Investment Boost emerges as possible fault line in run-up to Budget 2026
Wednesday, 28 January 2026
ANALYSIS: Many Kiwis will just be getting fully back into work mode after the holidays, and already we have an announcement from the Government of the Budget date.
Thursday May 28, for any public servants planning an autumn break.
Any day now the hot cross buns will no doubt start appearing on the supermarket shelves.
Sometimes, the final Budget before an election is an opportunity to try to generate a feel-good mood.
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But the pressure on the Government to present forecasts showing a return to surplus by 2030 under the Fiscal Responsibility framework, won’t allow for much, if any, of that.
Last year there was the “Growth Budget”. Finance Minister Nicola Willis said that had also been the promised “social investment budget” if not in name, and the former government famously had the Wellbeing Budget.
Willis has yet to name this year’s Budget, and took the unusual step this morning of asking Parliament’s Finance and Expenditure select committee for suggestions, but said if there was one word to describe it, that would be “responsible”.
She signalled investments in health, education, law and order and defence would be in the mix, but made clear that would involve tightening the screws elsewhere.
There would be “no splashing the cash” and most agencies and ministers had been asked to plan to manage any pressures with little or no additional funding, she said.
It is far too early for Willis to get drawn into the traditional tease of discussing in any concrete terms what might be “ruled in or out” of the Budget.
The Crown accounts have been tracking a little bit better than expected and it is in the Opposition’s interest to talk up the possibility of tax cuts, if only in the hope of cultivating a sense of disappointment assuming they don’t arrive.
But, really, they don’t appear to be on the cards.
Speaking to the media after her appearance in front of MPs, Willis didn’t explicitly rule out there being space for tax cuts of any kind, such as further business tax relief. But she appeared to come very close.
“Actually; this year’s Budget — my priority is not that,” she told The Post.
“I stand by our track record of delivering tax relief. In this Budget with the tight situation we are in, the focus will be in the investment in front-line services, getting that surplus position, and ensuring that we are on track to reduce the debt curve.”
Instead, Willis suggested the immediate political battle ahead over tax might be over the tax relief the Government offered to businesses in the last Budget.
The centrepiece was the Investment Boost initiative, which brought forward the speed at which businesses can offset the cost of investments against tax, allowing them to front-load 20% of that depreciation in the first year of their investment, at a forecast cost of $6.6 billion to the Crown.
Business investment has remained in the doldrums since the Budget and Willis could have cause for concern.
Shortly after her appearance in front of the select committee on Wednesday morning, Labour was pressing Treasury officials for evidence Investment Boost was having its intended effect of encouraging business investments that wouldn’t otherwise have been made, or made as quickly.
Willis’ not unreasonable argument has been that without Investment Boost, business investment could only have been lower. Labour Party finance spokesperson Barbara Edmonds acknowledged it was difficult to prove the “counterfactual” ‒ meaning what would have happened to business investment had the incentive not been in place.
But Labour’s front bench is voicing unease that the Treasury advised it would take Inland Revenue a few years to make any meaningful stab at estimating the policy’s impact.
Willis repeatedly returned to the theme of Investment Boost during her select committee appearance — even though the focus was expected to be the December Budget Policy Statement — saying it was “very much about building a more productive future”.
“I'll be very blunt. The reason I am focusing on Investment Boost is that I have watched Chris Hipkins and Barbara Edmonds become very equivocal in their language about it,” she subsequently told The Post.
“When we first announced Investment Boost, they welcomed it. They’ve promised to reverse just about every saving that we’ve made and I know they’ll be scratching for cash to make their plan stack up, so I’m concerned the Labour Party will campaign on revoking Investment Boost.”
Edmonds didn’t rule that out when asked, and Megan Woods, another senior Labour MP who sits on the committee, brought up criticism that Investment Boost was “untargeted”.
The incentive was made available to farmers upgrading to a new ute as much as to firms building a new factory, against the advice of some, such as Chartered Accountants Australia and New Zealand.
There was a reason the Government implemented the policy in the way that it did.
Had it engaged in lengthy consultations over the capital items for which businesses would be able to claim accelerated depreciation, businesses could have been expected to delay investments until those outcomes became clear — the exact opposite of the policy’s intended goal of hurrying up investments.
Intuitively, Investment Boost really should be doing exactly what it says on the tin.
But Labour would have ammo to hand if it decided to take aim at the scheme. Kiwibank last year surveyed its business bankers to gauge what they were hearing about Investment Boost’s impact.
It reported most investment activity it encouraged came from businesses either catching up on deferred “capex” from the past couple of years, or those whose investment plans were already under way prior to the scheme’s announcement.
It would probably be wrong to suggest that the minutiae of tax rules and depreciation are front and centre when most businesses are figuring out whether to splash out on capital investments.
But there is also a slightly weird short-term incentive for any government to scrap Investment Boost ‒ with a notice period ‒ following its introduction.
That’s because if Investment Boost was seen to be under threat, the rational responsible for businesses would be to bring forward investments and squeeze them in before the incentive disappeared.
And that also means that up until the election, the incentive may be with the Government, rather than the Opposition, to highlight any threat to the policy.
The Budget is still four months off, but that doesn’t mean the dance can’t begin.