Capital allowances
At the BPS, the Government discontinued the multi-year capital allowance framework and replaced it with capital allowances for each Budget in the forecast period. Compared to the BPS, the capital allowance for Budget 2025 has been raised from $3.625 billion to $4 billion. This increase has been offset in future Budgets by setting the capital allowances for each of the next three Budgets at $3.5 billion, representing a similar level of new capital investment over the forecast period as in the BPS. As capital investment requirements can be large, uneven and sometimes unexpected, the Government retains the flexibility to vary these capital allowances, within the constraints provided by its fiscal strategy.
Government agencies, including the Infrastructure Commission, are working to improve the quality of information on public investment needs and proposals. Better information will support the delivery of a stable medium-term capital pipeline that works to address New Zealand's infrastructure deficit and lift economic performance. Ahead of Budget 2026, this information will allow the Treasury to review investment assumptions in the fiscal strategy and could lead to revised capital allowances.
Capital allowances, like operating allowances, are a net concept. More efficient use of the Crown's balance sheet could support increased investment without increasing capital allowances (see section below on managing assets and liabilities).
Capital contributions to the New Zealand Superannuation Fund (NZSF) do not count against the capital allowance. Forecast contributions are set out in Annex 3.