Analysing Budget 2026: What’s in it for local government?

Below we list key aspects of the Budget of most interest to local government.

Local government

Reductions in funding

• Funding reductions of $1.61 million over four years for the Ministry for Cities, Environment, Regions and Transport local government operational funding allocation. This includes reduced funding for the Local Government Commission. (These functions are currently carried out by the Department for Internal Affairs, whose local government functions will be merged into the Ministry for Cities, Environment, Regions and Transport on 1 July 2026.)

Not funded in this budget

• There was no funding for any direct support for councils’ costs related to the Simplifying Local Government reform programme.

Housing

New funding

• $400 million across four years for improving council and community incentives to support housing growth. Councils will receive payments based on a proportion of the national average new dwelling consent value. That funding will help councils invest in the roads, services and local infrastructure needed to support growing communities. Councils will be paid more per home as they consent more homes:
  • For each new home consented up to an equivalent of 1% of their existing dwellings, councils will receive a payment of 0.25% of the national average consent value.
  • For consents of between 1-2% of existing dwellings, councils will receive a higher payment of 0.5% of the national average consent value.
  • Beyond 2% of existing dwellings, each new consent will generate a payment of 1.25% of the national average consent value.

Councils will be able to use this funding for infrastructure-related capital and operating expenditure, but not for water infrastructure or costs chargeable to developers via development contributions or levies. Councils will be required to report annually on how they have used funding, to demonstrate to communities that they are addressing growth impacts.

• $29.7 million across four years to establish a function within the Commerce Commission to provide regulatory oversight of development levies charged by territorial authorities and water organisations to recover the overall costs of growth infrastructure across a community. No identified funding for councils to implement development levies.

Reductions in funding

• Funding reductions of $6.4 million over four years for the Ministry for Cities, Environment, Regions and Transport housing operational funding allocation. (These functions are currently carried out by the Ministry for Urban Development, which will be merged into the Ministry for Cities, Environment, Regions and Transport on 1 July 2026.)

Resource Management

New funding

• $294 million in funding across four years to support Resource Management Reform Implementation, including:
  • The development and implementation of national instruments.
  • Improved data and analytics (including the development of the New Zealand Flood Map).
  • Practical guidance to assist councils, businesses and communities to transition to the new system.
  • A new Planning Tribunal to provide timely, accessible, independent and cost-effective resolution of planning disputes.

The initiative also includes an initial tranche of funding to deliver a centralised digital planning platform.

Not funded in this budget

• There was no funding for any direct support for councils’ costs related to implementing the resource management system reforms.

Transport

New funding

• Funding to address critical fuel price pressures resulting from the conflict in the Middle East, to support the continued operation of public transport services by Public Transport Authorities. Figures have been withheld due to commercial sensitivities and to avoid prejudice during negotiations.
• $400 million in capex held in contingency for a number of State Highway resilience projects. Final scopes and delivery timelines for individual transport resilience projects will be confirmed following further investigation, design and procurement work. Proposed works may be refined as projects progress. These are:

North Island

• SH2 Waioweka Gorge resilience
• SH3 Awakino Gorge resilience programme
• SH26 Kirikiri Stream bridge replacement
• SH25 corridor targeted resilience
  

South Island

• SH60 Tākaka Hill resilience
• SH6 Cromwell to Frankton resilience
• SH6 Frankton to Kingston resilience
• SH6 Haast to Hāwea resilience
• SH94 Milford to Te Anau resilience
  
  
• $1.773 billion in capex for the Cambridge to Piarere Road of National Significance. Further funding will come from the National Land Transport Fund to fund this extension of the Waikato Expressway.
• $106.9 million for one year of additional funding for overdue metropolitan rail renewals in Auckland and Wellington. This initiative is funded via reprioritisation from the savings identified in the Rail Network Investment Programme 2024-2027 Tagged Contingency – Reprioritisation. Decisions on future funding are pending the outcome of the review of the Metropolitan Rail Operating Model.
• $1.075 billion ($477.1 million opex, $598.2 million capex) in a tagged contingency to support the National Rail Freight Network, including for rail activities, including maintenance, operation and renewal of the national rail network through the to-be-agreed Rail Network Investment Programme 2027-2030. This initiative supports an efficient and reliable national rail freight network and is partially funded from the savings identified in Rail Network Investment Programme 2024-2027 Tagged Contingency – Reprioritisation

Reductions in funding

• Funding reductions of $12.2 million from the Ministry for Cities, Environment, Regions and Transport’s transport operational funding. (These functions are currently carried out by the Ministry of Transport, which will be merged into the Ministry for Cities, Environment, Regions and Transport on 1 July 2026).

Emergency management

New funding

• $500,000 for a one-off additional Crown contribution to Mayoral Relief Funds to support response and recovery activities relating to local emergencies.
• $9.7 million funding across three years to procure and deliver a real-time intelligence platform, operational tools for coordination during an emergency event, and an upgraded National Warning System. This includes enabling live information such as hazard maps, evacuation information, infrastructure outages and available emergency resources. This will improve the effectiveness of emergency management response and recovery efforts across New Zealand. Part of this funding is held in contingency. The contingency figures have been withheld due to commercial sensitivities.

Not funded in this budget

• There was no funding for any direct support for councils’ costs related to implementation of the new emergency management system reforms.

Natural hazards

New funding

• $2 million for the Natural Hazards Commission to develop a detailed business case for a Crown public infrastructure risk management scheme. The risk management scheme is intended to help the Crown understand its exposure to potential losses so it can choose the most cost-effective mix of insurance, self-insurance, and investment in resilient assets, enabling more efficient preparedness for and responses to shocks.

Biosecurity

New funding

• $109.2 million across three years to support the control of wilding conifers and to expand work in the highest-risk areas, Branch Leatham and Wānaka. It is funded through several sources, comprising $25.2 million from Budget 2026 operating allowance, $15.0 million from the Emerging Priorities Contingency, and $30.0 million from International Visitor Conservation and Tourism Levy revenue. The remaining funding is sourced from within agency baselines. The additional funding is time-limited to 2028/29, when a National Pest Management Plan will be available to inform decisions about future contributions from landowners and the Crown.

Climate change

Reductions in funding

• Funding reductions to the Climate Change Commission’s operating budget of $1.2 million across four years, to be delivered through operational efficiencies.

Environment

Reductions in funding

• Funding reductions of $14 million from the Ministry for Cities, Environment, Regions and Transport’s environment operational funding. (These functions are currently carried out by the Ministry for the Environment which will be merged into the Ministry for Cities, Environment, Regions and Transport on 1 July 2026).

Treasury identifies risks to the Economic and Fiscal Forecasts in the Budget Economic and Fiscal Update 2026.