Opportunities and challenges from the 2025 Budget

Following the excellent turnout and discussion at our post-budget events, hosted by Stuart Nash, we're sharing the key highlights and insights below.

As 2025 unfolds, New Zealand's labour market is embracing opportunities within an evolving economic and political landscape. The government's new "Growth Budget" charts a strategic path forward, aiming to boost economic growth, create jobs, lift wages, and address cost-of-living pressures while reducing debt. The $1.3 billion operating allowance reflects a disciplined approach to fiscal management, demonstrating commitment to building a stronger economic foundation for the future.

Sectors positioned for growth 

While reactions to the 2025 Budget have been mixed, several key sectors are poised for growth on the back of increased government investment.

The healthcare and education sectors stand to benefit from significant funding increases, creating strong demand for skilled professionals. Healthcare has been allocated $7 billion in operational expenditure increases over five years and $800 million in capital expenditure over the next decade. However, questions remain about whether this funding adequately addresses the sector's challenges. The Dunedin hospital project alone is $1.8 billion and growing. 

Education receives $1.1 billion in operational funding over five years and $734 million in capital expenditure over ten years. The funding is creating opportunities not just for teachers, but for education support staff, administrators, and specialist roles in curriculum development and student services.

These initiatives speak to the budget’s key goal of delivering more efficient, effective and responsive public services, in particular to improve health outcomes and educational achievement. 

Defence is another key area of investment, with $1.5 billion in operational increases and $2.67 billion in capital expenditure over the next decade.

The business sector faces a more nuanced landscape. The government's "Investment Boost" policy offers a 20% immediate tax deduction on new asset costs, representing a $1.7 billion annual commitment that aims to boost GDP by 1% and wages by 1.5% over 20 years. Although this policy carries positives, the business community remains unconvinced about its transformative potential. Many question whether the incentive will drive new capital investment or simply subsidise purchases that would have occurred regardless. The manufacturing sector may see marginal employment benefits as companies invest in new machinery, but the hiring impact is likely to be modest rather than transformational.

Job market opportunities and challenges 

The employment landscape emerging from budget allocations present several key opportunities which are tempered by wider economic pressures.

Opportunities 

Despite ongoing economic uncertainty, demand remains strong in several key areas:

• Skilled roles in healthcare, engineering, and technology continue to see high demand, supported by significant funding allocations in health and education.

• Contract and temporary roles are on the rise, particularly in the public sector, as organisations respond to funding boosts while managing headcount cautiously.

• Young workers could benefit from targeted policy changes, through the extension of KiwiSaver eligibility to 16-17 year olds, combined with benefit reforms designed to encourage job entry. This could drive hiring momentum in retail, hospitality, and the trades. 

• Social services may see a hiring lift through the new $190 million Social Investment Fund, which aims to support delivery of frontline community services.

Challenges 

However, economic challenges are weighing on permanent hiring and job market confidence:

• New Zealand’s economy is predicted to contract by 0.8%, with unemployment now sitting at 5.1%, contributing to cautious hiring decisions across multiple sectors.

• Permanent roles in the public sector remain limited outside the funded growth areas. Agencies continue to prioritise temporary or project-based staffing models, which offer greater flexibility during volatile economic conditions.

• The pay equity controversy has added further complexity to the employment landscape, particularly in public service and care sectors. The policy shift signals a fundamental change in approach to workplace equity that may influence long-term career planning decisions and employer value propositions. 

KiwiSaver changes: A mixed bag for talent retention

The budget's KiwiSaver modifications present both opportunities and challenges for employers competing for talent. The extension of eligibility to 16-17 year olds opens new avenues for youth employment, particularly in retail, hospitality, and trades. However, halving the government contribution to 25 cents per dollar (capped at $261 annually), while raising the minimum contribution to 4% over three years creates a more complex equation for salary packaging.

For employers, these changes require a fresh approach to benefits communication. The reduced government contribution may make other benefits more attractive by comparison, while the youth eligibility expansion provides a compelling reason for businesses to invest in school-leaver programmes. 

Strategic implications for 2025

The 2025 Budget sends a signal that the Government is now expecting economic stimulus and growth to be driven by the private sector, amid constrained government spending. As a result, the employment market is expected to remain steady but throughout the year.

For employers, the message is clear: strategic hiring decisions made now will determine competitive advantage later. The sectors receiving government investment offer the most immediate opportunities, but businesses in other areas should focus on talent acquisition strategies that emphasise flexibility and value beyond traditional salary packages. 

For professionals, the budget reinforces the importance of skills development and sector awareness. Those in healthcare, education, and defence are well-positioned for growth, while professionals in other sectors may need to consider how their skills translate across industries.

The government's goal of building a "stronger, more productive economy" appears to remain aspirational. With GDP contraction expected this year and the deficit projected to continue until 2029, the employment market will require careful navigation by both employers and job seekers.

As we move through 2025, the budget's true impact will be measured not in policy announcements but in actual job creation and wage growth. Early indicators suggest a tale of two markets: opportunities in government-supported sectors and continued caution elsewhere. Success will belong to those who adapt quickly to this new reality while maintaining focus on long-term strategic goals. 

Our team of expert consultants continue to monitor these developments closely to help both employers and professionals navigate this evolving landscape with confidence. Don’t hesitate to contact us for an obligation-free chat about the job market today.