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Budget 2026: Levy expected to cost banks and insurers $209m over four years

Thursday, 28 May 2026

There is a negative surprise for banks in the Budget, but Finance Minister Nicola Willis indicated it could have been worse.
There is a negative surprise for banks in the Budget, but Finance Minister Nicola Willis indicated it could have been worse.

The Government will impose a “modest levy” on banks, insurers and other businesses that are regulated by the Reserve Bank, Finance Minister Nicola Willis has announced.

The levy will be applied to 27 banks, 14 “non-bank deposit takers” and 81 insurers, but will be relatively small, compared to specific taxes on banks overseas.

Willis said it was expected to raise about $209 million over the next four years and the funds would be used to offset the running costs of the Reserve Bank.

It was “consistent” with levies in Australia, Canada and the UK, she said.

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Willis said the levy would “ensure the cost of regulation and supervision is borne by financial market players rather than taxpayers”, which she said was the norm overseas.

But Westpac chief economist Kelly Eckhold said it was a surprise and could prove “the thin end of the wedge”.

“It isn’t a large amount of money, but it is a meaningful shift in policy. Once it’s in place, it’s presumably a lot easier to consider expanding its scope or size,” he said.

Eckhold speculated the cost of the levy could be passed on to consumers, for example in the form of increased Kiwisaver fees.

There had been speculation ahead of the Budget that the Government might copy Australia’s Major Bank Levy, which is a 0.06% tax on Australian bank deposits and which in comparison raised about A$1.7 billion (NZ$2b) last year.

Eckhold said a levy modelled on that scheme could have raised about $400m a year.

That could still be in play for National after the election.

Willis made clear she would have gone further than she did in the Budget, had it not been for the views of National’s coalition partners.

Nicola Willis made clear she would have sought to raise more from the banks if that had the support of coalition partners.
Nicola Willis made clear she would have sought to raise more from the banks if that had the support of coalition partners.

ACT Party leader David Seymour made his opposition to a broader levy clear in April.

Willis said she had been “open about the fact I have been looking at fairness in the tax system for major banks”.

But the options she was continuing to look at were not ones that were agreed to by parties in the coalition “in this Budget”, she said.

The prudential levy will be introduced in the middle of next year and would equate to “less than 1% of the total profits of the big four banks alone,” she said.

A poll conducted by lobby group Better Taxes for a Better Future that was released on Monday suggested majority support for a bank levy among the public, with National and ACT party voters most in favour.

The lobby group’s spokesperson, Kate Stone, said the levy that had been announced was welcome, but would raise only $68m in 2027-28 financial year and did not address the “enormous profits banks are making in New Zealand”.

The Taxpayers’ Union lobby group said the levy was a “naked tax grab” that broke National’s promise of “no new taxes”, forecasting the cost would be passed on to savers and mortgage holders.

But Banking Association chief executive Roger Beaumont said banks “understood the need for appropriate funding for regulators”.

“Banks will engage constructively with the Reserve Bank in the consultation process to help make the levy appropriate, effective, and well targeted,” he said.