Govt's Budget 2026 spending and cuts – everything we know so far

Billions in defence spending, public service cuts, social housing changes, and a Winston Peters "leak" have already been revealed ahead of tomorrow's Budget, with Finance Minister Nicola Willis promising more to come.

The Government has used the past fortnight to preview a string of spending commitments and cuts, setting up Budget Day with announcements spanning drones for defence, rent increases for state housing tenants, and plans to slash public service jobs.

Follow live coverage of the Budget on 1News.co.nz and TVNZ+ from 2pm on Thursday.

But several big-ticket items flagged by Willis and Prime Minister Christopher Luxon remain under wraps, including what the Finance Minister has described as a "major lift" in health funding, plus police and corrections investment.

A further Budget announcement on courts policy was expected later today from Justice Minister Paul Goldsmith and Courts Minister Nicole McKee.

Luxon confirmed the net operating package would be $2.1 billion, below the $2.4 billion allowance set in December's Budget Policy Statement.

The capital package would be larger than originally planned at $5.7 billion net.

He has previously framed this year's Budget around four pillars: international security, energy independence, social cohesion and financial security.

The announcements don't cover all expected Budget measures, with potentially bigger new initiatives or other spending reprioritisations still to be revealed tomorrow.

But here's a comprehensive breakdown of the changes already revealed.

Willis and Public Service Minister Paul Goldsmith unveiled plans to cut core public service numbers from about 63,600 to 55,000 by mid-2029, a reduction of roughly 8700 roles.

The savings would come from a sinking lid on most agencies' operating budgets: 2% cuts in the coming financial year, then 5% in each of the following two years, delivering $2.4 billion over the forecast period.

Teachers, nurses, doctors, police and defence personnel are excluded from the targets.

Willis said the Government would also "significantly reduce" the number of public service agencies over the next five years, pushing for more mergers such as the one currently happening between the transport, urban development and environment ministries.

The Government would also oversee a push to move government systems to the cloud and "embed AI deployment as a basic expectation for all public entities", Willis said.

Defence Minister Chris Penk announced $1.6 billion in combined new funding, split between $880 million in operating and $700 million in capital.

Maritime security was seen as the centrepiece of the spending.

The capital funding will go towards the maritime fleet renewal programme and two new drone systems: one for surveillance in the South-West Pacific, and a polar-capable system for missions from navy vessels in the Antarctic Ocean.

Critical maintenance funding for the Anzac-class frigates and HMNZS Canterbury will keep the existing fleet operational until replacements arrive.

New training facilities and defence housing construction round out the package. Total new spending in defence since last year's capability plan now stands at $5.8 billion.

Major changes to public housing announced by Housing Minister Chris Bishop and Social Development Minister Louise Upston will see the minimum income related rent contribution rise from 25% to 30% of income from April 2027.

About 84,000 households would see rents increase by an average of roughly $31 a week.

The Government expects to save $387 million over the forecast period, with most reinvested into higher accommodation supplement rates, rising by $10 to $30 a week.

A separate reduction to the maximum rate of temporary additional support would save a further $195.6 million, with Upston saying the payment needed to better reflect its purpose as short-term hardship assistance rather than a long-term top-up.

Bishop said the current system was "unfair", with social housing tenants on a main benefit having on average $105 more per week left after housing costs than comparable private renters on the accommodation supplement.

The Government also flagged future changes, including defined tenancy durations and more regular reviews of eligibility.

Education Minister Erica Stanford announced $131 million for the next phase of the Government's so-called "Teaching the Basics Brilliantly" programme, targeting reading, writing and maths support across primary and intermediate Years 0-10.

The package includes maths kits for every Year 0-8 classroom, free digital writing tools for more than 200,000 students, new pen-and-paper workbooks for Year 4 and 5 students, and a Year 2 Literacy Check.

Three new pilot maths hubs will also be trialled as centres of excellence, while the number of full-time maths intervention teachers would increase from 143 to 179.

Stanford said the package was funded through "a mixture" of new money and reprioritised spending, but would not confirm the breakdown ahead of Budget day.

Separately, Associate Education Minister David Seymour announced $212.4 million to extend the school lunches programme through 2027.

He said the average cost per meal had dropped from up to $8.68 under the previous government to $3.58, and that complaints had fallen by more than 92%. The programme has not been permanently baselined and continues to be funded year by year.

Seymour faced major criticism when he first shook up the programme with complaints about food quality, delivery troubles, and supplier issues.

The Government has also confirmed it will scrap the fees-free tertiary education scheme, after NZ First leader Winston Peters pre-empted the announcement in what he called a "Budget leak" on Newstalk ZB.

"I'll give you a Budget leak right here, right now, the answer is yes," Peters said.

He said the funding would be redirected towards trades and industries "where we do need it and where we can get a far better payback for our money".

Finance Minister Willis confirmed that this year would be the last one students completing their studies would be eligible for fees-free support, saying the Government would "have more to say about this in due course".

The fees-free scheme was introduced by the previous Labour government, providing up to $12,000 in tuition fees for the first year of study.

The coalition revised it to instead cover the final year of tertiary study.

The decision means current second-year students who missed out on getting their first year free under the original Labour scheme will now also miss out on the final year under the coalition's revised version, RNZ reported.

Customs Minister Casey Costello announced $70.7 million over four years for upgraded X-ray equipment, facility security and defensive equipment for Customs staff, plus $10.8 million for four new international Customs posts.

Costello said more than 14 tonnes of cocaine had been seized in the Pacific region in the first two months of 2026, and that nearly 15 million illegal cigarettes had been intercepted at the New Zealand border in 2025.

She added that New Zealand was being targeted by transnational organised crime groups, warning "the danger is clear and very present".

The new posts would be established first in the Pacific and South America, in response to a "significant increase in drug-smuggling through those regions".

The funding was launched against the backdrop of three new underwater drones, now deployed in Auckland, Tauranga and Lyttelton, which allow officers to remotely inspect vessel hulls for smuggled goods beneath the waterline.

Thousands of businesses will be eligible for government-backed bank loans to reduce their reliance on dwindling natural gas supplies under a new $1.2 billion scheme.

The Gas Transition Loan Guarantee Scheme will see the Crown underwrite 80% of each supported loan in return for banks offering lower rates, with individual loans capped at $50 million. The scheme will run for three years, with loans repayable within 10 years.

Budget 2026 has set aside $48 million to cover potential losses.

Willis said the scheme was a practical response to the closure of gas-dependent businesses across New Zealand.

"This will make loans more affordable for firms wishing to switch fuel sources," she said.

To qualify, businesses must use reticulated natural gas and consume at least 1000 gigajoules a year — about 40 times the average household's annual usage.

Eligible businesses could include food processors, brewers, hotels, aged-care facilities and commercial growers. Twelve of the 17 gas fields currently operating in New Zealand are expected to stop producing within a decade, according to the Government.

Energy Minister Simeon Brown said the Budget also provided $5.9 million for energy conservation authority EECA to work with businesses exploring alternatives.

Associate Energy Minister Shane Jones said the Government would also pass legislation requiring gas industry participants to disclose supply and demand information to regulators, noting a 23% decline in gas reserves in the past year.

Biosecurity Minister Andrew Hoggard announced $79 million over three years to ramp up efforts to control the spread of wilding pines, taking a total commitment to $109 million.

“Wilding pines threaten productive farmland, water supplies in sensitive catchments, and native biodiversity – and they significantly increase the impact of wildfires.”

More than two million hectares of New Zealand are affected by wilding infestations, with untreated areas expanding by an estimated 5% a year.

About $30 million of the funding would come through the International Visitor Levy.

Health Minister Simeon Brown announced $35 million over four years for road ambulance services, including two new ambulance hubs in Auckland — one confirmed for South Auckland — an electronic patient records system, and more training for call centre staff.

Emergency ambulance demand is expected to grow by 95,000 incidents over the next four years, to an estimated 735,000 incidents. The investment is expected to reduce avoidable emergency department transports by around 23,000 a year by 2029/30.

Additional Health NZ and ACC funding for more frontline crews and 111 call handlers is still being negotiated as part of the next four-year ambulance contract.

Brown also committed $15.5 million over four years for specialist paediatric palliative care teams in the North and South Islands.

The teams will include specialist physicians, clinical nurse specialists, social workers and psychologists.

Currently, Health NZ funds just one specialist paediatric palliative care physician, based at Starship Children's Hospital. Up to 3000 children across the country may require palliative care support. The new service is expected to be fully operational by mid-2028.

Willis previewed a "major lift in funding" for the wider health system in her pre-Budget speech but has not released further details.

Targeted investments in police and corrections were also flagged but not yet detailed.

Elsewhere in Budget related spending, Infrastructure Minister Chris Bishop also announced $2.5 million for the new merged transport and environment ministry to overhaul rules around underground assets and transport corridor management.

A review found there were 6000 reported asset strikes a year in New Zealand, with estimated indirect costs of $1.45 billion in traffic delays and lost utility services.