Business Environment Profiles - New Zealand
Capital expenditure by the public sector
Published: 25 May 2026
Key Metrics
Capital expenditure by the public sector
Total (2027)
21 $ billion
Annualized Growth 2022-27
3.6 %
Definition of Capital expenditure by the public sector
This report analyses the level of public sector expenditure on gross fixed capital formation, which includes spending by the New Zealand Treasury (Te Tai Ohanga) and other central and local government entities. This report does not include state-owned enterprises. Fixed capital formation includes outlays on durable fixed assets, like buildings, vehicles, plants, machinery, roads and land improvements. Stats NZ (Tatauranga Aotearoa) is the source of historical data used in this report. The data is presented in financial years and measured in billions of seasonally adjusted, constant 2009-10 dollars deflated using chain volume measures.
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Recent Trends – Capital expenditure by the public sector
IBISWorld forecasts public-sector capital expenditure to strengthen by 4.0% in 2026-27 to $20.9 billion. This recovery follows two subdued years in which investment momentum stalled. After strong expansion in 2022-23 and 2023-24, public capital expenditure contracted by 6.1% in 2024-25 as the government pursued fiscal consolidation under a broad program of spending restraint, before stabilising with a modest lift of 1.0% in 2025-26.
The 2024-25 contraction reflected the fiscal priorities of the National-led coalition government elected in late 2023. The administration implemented a broad program of expenditure reductions aimed at restoring the Crown's operating balance, deferring or cancelling capital commitments across health, transport and social infrastructure that the prior government had approved. With the Reserve Bank of New Zealand's Official Cash Rate (OCR) held at 5.5% through mid-2024, borrowing costs remained elevated for central and local government, reinforcing the fiscal restraint already underway. A subsequent easing cycle reduced the OCR to 2.25% by early 2026, improving public borrowing conditions and contributing to the stabilisation evident in 2025-26.
The renewed lift in 2026-27 reflects a reorientation of government priorities towards infrastructure delivery. According to the New Zealand Infrastructure Commission, Te Waihanga, the national infrastructure pipeline comprises approximately 12,000 projects valued at $275 billion, spanning transport, housing, water and social infrastructure. Budget 2025 allocated $1.0 billion to hospital redevelopment and $700 million to school infrastructure, providing visible near-term support for public capital formation. The Infrastructure for Growth policy framework signals a sustained multi-year commitment to lifting the productive capacity of public assets. IBISWorld estimates that capital expenditure by the public sector will expand at a compound annual rate of 3.6% over the five years through the end of 2026-27.
5-Year Outlook – Capital expenditure by the public sector
IBISWorld projects capital expenditure by the public sector to expand 4.3% in 2027-28, reaching $...
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