Capital expenditure
The need for fiscal discipline applies equally to capital expenditure as it does to operating. There is a clear need for investment in New Zealand, but prioritisation is necessary to deliver value for money, given current capacity and fiscal constraints. The previous Government made a significant allocation of capital funding over recent years, the level of which has impacted market and agency capacity and consequently delayed the delivery of investments and increased costs.
In Budget 2024, the Government will top up the multi-year capital allowance (MYCA) by up to $7 billion, with the final number to be confirmed in the Budget. $7 billion is the amount assumed in each projection year (in real terms) in the Treasury's fiscal strategy model. At present, there is only $3.45 billion in the MYCA, which is intended to be a multi-year allocation. A MYCA top-up of up to $7 billion will help ensure that the Government's investment objectives are achieved in a way that is fiscally responsible and recognises the capacity of the market to deliver without pushing up costs.
The Government intends to take a more deliberate approach to building a sustainable pipeline of investments than has previously been the case. Capital investment decisions will be based on robust asset management and investment planning, including the presentation of high-quality business cases.