PNZ’s Rahul Watson-Govindan reflects on the budget
A Budget for Everyone*
Our PNZ members and the wider philanthropic community fund so broadly (across multiple areas from health to education to social enterprise) and vertically (governance to front line delivery) that it was hard to decide on the key points of the Budget that affect us. So instead of commenting on everything, here is my cherry-picked summary, the rest to be discussed over coffee!
*Overall this is a budget for everyone: there’s something in there for everyone to get upset about, and something there for everyone to like (if they can see past the dislike bits…).
All governments need to make choices and choices come with trade-offs. What do the major parties have in common? Both are ultimately striving for prosperity and growth – and both make bets – one on investing in businesses and one on investing in the community. The ratios applied between the two and the methods may differ, but fundamentally the first question is: ‘how can we generate wealth?’. There’s an urgent need to ask “how do we define ‘wealth’?” and diversify our thinking, but this is largely left unaddressed satisfyingly by any political party. One for another blog post.
The next big question is ‘how might we (re)distribute that wealth?’. Nicola Willis talks about ‘growing the economy and not living beyond our means’ which translates to “we’ll invest in wealth generation but distribute out less if we aren’t generating enough’. That is essentially what she and her government have done here. They have also anticipated that unless they try to fuel some ‘wealth generation’ then they’ll be in the same state as today in future budgets. The choices made in how to do this define their ideological standpoint and it’s not a case of ‘right and wrong’ it’s a case of one’s values and perspectives informing a sense of right and wrong. There are some ‘political’ distributions made too, but that’s perhaps a characteristic of our MMP government construct. More on that below.
Have they made the right trade-offs? Are they investing in the right areas? Will wealth be generated to the levels we need?
I’m writing this as the CEO of PNZ. We are the peak body for philanthropy in NZ and reflect and lead views on behalf of the broad church of the philanthropic community. There will be perspectives that other leaders are better placed to carry (e.g. pay equity, Māori, science sector, etc) – and we’ll ally with those views as they land if appropriate.
Budgets are an annual process and what’s not in this year – we will work with the government in partnership to articulate the value of including in next year’s budget. There are spaces for activism and there are also spaces for pragmatism.
Top 12 takeaways about the Budget 2025
Tight Fiscal Environment and Reprioritisation:
The Budget is notably tight, with a significant reduction in the operating allowance (new spending) compared to previous years. This signals a government focused on fiscal consolidation and reducing debt. Philanthropic organisations should anticipate continued pressure on public spending and be prepared to have conversations about whether or not to fill gaps or innovate in areas where government funding is constrained or reallocated. It may mean some tough conversations ahead (some already well underway for months) however it also presents an opportunity to innovate and partner on shared projects and areas of concern, leveraging the strengths of each organisation or sector.
2. Fiscal Conservatism and "Growth Budget" Narrative:
The budget emphasizes fiscal restraint and frames itself as a "Growth Budget”. This suggests a belief that economic growth is the primary driver of social well-being, which may not fully align with philanthropic goals centred on equity and direct social support. However, philanthropy also plays a vital component of economic wellbeing and growth – increasingly directly through impact investing.
3. An Expensive Bet on Business:
The cornerstone of the Budget’s mission to economic wellbeing is the Investment Boost. This policy allows businesses to immediately deduct 20 per cent of the cost of a new asset from their tax bill. The premise is that this will stimulate and bring forward capital investment and this will result in productivity returns sooner rather than later or foregone completely. On the face of it, the theory is sound – we do need to support NZ owned business to compete - but Treasury itself has only modelled a modest ROI from this and there is no accountability for the tax rebate: it’s a pure handout to businesses. It is also not a targeted allocation – perhaps restricting to the type of businesses we want (tech, manufacturing, renewables, social enterprises) may have been a better move. Also, given the government’s willingness to take an equity stake in it's support of oil and gas exploration initiatives, why not here? The government has chosen to reduce tax revenue by $1.7 billion per year. Will it pay off? Possibly: Can gifting you a fitness watch make you fitter? I look forward to partnering with the government to bring forward a similar bet on the philanthropic and social enterprise sector – one for next year’s budget.
4. Focus on "Social Investment" and Outcomes-Based Funding:
A significant aspect of the Budget is the establishment of a Social Investment Fund ($190 million over four years), which will commission social services from community organisations. This is a further shift towards a more outcomes-focused approach signalled at the end of 2024, with an emphasis on evidence and data to determine what works. It signals the government’s intent to invest in what truly works and to potentially move away from short-term, siloed funding. More commentary on this below. Philanthropic organisations that fund in the similar spaces to government could consider aligning their efforts with outcome measurement so that the community can demonstrate impact to be effective partners or recipients of this new funding model.
5. Increased Demand for Social Services:
Despite the government's efforts to curb spending, economists highlight continued economic pressures for many households, including the ongoing cost of living crisis. This will likely lead to sustained or increased demand for the services provided by many community and social sector organisations, putting greater pressure on philanthropic resources for the foreseeable future. Funding priorities and focus may need closer examination, and not fall into the trap of being a ‘government funds replacer’.
6. Targeted Government Spending in Key Areas:
While overall spending is tight, the Budget does include targeted increases in specific "frontline" services such as health, education (especially learning support and maths), and law and order. Most budgets have this though as the costs of delivery in these areas always growing over time. Is it actually more in ‘real’ terms? Is it enough to address the strategic issues in community? Philanthropy could consider how its funding can complement these targeted areas, or conversely, focus on gaps that are still under-resourced despite these increases – particularly in areas of unmet need or innovative programming and practise.
7. Education Sector Shifts:
The Education Minister was a big winner in the lolly scramble. The Budget signals a rise in support for children with disabilities and a strong focus on literacy, financial education, and maths. An increase in tertiary subsidies for priority areas like STEM and teacher education are also welcome. There's also significant reprioritisation within education, with some previous initiatives (like Kahui Ako) being axed. Philanthropy involved in education should review these changes and consider how their support can best address emerging needs or contribute to innovation in the sector. Philanthropy could also focus on areas where the Budget's investment is perceived as insufficient, such as early childhood education quality, teacher professional development in areas beyond literacy and numeracy, or specific Māori education initiatives that may have seen funding shifts. Understanding how ‘education’ fits within the Social Investment framework of the government may present opportunities for co-investment. Collaborative funding initiatives between philanthropic organisations and schools or communities could also amplify impact in priority areas.
8.KiwiSaver Changes and Potential Impact on Giving:
Changes to KiwiSaver, including a halving of the government contribution for most and its elimination for high-income earners, will influence individual financial behaviour. The Retirement Commission reckons that the budget announcement are expected to increase retirement savings for 80% of the scheme’s contributing members. Of the other 20%, half are unaffected, but the other half may well be impacted by changes (such as the reduction in Government contributions). The increase is important, because statistics indicate the average Kiwisaver balance sits at a low $37,000. Changes to Kiwisaver over the years, including last week, disproportionately affect younger NZers compared to older (no kickstart payment, government contributions halving, means testing). It’s strange to means-and-income-test support available to children and younger people, but not alter the eligibility for NZ Super…even if you’re ultra wealthy – until you realise this is the ‘political’ decision here: all governments have been loathe to risk upsetting the older voting population (not the least of which a party who actively courts that demographic in the form of NZ First). On a positive note, 16 and 17 year olds will now be part of the scheme and the employer and employee contributions will increase to 4 %. The Reserve Bank estimates that about 40% of KiwiSaver funds under management are invested in New Zealand assets so this will bring a welcome boost to productive parts of the economy. While not directly linked to philanthropy, shifts in personal savings always indirectly affect charitable giving. The gaps appearing (eg to younger populations, to Māori and other ethnic groups, to women) are areas philanthropy can look to address in a more targeted way. Lastly – we need to urge the government to utilise the Superfund and Kiwisaver in a more strategic way than it is now – how might we use the accumulated funds for investing in a better future for those retiring in that future? Here opportunities such as Impact Investing should be considered.
9. No New Taxation on Charities (for now):
The government listened to our feedback with regard to the IRD issues paper and deferred from this Budget any immediate plans for new taxation on charities. However, the ongoing public and academic debate around charity tax exemptions and business income (some of it frighteningly intellectually unimaginative) implies that this is an area that could see future changes. Philanthropic organisations should remain aware of this ongoing discussion and continue to support PNZ in our advocacy work. There’s value in reviewing tax settings – and we will continue to work together with the government to ensure fairness and integrity is assured so that we get the performance and trust we need in the sector. Work in Progress.
10. Importance of Economic Growth:
The Budget is explicitly labelled a "Growth Budget," with policies like "Investment Boost" aimed at stimulating business investment and economic expansion. A stronger economy is seen as crucial for generating the revenue needed to fund public services. Philanthropy plays a role in economic growth and wellbeing – both as a paid workforce, with associated business activities and in the projects we support. We need to consider how our investments are articulated into a broader economic well-being and community resilience narrative. More specifically our activities in the Impact Investing space (e.g. in the housing sector).
11. Vulnerability of Specific Demographics:
The Budget includes measures like means-testing for 18- and 19-year-olds on Jobseeker and emergency benefits. This could disproportionately affect young people and potentially increase their reliance on community support services. Whilst many in ethnic communities will find nothing out of the ordinary to support their children irrespective of age (and vice versa supporting elderly relatives), it is important to note that as a country we’re inconsistent with how we treat our youth between 15-21. Conveniently calling them adults when it suits us (punishing for doing crime) and kids when it doesn’t (means testing the parents if you need support). An absence of a party in power that specifically courts and advocates for youth is obvious when comparing what the 65+ older constituents received in this budget from the party that courts them. On a positive note, though, 16 and 17 yr olds now qualify for KiwiSaver. Long overdue. Philanthropic efforts focused on youth, homelessness, and welfare support may find increased need here. Also don’t also discount the power of funding for advocacy – especially for activating youth participation in local and central elections!
12. Environmental funding:
There's a notable absence of bold new investments in environmental protection, and in several key areas, funding has been reduced or reprioritised, or given to adverse areas. Most bizarrely, $200 million being allocated to invest in new fossil gas production with the government to take a 10-15% commercial stake in the ventures. This directly contradicts the urgent need to transition away from fossil fuels. All of this is particularly concerning given the well-documented climate and biodiversity crises we face, and the strong economic benefits that flow from a healthy environment. The cuts to critical environmental funds and international climate finance, reduced budget to EECA, scraping of the electric bus fund, the disestablishment of Predator Free 2050, the ending of funding to Mātauranga Kura Taiao Fund and the Nature Heritage Fund, coupled with the investments in fossil fuel companies, are a significant setback for New Zealand's environmental stewardship. From a philanthropic perspective, this budget highlights the ongoing need for private and community support for environmental causes. While government funding is crucial, it's clear that the philanthropic sector will continue to play a vital role in protecting and restoring our unique biodiversity and advancing climate solutions in New Zealand. We will be closely monitoring how these changes impact on-the-ground conservation and climate initiatives and will continue to advocate for greater government investment in these critical areas. There maybe opportunities ahead to partner with government to support for biodiversity and conservation efforts – these are areas that have cross-party support. The government can’t be absent from this – neither can philanthropy.
Six Opportunities from here to work in Partnership with the Philanthropic Sector
PNZ will work with the government in these areas over the next 12 months.
Strategic Partnerships and Collaboration:
While the Social Investment Fund encourages outcomes-based commissioning, the budget could have included more explicit mechanisms for fostering collaboration between government and philanthropy. This could include joint funding initiatives, shared data platforms, or collaborative policy development. Conversations have begun and progress being made.
2. Addressing Systemic Issues:
The budget's focus on economic growth and targeted interventions may not adequately address the systemic drivers of social problems, such as child poverty, inequality, and discrimination. Philanthropy often plays a crucial role in addressing these underlying issues, and the budget could have included measures to support this work. We’ll work with the government to bring knowledge and clarity into these spaces to inform policy or co-funding opportunities.
3. Long-Term Vision for the Social Sector:
The budget lacks a clear, long-term vision for the role of the philanthropic and community sector in New Zealand's social fabric. A more strategic approach, with clear goals and measurable targets, could help align government and philanthropic efforts for greater impact.
While there's a "Growth Budget" narrative, there isn't a stated, comprehensive strategy to foster the "social economy" – the ecosystem of social enterprises, co-operatives, and charities that blend social mission with economic activity.
Countries like Canada, France, and the UK have developed national strategies for the social economy, including dedicated policy frameworks, investment funds, and regulatory environments to support social enterprises. This involves recognizing their unique legal forms and providing specific incentives for their growth. The OECD has extensively researched and published on the "social economy" as a driver of inclusive growth.
Missing a broader social economy strategy means New Zealand isn't fully leveraging the potential of hybrid models (social enterprises) that can generate their own revenue while delivering social good, potentially reducing the long-term reliance on traditional grant funding from both government and philanthropy.
4. No Clear Strategy for Cross-Sectoral Data and Collaboration:
While the Social Investment Fund implies data collection, there's no explicit commitment to building a shared national data infrastructure or fostering formal cross-sectoral collaborative bodies that bring together government, philanthropy, and the community sector for strategic planning.
Progressive OECD governments are investing in shared data platforms to track social outcomes and identify needs across government and non-profit sectors. For example, some Nordic countries have sophisticated data systems that inform social policy and allow for better targeting of resources. The OECD highlights the importance of "strengthening partnerships" and "breaking down policy silos" through "continuous cross-sector engagement platforms."
Without robust shared data and formal collaboration channels, government and philanthropy might duplicate efforts or fail to identify the most impactful interventions, leading to less efficient allocation of resources across the social ecosystem. There is perhaps case to be made for building a philanthropy data warehouse that curates data on behalf of the community outside of the government data siloes.
5. Incentives for Philanthropic Giving:
There are no new tax incentives or policies to encourage individual or corporate philanthropy. Measures like matching grants, tax deductions for charitable contributions, or simplified giving mechanisms could significantly increase philanthropic resources. An OECD report on "Taxation and Philanthropy" explicitly states that "all of the countries surveyed provide some form of tax incentive to encourage philanthropic giving to eligible entities, although the generosity and design of the incentives vary." Common practices include tax deductions for individual donations (e.g., in the US or Canada), tax credits, or even government matching schemes. For example, some jurisdictions in the United States offer significant federal and state tax deductions for charitable contributions (albeit some under threat from the current Presidential administration). The UK has Gift Aid, which allows charities to claim an additional 25% on top of a donation. The absence of such novel incentives means New Zealand is not actively encouraging more private capital into the sector, missing an opportunity seen as standard practice or evolving best practice elsewhere.
This leaves the philanthropic sector reliant on existing giving patterns without new government stimulus, potentially limiting the growth of overall philanthropic capital at a time when government funds are constrained. This is an area we’re actively engaging the government on and we hope to make some progress in the coming 12 months.
6. Limited Direct Capacity Building for the Sector:
The Budget doesn't appear to include specific funding for capacity building within the broader community charity sector (e.g., for governance training, technology adoption, or collaborative infrastructure beyond the Social Investment Fund's commissioning model). Some OECD countries recognize the need for a robust civil society infrastructure. For instance, countries like Ireland have funds specifically dedicated to building the capacity of NGOs. The European Union also has various structural funds that can be accessed by non-profits for capacity development. A number of national governments across the OECD provide grants for "third sector" infrastructure organisations or programs aimed at enhancing the effectiveness and sustainability of non-profits. Without direct investment in the sector's foundational strength, charities may struggle to adapt to new outcomes-based funding models, measure their impact effectively, or innovate, particularly smaller and grassroots organizations.
Having said all this – we need to acknowledge where much of the money has come from. The pausing of pay parity settlement claims has given the government $12B in spending money that otherwise wouldn’t be there. Would we have hurt as a country for settling those claims vs the reallocations the government has made here ? The answer may depend on individual bias – but in the short term at least, women working in fields where they historically dominate the workforce have paid a price. It’s not only a women’s rights issue – many of the professions underpaid have been occupied by Māori, immigrants and ethnic minorities. The emphasis in the Budget remains heavily on fiscal prudence and traditional economic growth. The philanthropic ecosystem can be a powerful, integrated partner in national development. As we set about ‘growing wealth’ in this country we need to remember why we do so – it isn’t to grow more wealth. It’s to distribute and invest the wealth for a future country we all want. Philanthropy plays a vital role in supporting that future and we will work with the government to gain the outcomes we need for our communities and NZ’s future.