Budget 2025 is a bit bitsy - here are the best bits

Thursday, 22 May 2025

Your Budget summary: Pay equity reforms have saved a whopping $3.2 billion/year, KiwiSaver's annual sweetener has been halved, private schools get subsidies, teenage beneficiaries have more hurdles, and the BestStart weekly payment is no longer universal. Explainer Editor Lloyd Burr breaks down the Budget's best bits.

ANALYSIS: It's tempting to call this the 'Bitter Taste Budget' because it makes plain the extraordinary sum the Government has saved in its urgent, controversial, and arguably undemocratic changes to pay equity legislation.

By moving the pay equity goal posts, stopping the game halfway through, and changing the rules, Finance Minister Nicola Willis has saved a whopping $12.8b over the next four years - around $3.2b every year.

It shows there was some truth in comments made by Associate Finance Minister David Seymour when he declared a fortnight ago that pay equity changes “had saved the Budget”.

So it could be called 'Bitter' or 'Backhanded', but I've landed on 'Bitsy' because that's what it is. It's just a lot of bitsy changes and on the whole, rather boring. Willis was right in saying there were no rainbows and unicorns. But there are still some controversial changes.

The state of the books

The Government's operating account is still in the red and will be for the next four years. The balance for 2025 is -$10.2b, 2026 is -$12.1b, 2027 is $8.1b before breaking into the black in 2029 with a surplus of $200m.

Net core Crown debt is forecast to be $185.6b for 2025, rising to $238.5b by 2029. As a percentage of GDP, that's 42.7% and 45% respectively.

Pay Equity

The figure the Government has been at pains to avoid for two weeks was tucked away on page 80 of Willis' 'Summary of Initiatives' report.

The urgent law change has saved $2.9b in 2026, $2.6b in 2027, $2.6 in 2028, and another $2.6b in 2029. On top of that is savings of $1.8b in capital expenditure.

All up, that's $12.8b saved by reducing the scope of underpaid women who are able to make a claim to be paid more.

KiwiSaver

It will halve the current annual Government bonus of $521.43 to every KiwiSaver account (provided the holder puts in $1043 in that year).

From July, that sweetener will fall to $260.72. And it will be means tested - so if you earn more than $180,000, you won't get it.

This change alone save the Government $2.5b over four years.

The current employee and employer minimum contribution will increase to 3.5% in April next year, then to 4% in 2028. There will be provisions to opt out of that if households can prove their budgets are tight.

This comes after the last National government scrapped the $1000 'KiwiSaver Start' payment, and removed the automatic opt-in provision.

BestStart

The Labour-introduced 'BestStart' payment, whereby all parents get $73/week in the first year of their baby's life. That will no longer be the case.

Like the second, and third years of the policy, the first year will now be means tested. Households that earn more than $97,000 won't be eligible to get it.

This saves the Government $200m over four years.

Teenage Beneficiaries

The parents or caregivers of 18- and 19-year-old beneficiaries will be means tested under a new 'parental assistance test'. If the parents or caregivers have the means to support them, they will not be eligible for the dole.

Private Schools

The government will boost private school subsidies by $15.7m over four years, which is an 11% increase.

Why do private schools need public money? Associate Education Minister David Seymour says the parents of private school kids 'pay just as much tax as anyone else'.

Business Tax Deductibility Boost or 'Investment Boost'

Businesses will now be allowed to immediately deduct 20% of the value from any new assets they buy, in that tax year. It will be on top of normal depreciation.

For example, if Farmer Joe buys a new $200,000 Ford Ranger. With the new 'Investment Boost' policy, Farmer Joe can claim $40,000 as a tax expense, and another $16,800 of depreciation on the remaining 80%.

This policy is not cheap. It will reduce the Government's tax take by a whopping $1.7b every year.

New ferry costs hidden

After criticising the previous government for blowing out the Budget for new Interislander ferries, today's Budget withholds any costings for them.

Because the Government is currently tendering with ship-building yards, the cost of the program has been 'withheld due to commercial sensitivities'.