The 'Growth' Budget – the second Budget of the National-Act-NZ First Coalition Government – has just been released. As expected, there is a clear focus on tightening the fiscal belt, with targeted changes to promote economic growth.
Investment in gas
While the Budget is fairly lean for the energy sector, $200 million of tagged contingency funding (over four years) has been earmarked for Crown co-investment in new gas fields, in an effort to address New Zealand's waning gas supply. The Budget was released in conjunction with an announcement from the Honourable Shane Jones, Minister for Resources and Associate Minister for Energy, expressing the Government's willingness to take a cornerstone stake of up to 10-15% in new gas field developments.1
While the exact structure of these investments has not yet been finalised, the Hon Shane Jones is quoted as saying:
"Developing a new offshore gas field from exploration to production can carry a billion-dollar price tag and projects of this scale are likely to need offshore investment. We have demonstrated potential for significant gas development and while investors are interested, we need to show their commitment will not be a wasted exercise."
The Government's announcement aligns with its initiation of the process to reverse the ban of offshore oil and gas exploration via the Crown Minerals Act Amendment Bill (which is currently awaiting its third and final reading). This tagged contingency, in tandem with the reversal of the ban, indicates that New Zealand is "open for business" to potential investors, and should help to assuage the sector's historic comments that the industry would be unlikely to invest in exploring for new gas without Government support.2
Tax incentives
The energy sector as a whole will also welcome one of the Government's key economic growth items of Budget 2025, "Investment Boost", a tax incentive which allows businesses to immediately deduct 20% of the cost of a new asset. Investment Boost is intended to encourage businesses to invest in productive assets, including machinery, equipment and related infrastructure. Investment in the energy sector will therefore be eligible to benefit from the Investment Boost initiative.
Investment Boost is able to be accessed by any business that pays tax in New Zealand. Foreign residents who invest in New Zealand resident companies involved in the energy sector can therefore benefit from Investment Boost.
Key points to note in relation to the Investment Boost policy are:
- The Investment Boost tax deduction is available in addition to normal tax depreciation deductions.
- Investment Boost applies to new assets purchased from 22 May 2025, with no cap on the value of eligible investments or the number of assets for which it is claimed.
- Notably, the Investment Boost deduction is also available for new commercial and industrial buildings which do not generally allow tax depreciation deductions.
- Certain assets are not eligible, including land or fixed-life intangible assets (such as patents).
Other initiatives
In line with the general tenor of Budget 2025, aside from the above, there is limited provision for new energy investment by the Government. Other key energy initiatives include:
- The Government has reduced Crown funding for the Energy Efficiency and Conservation Authority (EECA). This cut is partially offset by increasing levy funding.
- Additional energy policy capability will be added to the Ministry of Business, Innovation and Employment. This is designed to help provide advice on actions coming out of the independent review of the electricity market performance.
- There is also a short-term project on how best to leverage Government procurement to achieve energy sector objectives.
Budget 2025 is entirely consistent with the Government's previous approach to governing the energy sector of reducing the red tape associated with investment, but not funding it. This aligns with the absence of any initiatives in the Budget relating to renewable energy or strengthening the resilience of New Zealand's national electricity infrastructure.