Introduction
With the dust settled on Budget 2026 and the release of the Government’s response to the National Infrastructure Plan on 16 June 2026 (Response), which largely accepts its recommendations, we examine how the Government’s recent Budget aligns with the National Infrastructure Plan’s (Plan) recommendations.
The Plan comes against a backdrop of New Zealand having an infrastructure deficit in excess of $200 billion. It recognises that changes to the way infrastructure is planned, procured, and managed are necessary if New Zealand is to close its infrastructure deficit. That, at least, appears to have cross-party acceptance. The Minister for Infrastructure, Hon Chris Bishop, noted in his foreword to the Response that having a plan is insufficient on its own; what matters is execution. With that in mind, this article summarises what the Budget does for infrastructure and considers how it stacks up against the Plan.
The Budget’s Investments in Infrastructure
The Budget allocated $5.7 billion in net new capital spending focused on core government sectors. Investment is concentrated in:
- transport ($2.7 billion)
- defence ($2.3 billion)
- education (approximately $500 million).
The transport capital programme includes $1.773 billion for the Cambridge to Piarere Road of National Significance, $400 million for state highway resilience projects, and $598 million for the national rail freight network. In education, $310 million is allocated to expanding school capacity by funding new schools, acquiring land, and building additional classrooms. A further $160 million goes towards maintaining and upgrading existing school properties. In the health sector, funds have been allocated for a 158-bed ward tower at Whangārei Hospital and for design and enabling works for redevelopments of Tauranga, Palmerston North and Hawke’s Bay hospitals, although exact figures have been withheld due to commercial sensitivities.
The Budget addresses government funding of pipeline projects in these three sectors. Inevitably, alternative sources of funding will be needed to fully implement the Plan and make meaningful inroads into the infrastructure deficit (in these sectors and others).
Funding has also been allocated to several changes to infrastructure planning and delivery systems. Multiple agencies are being consolidated into the Ministry for Cities, Environment, Regions and Transport (MCERT), which will consolidate functions previously held across transport, housing, environmental, and local government agencies. Accompanying this, $294 million over four years will fund implementation of the new resource management planning system, including national planning instruments, a digital planning platform, and a new Planning Tribunal. Additional initiatives will fund regulatory oversight of development levies and a review of underground asset stewardship in infrastructure corridors.
Alignment with the National Infrastructure Plan
The New Zealand Infrastructure Commission released the Plan in February 2026. Key priorities included maintaining our existing infrastructure, making it easier to build, planning what we can afford, and finding common ground. You can read more about the Plan here.
The Budget funds several initiatives that align with the Plan’s priorities.
- Maintenance is a key aspect of the Plan. Several initiatives focus on maintaining existing infrastructure and improving its resilience. This includes $160 million for maintaining and upgrading the school property portfolio, $400 million in capital funding for state highway resilience projects, $107 million for metropolitan rail renewals in Auckland and Wellington, and $598 million in capital and $477 million in operating funding for the Rail Network Investment Programme 2027–2030, which supports the maintenance and renewal of the existing rail network. These investments are consistent with the Plan’s focus on looking after existing assets.
- The Plan identifies the need for improving delivery systems. $294 million is allocated to support resource management reform. These funds are directed at implementing a new planning system, developing analytical tools (including the New Zealand Flood Map), and setting up supporting institutions (such as the new Planning Tribunal). These changes are intended to reduce planning constraints, making it easier to deliver infrastructure and housing over time.
- The Budget provides around $30 million over four years to establish regulatory oversight of development levies, strengthening how councils recover the cost of growth infrastructure. This is in step with the Plan’s emphasis on greater use of user‑pays funding mechanisms to support infrastructure delivery.
The Government’s Response
The Response accepts, or accepts in principle, all the Plan’s recommendations. It also highlights how the Government intends to implement some of those recommendations.
- Responses from the Green and Labour parties that broadly supported the Plan’s recommendations were included in the Response. This indicates an effort to build a cross-party consensus on New Zealand’s approach to infrastructure. This is a step towards building common ground – a key theme of the Plan.
- The Government has committed to amending the Public Finance Act 1989 and Crown Entities Act 2004 to require capital-intensive government agencies to publish long-term investment and asset management plans and to report on their asset management performance. The focus on asset management aligns with the Plan’s emphasis on maintaining existing infrastructure, while long-term planning will help plan what we can afford.
- The Government has directed MCERT to develop proposals for reforming the land transport funding system. It has also noted its agreement with the Plan’s call for time-of-use charging and the prioritisation and sequencing of major projects. This is consistent with the Plan’s priority of planning what we can afford.
Our Comment
As we noted in our article on the National Infrastructure Plan, 44 unfunded megaprojects make up 52% of the value of the National Infrastructure Pipeline. The Budget includes $1.773 billion for the Cambridge to Piarere Road of National Significance but does not fund any other megaprojects. While this reflects current fiscal constraints, there remains a gap between identified infrastructure needs and committed funding.
The Government will need to carefully assess how to fund these projects (including by partnering with the private sector) but must also balance the upfront cost of infrastructure against the cost of not funding projects.
A recent report commissioned by Civil Contractors New Zealand, Infrastructure New Zealand, and Water New Zealand estimated that cancelling and delaying infrastructure projects has cost New Zealand $11.8 billion over 25 years. According to the report’s author, Shamubeel Eaqub, these costs accrue because of inflation, productivity losses, and the deferment or loss of public benefit. This underscores that there is more to consider than the price of construction when reviewing infrastructure investment. Reaching consensus on projects, planning thoroughly, and efficiently delivering on a predictable pipeline is imperative.
For several initiatives, headline figures represent a spending ceiling rather than firm commitments to invest that amount. For example, the Budget does not confirm which highways will benefit from the $400 million for state highway resilience, nor when the funds will be deployed or how much will be committed each year. Similarly, the $310 million allocated to growing the capacity of schools promises to deliver up to 232 classrooms and does not specify an investment timeline (for example, 200 classrooms over three years). More clarity around these initiatives would provide the infrastructure sector with greater certainty, enabling the sector to invest in capacity over the long-term.
The Government’s positive response to the Plan signals intent to improve infrastructure planning and delivery. However, there is still some cause for caution. While the Green and Labour parties have voiced support for the Plan, there remain areas of disagreement between them and the Government regarding infrastructure. Additionally, the Response commits to publicly consulting on proposals for reforming the land transport funding system by June 2028, indicate the time required to implement reforms.
Investments in asset maintenance, resilience, and planning reform are broadly consistent with the priorities set out in the Plan. However, the extent of funding for new large-scale projects and the reliance on indicative allocations highlight the ongoing gap between identified infrastructure needs and committed investment. The extent to which these measures translate into delivered projects will be a key consideration for industry participants over the coming years.
If you have any questions, please get in touch with our Construction & Infrastructure Team or your usual contact at Hesketh Henry.
Disclaimer: The information contained in this article is current at the date of publishing and is of a general nature. It should be used as a guide only and not as a substitute for obtaining legal advice. Specific legal advice should be sought where required.
