself through savings in otherwise costly motel bills.

This Budget boosts funding to support New Zealanders in need. Budget forecasts show several thousand fewer New Zealanders on jobseeker support and sole parent support benefits in the coming years. That is a great thing, and it is part of a deliberate effort by this Government. Our Budget includes funding of $93 million for additional case management and assistance to support sole parents into work. That is the upfront cost, but the initiative is expected to deliver net savings of $97 million as more sole parents move from receiving a benefit to having a job. That is good for those mums and dads, and it great for their kids and their future prospects. The Government is also reducing the maximum rate of temporary additional support payments, generating $196 million worth of savings. This is to better reflect the original purpose of those payments—before the last Government expanded them—which was to provide temporary hardship support, paid as a last resort and not meant to be a long-term top-up to beneficiaries’ incomes. The Budget also provides ongoing funding for the Food Secure Communities programme and the KickStart Breakfast programme—we’ve fixed up another one of their fiscal cliffs—and it delivers a step-up in investment to better protect children at risk of harm.

In 2022, Dame Karen Poutasi issued a compelling report with a series of recommendations to the Government on steps it must take to ensure strong and effective safety nets that prevent the abuse and the death of children. Far too many children are still abused in this country, and as parliamentarians we have a responsibility to protect them more. While that report had remained on a shelf, our Government has picked up each and every one of Dame Karen’s recommendations, and this year’s Budget invests $77 million to help make the changes needed to our system of helping vulnerable children.

Alongside this, Oranga Tamariki will receive a $184 million funding uplift so it can better respond to reports of suspected harm and increase its support for children with high and complex needs.

Finally, Budget 2026 provides funding of $36 million to introduce a version of the SuperGold card that can be used as an accepted form of primary identification. This will help seniors access services that require identification when they may not have a driver’s licence or passport—and I think you know where that idea came from.

Over the last year, Inland Revenue has consulted widely on the taxation of charities and not-for-profits, fringe benefit tax, and loans made by companies to their shareholders. The Government has made decisions in each of these areas. We will ensure that membership subscriptions and levies received by not-for-profits remain non-taxable. We will ensure that the amount of net income a not-for-profit organisation can earn without having to pay tax from $1,000 to $10,000, and we will ensure that the donation tax credit scheme remains financially sustainable, and limits tax planning risks, by capping eligible donations at $100,000 a year.

On fringe benefit tax, the Government is simplifying the rules for private motor vehicle use. Small business—we’ve heard you. We’re going to make it simpler. There will no longer be a requirement for detailed logbooks. Instead, a “close enough is good enough” approach will significantly reduce compliance costs for businesses. Another change will ensure that six months after a company has been removed from the Companies Register, any outstanding loans it previously made to its shareholders will be taxed as income.

Finally, the Government is introducing a new prudential levy on banks, non-bank deposit takers, insurers, and some other financial institutions, to cover the costs of prudential regulation and supervision. Such a levy is consistent with other jurisdictions, including Australia and the UK, and is also consistent with the approach we take to levies imposed by other New Zealand financial regulators. It is expected to recover revenue of $209 million over the forecast period.

In closing, while I have the pleasure of delivering this speech, the Budget is 100 percent a team effort. It reflects the efforts, late nights, and extraordinary skills of talented New Zealanders, including those in the Public Service and in Ministerial offices. Most importantly, the Budget reflects and demonstrates what it is to deliver strong, stable government.

The Budget Ministers team includes Associate Finance Ministers David Seymour, Shane Jones, and Chris Bishop. Each represents a different political party, but each came to this Budget with a focus on responsible management of the Government’s finances. Together, we have worked through the difficult choices and trade-offs that a Budget always entails. Where we have disagreed, we have done so agreeably and with respect, and no matter the challenge, we’ve always found a way through. The ultimate result, I think, gentlemen, is a Budget we can all be proud of.

I also want to thank the Prime Minister for his consistent support, for his wise counsel, and for his enduring belief in the potential of this great country of ours, New Zealand.

Finally, Mr Speaker, please let me acknowledge the support of my own family who are watching from the gallery today: my Mum and Dad, my brother and sister, their spouses, my husband, and our four children. James, Harriet, Reuben, and Gloria, I know I’m not home enough; I work hard, and I hope to make you proud.

New Zealand has a great future ahead of it. The Government’s disciplined management means Kiwis can look forward to a growing economy, effective front-line public services, and increased investment in the things that really matter. We can have all of that and a strong set of books too. Thanks to our care with public money, the Government’s books will return to surplus a year earlier than previously expected. But none of this, colleagues and none of this, members, can be taken for granted. Delivering these results requires New Zealand to stay the course. Now is not the time for promises of reckless spending and big new taxes. This Budget shows that the Government’s programme over the last 2½ years is making a difference. We are securing the future, and Kiwis can look forward with confidence. They just need to choose it; they just need to vote for it. I commend this Budget to the House.

💬 SPEAKER: The question is that the motion be agreed to.

Second Reading—Budget Debate