Budget 2026: Nicola Willis says ‘job-rich’ projects will feature in $2.2b boost to capital allowance
Thursday, 14 May 2026
Finance Minister Nicola Willis says the $300 million slimming of the operational allowance in her Budget will allow the Government to spend more on “job-rich” capital programmes.
But her predecessor and sometime bête noir Ruth Richardson says the Government should be reducing spending overall instead of continuing to borrow ‒ with the Government preaching virtue but not quite following it yet.
Prime Minister Christopher Luxon announced on Wednesday afternoon that Willis had trimmed the anticipated operating allowance by $300m to $2.1 billion, down from $2.4b projected in December.
The “operating allowance” is the amount of money the Government gives itself for new recurring annual spending ‒ expenditure on new programmes that will stay in place such as new tax credits or programmes.
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Willis suggested that this trim would allow the Government to make its “capital allowance” far larger ‒ $5.7b instead of $3.5b, a $2.2b boost.
Capital spending is on one-off projects like schools, hospitals or roads.
“The approach we've taken is if we watch very carefully our day-to-day operational spending, as we have with the lower operating allowance, that will allow us to prudently make investments in the assets that will grow New Zealand for the future. So the approach we've taken is, with great fiscal discipline, we're able to make better investments for the future,” Willis said.
The $2.2b boost is worth around seven years of the $300m annual saving.
“We have a larger capital allowance than has been in the case in previous Budgets, because with prudent budgeting, we've provisioned to make bigger investments in New Zealand's future and in job-rich projects that will see people behind spades and high-vis building for New Zealand's future.”
Willis said she would not get into specific projects ahead of Budget day but media could read into what had previously been funded by capital spending.
“The capital allowance gets put towards building schools and fixing up schools and building new classrooms. It gets put towards hospitals and fixing hospitals. It gets put towards transport projects, whether they be road or rail or other projects. It gets put towards courts, police stations, a range of capital assets,” Willis said.
She said that prudent spending was the most important thing but projects like hospitals involved “real people and real jobs”.
Unemployment has risen under this Government from 3.9% in September 2023 to 5.3% in March 2026. The rise began ahead of the election.
Richardson: Luxon wants to be virtuous, but just not yet
Richardson said all new spending ‒ capital or operational ‒ represented new borrowing.
“Spending is spending,” Richardson said.
She said Luxon’s rhetoric around fiscal consolidation was not yet being matched by his spending.
“He’s got the fiscal virtue religion, which is very good. But it’s a case of him saying: ‘God make me virtuous, just not yet! Just let me spend a little bit more!’“
Richardson is the chair of the right-wing Taxpayers’ Union, which also criticised the speech for not committing the Government to a “zero” Budget with no new spending.
Public Service Association head Fleur Fitzsimons said the $300m cut in new operating spending would hurt public services and drive more Kiwis overseas.
“Thousands of jobs have already been axed. Services New Zealanders depend on are already suffering. And now the Prime Minister says ‘ongoing reprioritisation’ is required. Let’s be clear: that’s code for more cuts, all because the Government made a choice to fund tax cuts over public services,“ she said.
“New Zealanders deserve a public service with the people and resources to deliver. This Budget should be rebuilding our public services, not running them further into the ground.“