Government consumption expenditure in New Zealand - Data and Analysis (1988-2034)

IBISWorld expects government consumption expenditure to dip by 0.8% in 2026-27, reaching a total of $59.8 billion. This decline reflects the unwinding of a substantial increase in social assistance benefits in late 2025, as well as the reversal of the substantial 3.8% rise in 2025-26. Annual inflation reached 4.1% in the June 2026 quarter and is expected to weigh on real government consumption expenditure for the remainder of the year. Still, a significant portion of government expenditure is allocated for health services, which are challenging to reduce, particularly as New Zealand's growing and ageing population sustains underlying demand. This helps put a floor under nominal government spending and limits further declines.The majority of government consumption spending is attributable to the Central Government, which accounted for approximately 86.5% of total expenditure in the 2025-26 fiscal year (the latest available). However, local government consumption has increased slightly as a share of total expenditure over the three years through 2025-26. Local government consumption spending has increased at an average annual rate of about 3.6% over the three-year period, while central government consumption spending has risen by 0.9%. The Central Government is responsible for functions such as taxation, law and order and defence, while it is also responsible for advancing the economic and social wellbeing of the country. Local governments are responsible for the general administration of territorial authorities in New Zealand. This includes various expenditures related to roads, transportation, water supply, planning and regulation, culture and recreation and sports facilities.Over the past five years, growth in local and central government spending has contributed to increased government consumption expenditure. Government consumption expenditure has been focused on health, education, infrastructure, lifting the incomes of Maori and Pacific peoples, investing in new technologies and transitioning to a more sustainable economy. Economic uncertainty associated with the pandemic and efforts to boost the tourism sector's recovery also led to a higher growth rate in government expenditure over the two years through 2021-22. Nominal spending on health, education and social support also rose over the two years through 2023-24, driven alrgely by high inflation lifting wages and the cost of delivering services, alongside demographic pressure on overall demand. Growth stalled in 2024-25 amid fiscal consolidation, with the coalition government targeting a reduction in core Crown expenditure as a proportion of GDP. Overall, IBISWorld forecasts government consumption expenditure to rise at a compound annual rate of 1.1% over the five years through 2026-27.