Budget 2024

Fiscal Strategy Report 2024
Te Rautaki Moni TÅ«matanui

Capital allowances

In Budget 2019, the previous Government introduced the Multi-Year Capital Allowance (MYCA) to reflect new capital funding available over the next four Budgets. The MYCA replaced a single-year capital allowance.

This change was intended to improve capital funding trade-offs and support a longer-term view of capital investment. In practice, the MYCA has not done this. Large annual increases to the MYCA and immediate allocation of those increases have limited the MYCA's use in supporting multi-year trade-offs.[6] It has also complicated how the Government's future capital investment intentions are understood and communicated.

The Treasury will be reviewing the capital allowance framework with the aim of enhancing fiscal transparency and supporting a stable capital pipeline focused on high-value investments.

In the meantime, the Government has topped up the MYCA by $7.0 billion and committed net new capital funding of $2.4 billion in Budget 2024. A total of $7.5 billion remains in the MYCA to fund high-priority infrastructure projects in the future.

This net new capital funding of $2.4 billion in Budget 2024 is on top of an existing full capital pipeline (including programmes already in delivery) and focuses on critical asset maintenance, renewals, and upgrades. The previous Government allocated significant levels of capital funding in recent Budgets, leading to a capital investment pipeline larger than agencies and the market could deliver, as evidenced by cost escalations and delays.

The Government's approach to capital investment will allow for consideration of the market's capability to deliver and agencies' capability to better manage cost increases and delivery delays. This approach enables the Government to increase investment in future Budgets while ensuring a more stable and sustainable investment pipeline.

Capital contributions to the New Zealand Superannuation Fund (NZSF) do not count against the MYCA. Annual capital contributions are calculated in accordance with the formula in section 43 of the New Zealand Superannuation and Retirement Income Act 2001. Forecasts of these contributions are shown in Table 2.

Table 2 — Contributions to the NZSF

Table 2 - Contributions to the NZSF
Year ending 30 June
NZSF contributions 1.6 0.9 0.9 0.9 0.8

Source: The Treasury

Box 1 - Responsibly funding climate and resilience investments

In the December mini-Budget, the Government returned the unallocated balance of the Climate Emergency Response Fund (CERF) for use in Budget 2024 and future Budgets. The Government will invest responsibly to support New Zealand's transition to a low-emissions economy and climate-resilient future. It will consider climate and resilience investment proposals through the normal Budget process and manage them against Budget allowances. It does not require a bespoke fund to do this.

The National Resilience Plan (NRP) was established following the North Island weather events to provide funding for urgently-needed but not-yet-quantified rebuild projects. More than a year later, many of these are underway and a unique fund is no longer needed to fund future projects. Funding climate resilience will continue to occur through the normal Budget process and the Regional Infrastructure Fund.


  1. [6] In Budget 2023, for example, the previous Government increased the MYCA by $17.6 billion and committed $17.4 billion at the same time, leaving only $3.1 billion in the MYCA to cover new capital investments in Budgets 2024 to 2026 – an inadequate amount.
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