Back in May, the Government presented their “Growth” Budget” for 2025. But with the books in deficit as far as the eyes can see, the overall fiscal impulse profile remained contractionary. There was some stimulus for growth now, but none further out. That was no surprise. The Government’s hands have remained tied as they continue to grapple with balancing the books. It's hard to “go for growth” without the funding to back it.

So, in came the Governments Investment Boost scheme - the cornerstone of Growth Budget 2025. A tax incentive whereby businesses can deduct 20% of a new asset’s value from that’s years taxable income, on top of normal depreciation. The goal? To encourage investment in productive assets, like machines, tools, and equipment… and accelerate growth. The incentive helps Kiwi businesses to lead the growth in the economy. They know, better than most, where to invest.

Now according to initial estimations from Treasury, the investment boost was expected to lift GDP by 1% and wages by 1.5% over the next 20 years – with half of these gains in the next five years. All the while costing the Government around $1.5bn per year.

Boosting investment in productive assets is something we certainly support, but it will take time to work. The timing of the initiative landed when businesses were, and still are, grappling with uncertainty, a lack of confidence, and weak demand. Businesses have been more concerned with simply surviving rather than looking to expand and invest. Businesses ‘surviving’ rather than ‘thriving’ has muted the uptake of the scheme, at least in the near term. We need a more convincing period of sustained demand in the economy. We’re closer to that now than we were in May, especially with the RBNZ signalling a shift toward stimulatory settings. Conditions are set to improve. But the here and now still poses many challenges for Kiwi businesses, with many unable or unwilling to invest.

Quantitative data on both the uptake and impact of the scheme remains limited. But we know that some of the anecdotal insights we get from Kiwi businesses paint a telling picture, well ahead of any official data.

So, we asked our business bankers across the country what they were seeing on the ground.

In response to whether clients were considering taking up the Governments “Investment Boost”, two thirds of the survey responses were no.

It’s what we expected might be the case. Businesses are still holding out for calmer waters, and a brighter outlook. And for those who did report clients taking up the scheme, it seems that most businesses using the incentive were either already planning to invest in capex or were catching up on deferred investment from the past couple of years.

Here are some of the standout comments from our business bankers that sum up the general sentiment and uptake of the initiative so far:

“Nothing yet, problem is still revenue. Need surety of revenue before further investment especially as its a cash flow plus not a permanent write off as such. But this is great as economy starts picking up.” Rudi Bansal, Regional Manager – Auckland.

“The majority of customers I have talked to are planning to meet deferred capex from the last two years. I haven't heard much about customers thinking about growth capex with the Investment Boost.” Troy Sutherland, General Manager

“Yes, if they had the projects to purchase the new equipment for. Most are saying they don't have the projects to warrant buying new equipment at present.” Ben Gillies, Commercial Growth Manager – Auckland

“Our clients haven't cited this as an influencing factor in asset purchase decisions yet, however, some clients are receiving a 'cherry on top' for decisions already made. This is boosting confidence, which is a good result. Our conversations with local accountants indicate a mixed response to the policy. There are unanticipated accounting software updates required to accommodate the change, and the financial impact won't be felt for approx. 12 months, so whilst it reads well the real-world impact is somewhat muted.” Will Warren, Commercial Manager – Manawatu-Whanganui

“Yes, however capex spend on hold until business confidence lifts further, estimated back end of this year into next year.” Pauline Pellowe, Commercial Manager – Nelson/Tasman/Marl/WC

“Hasn't made clients rush into Capex purchase however has improved the equation for those already considering purchasing new gear and, in some cases, has been the encouragement needed to commit to new investments.” Jack Laity, Commercial Manager – Auckland

“Some are looking to replace aged assets as part of replacement programmes but poor 2025 FY trading may hinder this as a lot of businesses cashflows have been heavily impacted by weak trading.” Karl Trafford, Commercial Growth Manager – Gisborne

“Yes, but only for capex that was going to happen anyway.” Phil Whittle, Commercial growth Manager – Auckland