Perhaps it should come as no surprise that Budget 2025 has done little to accelerate the provision of the new public infrastructure that New Zealand so clearly needs.

After all, the Budget is the outcome of a deliberative process of policy choices. If those choices are too difficult or cannot be sustained, they will not be made.

As a result, when it comes to critical public and health infrastructure, incremental new investment in the rail network, improved tax treatments, or the publication of updated lists of projects, all of which have been seen in Budget week, only gets us so far.

Cancellations and changes

The elephant in the room remains the absence of the cross-parliamentary consensus that would stabilise our local industry and give it confidence to grow and invest in its workforce, and give foreign investors confidence that a new administration won’t later cancel infrastructure projects they want to be involved in.

All the same, the Budget’s tax tweaks, timed for the 2026/27 tax year, should, in principle, make investment financing more straightforward and appealing to foreign capital by allowing the expensing of up to 100% of third-party foreign debt costs.

This treatment has existed for public-private partnerships since 2018, but has seen little uptake.

The Government hopes extending it to a wider range of transaction financing options will help tip the scale in favour of choosing NZ projects from the global plethora of options.

In practice, however, the more pressing question for potential investors is likely to be: which of these projects will still be on the list if there is a change of Government?

Is the investment in bidding for such projects worth the effort, given the reality that this Government has talked a big game on supporting major, new infrastructure, but the practical reality of its actions have resulted in the local sector doing it tough?

High-profile cancellations and changes since the coalition came to power have sent the sector back to the drawing board on a number of projects, wasting prior expenditure and resulting in a huge gap in the pipeline.

The workforce that was being assembled for those projects has also, in many cases, dissipated, with many appropriately skilled workers leaving the country to pursue opportunities elsewhere.

In other words, while spending and investment environment changes announced in the Budget are important, so, too, is the wider suite of regulatory and policy changes the Government has announced in its first 18 months in office.

Infrastructure deficit

However, these resets have yet to produce a swifter flow of work to the market.

While uncertainty about shared political visions for the nation’s core infrastructure needs remains, improvements in policy settings can only do so much.

The ability to deduct a higher level of interest expenses at tax time, or to gain a fast-track consent for a big project, or eventually to use the provisions of an amended Resource Management Act is only valuable if the political consensus is sufficiently settled for a multi-year project to survive a three-year parliamentary term.

The private sector and international debt finance are simply not going to resolve the infrastructure deficit without some hard conversations here in NZ across the political spectrum about who we want to be as a country, and what infrastructure we need for the future to enable us to get there.

Other, similar countries, such as Ireland and Denmark, have done this successfully.

Like NZ, they are small, export-oriented democracies, except that they reached political consensus on a range of sectors of the economy and infrastructure priorities that transcended party politics.

Whether this can be achieved in NZ remains perhaps the most important question that the Government has yet to face fully.

While opportunities for alignment have been created, such as the involvement of the Labour Party finance spokesperson in the recent international investor summit, the appetite for enduring bipartisanship remains elusive.

For example, the coalition’s recent use of parliamentary urgency to turn the clock back on pay equity claims without allowing public scrutiny may have nothing directly to do with infrastructure priorities, but it inevitably damages such fragile trust and agreement as can be achieved between political opponents.

So, as the dust settles on Budget 2025 and attention turns to the course of a long-sought economic recovery leading into a general election in about 18 months’ time, has anything really changed?

The answer appears to remain: a little, but there is more work to do.

This article was posted on BusinessDesk on Friday 23 May 2025 and is republished with permission.