Schools, hospitals and the motorists of Waikato are the winners of Finance Minister Nicola Willis’ final budget of this term, with major losers including banks, which will face an additional tax worth $209 million.

The Budget included no direct fuel crisis relief for households, although there is additional relief for some services that are exposed to high fuel costs, including increases in milage rates, which were previously announced. The Government has given itself a $450m contingency fund for fuel-related costs in the future.

“I want New Zealanders to have the confidence that the Government has the resources to respond,” Willis said as she announced the Budget, attacking calls for cost of living relief as a “sugar hit”.

Finance Minister Nicola Willis presenting the 2026 Budget. Photo / Mark Mitchell

“Sugar hits don’t work, they only make it more painful in the long run,” she said.

The biggest winner of all may be the Government itself, which, against expectation, has managed to present a Budget that charts a path back to a $2.6 billion surplus by 2028/29.

Willis, arriving to unveil the Budget at 11.59am, greeted reporters with the line, “I’d expected to say good afternoon, but I’m here a little early - like the surplus”.

Health and education spending

Education Minister Erica Stanford has won $309.6m from the Budget to build roughly 232 new classrooms for 4714 students in both English and Māori medium education.

There is also $160m for school property maintenance and $160.4m over four years in increased funding for their daily operations. Up to 10 schools will be redeveloped with the funding.

Health Minister Simeon Brown has kept to a 2024 commitment to increase core health spending by $5.5b over four years - a sum announced back in 2024. Pharmac will get $54m to fund cost blowouts and to buy new medicines. Total health spending will rise to $34.2b in the next fiscal year.

The Government has also announced a redevelopment of part of Whangarei Hospital to deliver a 158-bed ward tower in late 2031.

Education Minister Erica Stanford. Photo / Mark Mitchell

The Government funded the next stage of redeveloping regional hospitals in Tauranga, Palmerston North and Hawke’s Bay. The cost of those redevelopments is commercially sensitive and has not been released.

Multi-year health cost pressure funding ends in the current Budget. Willis promised she would announce further health funding, including “many billions more” ahead of next year’s Budget.

The Budget included funding to lower the eligibility age for free bowel screening from 58 to 56. Brown said 200,000 New Zealanders would benefit from the change.

The change will cost $45.6m over four years.

Coalition tensions on super bubble to surface

Willis leaned heavily into campaign mode when taking questions after she announced the Budget, launching a broadside on NZ First and Labour’s policy of not changing superannuation.

She presented a slideshow on the ballooning costs of superannuation, which will hit $31.2b in 2030.

Referring to National’s pledge to lift the super age, Willis said, “I believe that in the absence of doing anything about our settings for the future we will be committing a huge act against intergenerational equity”.

Willis said that doing nothing about superannuation was effectively a pledge to have higher taxes and lower super payments in the future. She said parties that did nothing on superannuation reform were “prepared to rob everyone in this country under the age of 50. I plan to reject that approach”.

NZ First Deputy Leader Shane Jones, sitting close to Willis said he would “defer” superannuation comment to his “rangatira”, Winston Peters.Act Leader David Seymour, responding to the same question said that “things have to change” and that the “winds of change are blowing”.

SuperGold gets facelift

Peters managed to get a significant win for superannuitants.

The Budget includes funding to allow the more than 900,000 New Zealanders over 65 to upgrade to a version of the SuperGold card which can serve as a form of photo-ID.

The scheme will cost $42m in a mixture of operational and capital funding.

The rollout of the photo-ID version of SuperGold is expected in October 2028.

Taxes, inflation get Government to surplus

The surplus is achieved using Willis’ preferred ObegalX measure, and not the traditional Obegal measure, which returns to surplus in 2029/30. If achieved, it will be the first surplus since 2020. Willis initially set an earlier surplus target, but in December she kicked the goal back a year.

Underneath those numbers is further pain for New Zealanders. The surplus is partly achieved thanks to higher inflation increasing the tax take by $3.1b more than expected in the last Treasury update in December.

There’s further bad news in the economic forecasts. Treasury has shaved 1.2 points off its GDP forecasts for this year, and expects the economy to be smaller than expected for some time - the economy only roars into life in 2028, posting growth of above 3%.

The unemployment rate will only fall below 5% in 2028, a year later than forecast in December. House price forecasts have been slashed from 6-7% a year out to 2030 to just 3-4% a year. Inflation will hit 4% this year before dropping back to 1.6% next year. The good news is that wage growth has held up at 2.8% this year, rising to 3% by 2028.

$7 billion in infrastructure investment - road and rail the winner, Willis goes cold on fuel-tax increase

Infrastructure Minister Chris Bishop announced the Budget would fund $7b worth of infrastructure investment

Bishop, with his Transport Minister hat on announced $1.8b to fund the construction of one of the Government’s Roads of National Significance, the Cambridge to Piarere Expressway.

Housing Minister Chris Bishop. Photo / Mark Mitchell

Bishop said the road was a “critical freight and economic link connecting Auckland, Waikato, and the Bay of Plenty with the central and lower North Island. He said the road had a benefit-cost ratio of 2.7 to 3.1.

The Budget assumes the Government will keep to its 12c a litre hike to fuel tax on January 1. Willis was blunt in the lockup saying if fuel taxes are as high in January as they are now, she would not be increasing fuel excise.

Rail will get a $1.075b investment in the years out to 2030 with an additional $106.9b to be spent on renewing track infrastructure in Auckland and Wellington.

Surprise tax increase on banks and charitable donations and tax cuts for investors and airlines

The Government announced a handful of tax hikes. The first, is a levy on banks, non-bank deposit takers, insurers and other financial market participants to help cover the costs of the Reserve Bank, which is their regulator.

The $209m in revenue that will be raised represents less than 1% of the profits of the big four banks alone.

The Government had been looking at a broader levy, but today admitted there had been disagreement among the coalition partners about how that would look.

The Government will change tax rules to tax loans that are made by companies to shareholders that remain outstanding six months after the company is removed from the companies register. This removes a loophole that allowed shareholders to reduce their tax liability through these loans. The measure makes $146m over four years for the Government.

The Budget also sets a limit of $100,000 for people claiming tax deductions for making donations. The change is expected to raise $52.6m over four years.

The Government has changed foreign investment fund rules to benefit people who invest in overseas stocks, lifting the de minimus threshold to $100,000 from $50,000. This will have the effect of reducing the tax people pay on stocks they hold offshore. The changes will cost $72.5m

The Government also included a tax break for airlines “dry lease” aircraft parts for use in their local airlines. The Government has exempted these from non-resident contractors tax, which will see the Government lose $17.8m over four years.

Law and order boost – regional police stations to be replaced, prison population boom requires additional funding

The Government included a $1.3b package for law and order.

Police Minister Mark Mitchell said that funding would include money to replace the Greymouth and Whanganui Police Station.

The booming prison population has required an additional top up. This is the third Budget in a row that the coalition has had to increase funding for corrections. It has fond $477m over four years to pay for “prisoner population volume pressures”.

The corrections Budget was $1.9b in June 2024. It is expected to grow to $2.4b by the end of the period covered by this Budget.

$400m for councils - and one very expensive map

Councils will get $400m over four years in incentive payments for consenting new homes. The policy replaces a coalition commitment to share a portion of GST collected on developments with councils.

The more councils consent, they more the Government will pay them.

The $400m is being held in a tagged contingency for councils to receive if they consent new homes. For each new home consented up to a limit of 1% of a council’s existing dwellings, councils will receive a payment worth 0.25% of the national average consent value.

For consents between 1-2% of existing dwellings, councils will get a payment worth 0.5% of the national average consent value. This payment rises to 1.25% for consents beyond 2% of existing dwellings.

Wearing his RMA reform hat, Bishop announced $294m over four years to support the rollout of his new resource management system, including a large investment in the digitisation of the planning system.

He said this investment had a benefit-cost ratio of 7.2, meaning it returned significantly more value than it costs.

Currently, New Zealand’s councils maintain 78 different planning systems creating confusion and duplication.

Bishop said that “over time” he wanted “New Zealanders to be able to go to one website, look at one map, and get clear information about their property and the rules that apply to it.

Child poverty targets will be missed, Government unlikely to meet first Paris climate goal

The Government is on track to miss its three main child poverty targets, which are set for 2028 although child poverty metrics improve slightly this year.

Willis said the Government wanted to improve opportunities for parents to work.

Treasury also repeated warnings the Government will need “sizable offshore” purchases of carbon credits to meet its first Paris Agreement target in 2030.

“It is likely that meeting this target would involve significant costs, starting within the current fiscal forecast period,” Treasury said in its commentary.

The Government has said it will not purchase these credits, meaning hitting the target is unlikely.

Willis attacked the Paris target, which was set by the Key Government, but which was made significantly more ambitious by the Ardern Government.

Willis said James Shaw, that Government’s climate change minister “signed us up irresponsibly to a cost the country can’t afford” in agreeing the target, but she said the Government remained committed to upholding its international obligations.