The scheme was funded for four years at $40m per year for four years – or a total $160m – and was designed to stop talent defecting across the Tasman, where a similar rebate was already in place (of 30c in the dollar from the federal government, topped up by state schemes), and talent poaching by the film industry.

But during the first two years of the scheme only just over half the money was paid out each year.

Last year it was $22.4m of the potential $40m (unallocated funds go back to Treasury rather than being rolled over to supersize the following year).

NZ on Air said nearly all rebates had been approved. The under spend was because of a lack of applications.

Earlier this year, the NZ Game Developers Association (NZGDA) proposed a solution: Increasing the rebate to 25% and the cap to $4m.

NZGDA director and treasurer (and PikPok chief financial officer) Lance Burgess said that, because of the current underspend, the increases could be accommodated within the annual $40m cap.

Hipkins also picked up on this point today, saying his party’s proposed increases could be accommodated under the rebate scheme’s current budget.

The Labour leader said his party’s new gaming policy was thematically linked to the Future Fund announced earlier this week, which he said was “all about deepening the pool of capital that’s available to back New Zealand businesses”.

But during a Q&A, Hipkins was asked why foreign-owned firms like West Auckland’s $105m revenue Grinding Gear Games – now part of Chinese conglomerate Tencent, which made a $14.7b second-quarter profit – should get any money from Kiwi taxpayers.

“The jobs are based here in New Zealand,” Hipkins replied.

“If they’re keeping people in good work here in New Zealand, meaning that talent doesn’t end up leaving the country, that’s good for New Zealand. We’re not going to tell our gaming sector that they can’t have foreign investment.”

Grinding Gear Games cofounder Jonathan Rogers said his firm had 114 staff at the time Tencent first took a majority stake in 2018 (now lifted to 100%).

It had 180 employees by April last year and 240 in July this year – all still based in Henderson, West Auckland.

Hipkins said: “Our primary sector has always been really important for New Zealand, and it always will be, but to have a higher standard of living, we’ve got to grow new parts of the economy.”

Reti’s bump for smaller players

In a policy update last month, Science, Innovation and Technology Minister Shane Reti kept the rebate at 20% but – in what Burgess saw as a major win for the sector – shifted the rebate from a four-year scheme to a permanent programme.

Reti also increased funding by $2.75m to $5m per year for a separate scheme, dubbed “Code”, that offers direct grants to small game developers.

NZDA had been lobbying for a bump in Code funding and welcomed the increase.

But Burgess also noted that, as things currently stand, funding for Code (introduced by the previous Government) will expire in two years.

Hipkins said he saw Code as a success and supported the current Government’s increase in funding for the programme. But today he would not commit to extending it.

“We’re not writing tomorrow’s budgets today,” Hipkins said.

Bigger studios dominate

Burgess also saw scope to increase total rebate allocations per company to $5m or $6m while staying under the current $40m allocation – not something Hipkins or Reti has been willing to countenance.

Burgess said such an increase would allow the big studios that received the maximum $3m last year (PikPok, Grinding Gear Games among them) to hire more staff as the industry heads toward its goal of $1 billion annual revenue.

The sector grew at a rapid clip in the 2025 financial year, according to the NZDA’s annual survey, with total employees increasing by 29% to 1418 and total earnings to $759m (of which $709m was export receipts).

But the growth is dependent on hits, such as Splitting Point Studio’s runaway success for Grow a Garden.

“Not every year will be like this year,” Burgess said.

A $5m or $6m rebate cap would help game developers compete with the movie makers who poach staff for special effects and other roles.

And in Burgess’ view, the gaming sector was equally or even more worthy.

“We employ our staff fulltime and we pay tax locally,” he said.

He noted that the handful of big studios – including PikPok, Grinding Gear Games and Rocketwerkz – employed around half the industry’s staff and paid half its taxes, putting them in a position to put higher rebates to work, should the cap be lifted further to $5m or $6m.

But overall, he was happy. Reti had committed to continuing the GDSR at a time when many incentive schemes introduced by the previous Government in other industries had been scrapped, while Hipkins had pledged to expand it.

“The industry now has certainty in terms of what a change of Government would mean,” he said.

Reti bites back

“Looks like Labour are trying to distract from their other economic policy failures this week. Let’s hope they’ve done their homework on this one, as they haven’t nailed the details on their last two,” Reti told the Herald shortly after Hipkins’ speech.

“This Government has been clear that we’re backing an already thriving sector.

“We believe in supporting a greater number of startup studios to expand the sector, create more thriving businesses and more high-tech jobs. That’s why we’ve boosted funding for Code, more than doubling their budget to provide grants for early-stage developers.

“Labour’s policy would benefit only well-established studios and max out the funding faster, with uncertain benefits. They say it’s cost-neutral but they need to show us the maths and explain where money is coming from.”

Hipkins: It’s costed

Hipkins said Labour’s new policy had been costed at $11m per year – still well under the $30m cap.

The figure included an estimated 10 to 15 smaller gaming companies that would become eligible as the qualifying annual revenue requirement was lowered from $250,000 to $200,000.

The rebate paid for itself as the growing game industry paid more tax, Hipkins said.

Last year, the NZGDA said its members paid $115m in PAYE and other taxes, while being paid rebates totalling $22.4m.

Chris Keall is an Auckland-based member of the Herald’s business team. He joined the Herald in 2018 and is the technology editor and a senior business writer.