Sean O'Meara
Regional Director - Project & Infrastructure Advisory
Prior to the Budget being delivered, the Government released a range of announcements on capital and operating spending in Budget 2025. In her 29 April pre-Budget speech, Finance Minister Nicola Willis said the focus for new spending initiatives in Budget 2025 would be limited to the most important priorities of health, education, law and order, defence, and some critical social investments.
While the operating allowance for Budget 2025 was lower than originally projected, the net capital expenditure was higher, at $4bn. However, with a backdrop of fiscal restraint, many business sectors will not have been expecting announcements of significant new spending in the upcoming Budget. We know from our recent BDO Business Wellbeing Index that economic pressures and financial growth are key issues they may be looking out for in Budget announcements and future policy updates.
With this scene set, here’s what Budget 2025 has delivered across some of Aotearoa’s key sectors:
The recent New Zealand Infrastructure Investment Summit signalled the Government’s desire to lift foreign direct investment and help to bridge New Zealand’s infrastructure gap. New Zealand’s infrastructure deficit has been much discussed, and today’s Budget has set out new spending initiatives across several key infrastructure areas, including rail and roads, hospitals, schools and more.
Meanwhile, the construction sector is suffering from declining business performance sentiment, with just 49% of construction business leaders feeling positive about their business performance according to our May 2025 BDO Business Wellbeing Index. A reduction in new home consents and high build and finance costs have challenged the sector, and while some of today’s Budget’s infrastructure announcements may trickle down to benefit the construction sector, some business leaders may have been hoping for more.
One billion dollars has been committed to upgrading and expanding hospitals across the country, including a major redevelopment of Nelson Hospital, a new emergency department at Wellington Regional Hospital, Auckland hospital infrastructure and more.
Rail is another big infrastructure winner in the Budget, with more than $600 million set aside for rail upgrades and renewals. There’s also considerable investment in hospitals and schools, plus additional funding to help North Island communities complete road recovery works after 2023’s weather events.
In a tax announcement that may impact infrastructure, Budget 2025 has committed $65m to change New Zealand’s thin capitalisation rules, which determine the amount of tax-deductible debt that foreign investors can put into New Zealand investments. Finance Minister Nicola Willis said this was to encourage foreign investment in New Zealand infrastructure.
Similarly, the Investment Boost tax incentive announced today may benefit the construction sector, as it applies to the purchase of new commercial buildings. Infrastructure business leaders may also benefit from the incentive, which may allow them to invest in plant and machinery to deliver future assets.
“New Zealand’s infrastructure program is a matter of national significance, and the effective planning and prioritisation and investment in the roads, public transport, hospitals, schools, courts and infrastructure that keeps this country running is vitally important to its social and economic future. Budget 2025 goes some way to addressing this, with significant funding for hospitals, rail, schools and roads.
The Government’s City and Regional Deals programme is a good example of an initiative that has the potential to be transformative and intergenerational in its impact, if the right focus is given to the inclusion of the projects and initiatives within the deals that have the most strategic merit and potential impact - and if all levels of Government are serious about the funding and investment that needs to underpin the programme.
We’re enthusiastic about the role that infrastructure can play in contributing to New Zealand’s economic growth and its flow on effects for businesses. We will be keeping a close eye on further announcements from the government over the coming months.”
- Sean O'Meara, Regional Director - Project & Infrastructure Advisory
“Construction business leaders are experiencing a much more challenging environment than the sugar rush of 2022. While it was expected that the market would come back down after those unsustainable levels of activity, the current conditions are tough for many businesses. Lower interest rates and a return to residential building consents similar to pre-Covid levels should help to stabilise the sector, but it will take time for any economic recovery to trickle down.”
- Nick Innes-Jones, National Construction Sector Leader
Learn more about the leading issues for the construction sector and practical tips to help navigate these in our May 2025 BDO Business Wellbeing Index.
Divya Pahwa
Retail business leaders have experienced considerable challenges in recent years, but the recent reduction in inflation and interest rates have helped to boost confidence in the sector.
Our May 2025 Business Wellbeing Index shows retail business leaders are feeling more positive than they were in September 2024, likely partly attributed to an expected uplift in consumer confidence later as reduced inflation and OCR cuts trickle down into potential increases in consumer spending. However, this may take time, and challenges still remain for the retail sector.
Budget 2025 contains no direct policy announcements for the retail sector, however there are a range of measures that will likely indirectly impact retailers, including policies relating to cost of living, stimulating the economy and frontline police.
“We know it’s been tough for many Kiwi retailers in recent years. Our BDO Business Wellbeing Index results suggest that the businesses that have made it through this time are starting to feel slightly more positive about their business performance, which is great to see. Inflation has been brought under control and as the country’s economic situation slowly improves, many retailers are expecting consumers to be back spending in higher numbers. However, this will take time, and retailers are still operating in a challenging environment.”
- Divya Pahwa, National Retail Sector Leader
Learn more about the leading issues for the sector and practical tips to help navigate these in our May 2025 BDO Business Wellbeing Index.
The tourism industry received a boost in April with the announcement of $13.5 million investment for Tourism New Zealand to encourage more international visitors. This was welcome news for the sector which has had a slow recovery post-pandemic, but leaders may have been expecting more from the Budget announcements.
Our May 2025 BDO Business Wellbeing Index shows that while tourism business leaders are feeling more positive about over business performance than they were in April 2025, they are feeling less positive about their workload, economic pressures, and their ability to leverage and adapt to new technologies (including AI).
With no headline police announcements dedicated to tourism in the 2025 Budget, tourism leaders may be looking at other measures that may indirectly support their sector, including those aspects of the Budget which support cost of living and workforce supply through migration policy changes.
“Many tourism businesses have seen a strong recovery in the last year as international visitor numbers have picked back up after the Covid slump. However, it’s important to note that not all tourism markets are equal, and while some regions are back to capacity, others continue to struggle with adverse weather and other challenges. As tourist visitor numbers pick back up, it’s important for businesses to ensure they have the right support to cope with the increased workload.”
- Richard Timpany, National Tourism Sector Leader
Learn more about the leading issues for the sector and practical tips to help navigate these in our May 2025 BDO Business Wellbeing Index.
Richard Timpany
Charles Rau
Prior to the Budget, our BDO Business Wellbeing Index revealed business performance sentiment in the Agribusiness sector is more positive than all other sectors surveyed.
“Our recent BDO Business Wellbeing Index shows a more positive business performance sentiment reported by New Zealand’s agribusiness leaders, which is encouraging to see after such a challenging few years for many farmers. The agriculture sector is hard-working and resilient, and the more favourable commodity prices for many products will be warmly welcomed."
- Charles Rau, Agribusiness Sector Leader
With no new policy announcements specifically targeting the sector in today’s Budget, agribusiness leaders will be looking to other announcements for indirect means of further supporting business growth, including those policies which support regional New Zealand.
Beyond the Budget, farmers and business leaders in the agriculture sector will be maintaining a keen eye on macroeconomic factors, including the dynamic global trade environment, to further support business growth.
Learn more about the leading issues for the sector and practical tips to help navigate these in our May 2025 BDO Business Wellbeing Index.
In the lead-up to the Budget, our May BDO Business Wellbeing Index showed growing positivity among Māori business leaders. This positive sentiment may be linked to better conditions in the agribusiness sector; the Te Ōhanga Māori – The Māori Economy 2023 report shows agribusiness accounted for 21% of Māori-owned businesses in 2023, with a strong presence in forestry, fishing, sheep and beef and dairy. Māori small businesses may also be seeing the impact of falling inflation and interest rates.
Māori businesses have a broader view of business success – driven by people and purpose as well as profit. Beyond the financial announcements in today’s Budget, Māori business leaders may be looking at broader policy directions relating to their business and wellbeing, such as healthcare, education and social policy announcements which create a positive environment for both business and employees.
While there were few targeted initiatives in today's Budget, there has been a boost to Māori education, with $54 million in operational funding and $50 million in capital investment committed to curfriculum support and teacher development to advancing Māori learner achievement.
“Business performance sentiment has improved for our Māori business leaders. It was a tough operating environment for them in September last year but the resilience of the Māori community – likely coupled with falling inflation and interest rates – has helped to improve their business outlook.”
- Angela Edwards, Māori Sector Leader
Learn more about the leading issues for the sector and practical tips to help navigate these in our May 2025 BDO Business Wellbeing Index.
Angela Edwards
Mark Peterson
The success of the Not-for-Profit sector hinges on the health of the wider economy as a funnel for ongoing investment and donations. Our May 2025 BDO Business Wellbeing Index shows just 50% of Not-for-Profit business leaders are feeling positive about their overall business performance, with business growth and cash flow among the drivers of negative sentiment.
While financial performance remains essential for Not-for-Profits, their leading purpose for being in business is typically more about making a difference and improving communities. However, the ability of Not-for-Profits to make an impact often relies on finances, so business leaders in this sector will be hoping for continued improvement in New Zealand’s economy.
While there have been no specific announcements targeting charities and Not-for-Profits, the efforts of Budget 2025 to further stimulate economic growth have potential to indirectly benefit the sector over the long-term.
“Not-for-Profits have been adversely impacted by New Zealand’s challenging economic conditions in recent years. With lower inflation, we may soon see more money that can be channelled into donations from the private sector – but the sector will continue to rely on government support and other funding models to help keep their operations viable. We’re seeing a clear intention from government holding stronger accountability for outcomes associated with funding. With less taxpayer money, increased funding through government contracts is less likely and where measures aren't being delivered, contracts to service providers may be revised.”
- Mark Peterson, Not-for-Profit Sector Leader
Learn more about the leading issues for the sector and practical tips to help navigate these in our May 2025 BDO Business Wellbeing Index.
