The EMA says the emphasis on Trades Training and channelling high school students into skills and trades, as well as university, is a positive from today’s Budget announcement.
“The confirmed re-prioritisation of funding from the previous Fees Free scheme into trades training could go some way to filling future gaps in the trades, and enhance the work readiness of those leaving our schools and heading into skills and trades-oriented careers,” say EMA Head of Advocacy Alan McDonald.
“The confirmation of an additional 10,000 places in trade academies and around eight new trade focussed courses for high school students is a good use of that Fees Free funding.
“The new Industry Skills Boards (ISBs) will develop those courses, backed by funding of $15 million. Hopefully, the additional funding of $90 million for the New Zealand Qualifications Authority (NZQA) will also see the Authority approve those courses more quickly than its current approval times, and get those courses underway.”
McDonald says the Budget did a bit with not very much, with confirmation of funding for several larger infrastructure projects, while the revised forecasts were not as bad as many expected.
“Getting back to surplus a year earlier than previously forecast (28/29) was a surprise, no doubt helped by the additional taxes and some of the savings identified in recent announcements about the public service.
“GDP growth for this year is down to 1.2% from 1.7%, and will still be challenging, especially reaching the 3.2% forecast in 2028. A lot is going to have to stabilise to make some of these predictions a reality. Unemployment also has a new peak at 5.5% in June this year, up another 0.1% (several thousand jobs) before dropping back.”
McDonald said the other main positive from the Budget was the committed funding for infrastructure.
“Firm commitments to Whangarei’s hospital upgrade and Dunedin’s outpatient clinic, plus buying the land for the new South Auckland hospital, are a boost for the health sector, in addition to land acquisition for 10 new schools.
“Then you get the hard infrastructure like the Cambridge to Piarere road extension in the Waikato, and more than a billion dollars for rail. Road projects around Tauranga and the Waikato improve access to our ports for exporters, while changes further north also bring Northport more into the mix. It’s not clear where the spend on rail upgrades will go, but improving rail connectivity for both Auckland (a fourth main line) and Northport should be among the priorities.
“There wasn’t much to spend, but some of those priorities look to the longer-term.”
Executive Summary
Budget 2026, entitled ‘Securing New Zealand’s Future’ was delivered against the backdrop of a challenging domestic environment and heightened international uncertainty.
As expected, there were the usual increases in expenditure on health, education and defence, while there were specific policy announcements in respect to housing (incentivising local authorities to support housing growth) and assisting businesses in transitioning from gas to alternative fuels, while the Government outlined its Public Sector reform programme to improve services and lower costs. Minor changes to tax policy also featured.
Given the political, economic, and fiscal constraints facing the coalition government, Budget 2026 can broadly be viewed as a fiscally responsible Budget, particularly given the natural pressures associated with an election year. There were certainly no sugar hits for which the Coalition Government can be commended.
Capital expenditure was carefully targeted at much needed infrastructure with a particular focus on roads and upgrading schools, courts, and ensuring energy security.
The key economic takeaways:
• Economic growth is expected to come under pressure in the short-term but improve in the out-years.
• Inflation and inflationary expectations continue to rise in the short term – a combination that increases the likelihood of higher interest rates for both businesses and households.
• Unemployment is expected to rise in the short term before declining over the forecast period.
• Government finances remain under pressure despite significant efforts to restrain and reprioritise expenditure.
• Despite forecast savings, budget surpluses remain some distance away, although a surplus is expected in 2028/29 – one year earlier than previously expected.
• Net debt is forecast to rise in the short term before gradually declining over time. The significant increase in net debt since 2019 is expected to continue, having risen from approximately 19 percent of GDP in 2019 to more than 43 percent currently and peaking at 46.1 percent in 2028.
• Operating within the Government’s projected fiscal operating allowance over the next several years will remain difficult and leaves limited scope for substantial new spending initiatives.
Overall the Budget reflects a degree of expenditure restraint and reprioritisation of resources, although whether it will be enough as a longer-term strategy for addressing New Zealand’s structural fiscal challenges remains questionable. While critics will focus on the expenditure cuts, NZ needs a dose of realism if we are to rein in increased government debt (currently costing over $9 billion in annual interest payments alone).
Returning to Budget surpluses still seems a long way off, particularly if we face another shock and are heavily dependent on economic growth being achieved. Moreover, it should be noted that making any forecasts in the current environment is fraught, as demonstrated by the total $450 million the Budget has allocated as an “emergency savings account” should the fuel crisis continue.
Difficult but increasingly critical issues remain unresolved, including:
• Long-term sustainability of New Zealand Superannuation; and
• Realising opportunities for asset recycling where central or local government ownership may no longer be necessary.