Health has claimed the biggest single increase in Budget 2026, rising 10 percent to $34.2 billion — but the overall picture is one of fiscal restraint, with the Government betting on a return to surplus by 2028.
Finance Minister Nicola Willis has delivered what she called a disciplined, back-to-basics Budget — no election-year surprises, no lollies — as the Government tracks toward a surplus it says will arrive a year earlier than forecast. Here is where the money is going.
The big number: $34.2 billion for health
Health received the largest single boost, rising from $31 billion last year to $34.2 billion — a 10 percent increase and a figure that makes health by far the biggest single item in Government spending. The headline figure covers frontline services ($5.5 billion in new money over four years), but the detail reveals where the money is actually going:
- $680 million in capital spending for hospital upgrades, including a new 158-bed tower block at Whangārei Hospital, and redevelopments at Tauranga, Hawke's Bay, and Palmerston North
- $930 million for new clinical equipment, technology upgrades, and facility improvements nationwide
- $153.6 million over four years to expand cyber security monitoring across the health system, following multiple high-profile IT outages and the Manage My Health data breach
- $45.6 million to lower the bowel cancer screening age from 58 to 56, covering an extra 200,000 people
- $34 million for three-day postnatal hospital stays
- $54 million in increased Pharmac funding ($13.5 million per year)
Primary care — GPs and community health services — did not receive a dedicated funding increase. The sector had been calling for more, arguing it would ease pressure on hospitals.
Transport: roads and rail
The second-largest visible commitment is transport infrastructure. The Budget allocates $1.77 billion to extend the Waikato Expressway 16 kilometres from Cambridge to Piarere Road — a project discussed for years but not yet funded. A further $1.075 billion goes to KiwiRail's network from 2027 to 2030, and $107 million for urban rail upgrades.
A levy on banks, a 'rainy day' fuel fund
The Government introduced a new levy on banks, insurers, and financial market infrastructure providers, expected to raise just over $200 million over four years. That money covers the cost of services provided by the Reserve Bank. Separately, $450 million has been set aside as an emergency fuel reserve, on top of $150 million already announced for strategic reserves.
Where the cuts fall
Most government ministries face a 2 percent funding reduction in 2026, followed by two rounds of 5 percent cuts in subsequent years — a total 12 percent reduction from current baseline. Agencies that are exempt include Health, Education, Oranga Tamariki, law and order, and defence and intelligence. Foreign Affairs is exempt from this year's cut but remains on the list for future reductions — a point of tension with Foreign Minister Winston Peters.
Fees-free tertiary study is being abolished, saving an estimated $1 billion over four years.
A surplus on the horizon — or so the forecasts say
The Government is betting that tax revenue growth and spending restraint will return the operating balance to surplus by the 2028-29 financial year, a year earlier than the December forecast. Willis described the approach as digging out of a post-Covid hole. Treasury is counting on $3.8 billion in new spending being offset by $1.7 billion in savings — with $209 million of the levy on banks helping to cover Reserve Bank costs.
The caveats are significant: the Iran conflict and its effect on fuel prices adds considerable uncertainty to any economic forecast for the year ahead.
This article is for general information only and is not personalised financial advice. Seek advice from a licensed financial adviser (registered on the FSPR) for guidance specific to your situation.