Finance Minister Nicola Willis has recently talked up AI’s potential for helping to shave $2.4 billion in public sector spending by cutting 8700 jobs and using artificial intelligence to fill the gaps.
But Craig Young, chief executive of the Technology Users Association of NZ, said he saw no immediate details about how this would be achieved.
“While there are some useful initiatives regarding online safety and cyber security – such as funding to explore regulatory options for children’s online safety, core security upgrades for Health New Zealand, and a more secure schools’ payroll system – these efforts are scattered and disjointed rather than forming a cohesive national strategy for digital trust and safety,” Young said.
“Most glaringly, the budget contains absolutely nothing to address access and inclusion for digitally excluded communities,” he added.
“If we truly want to ensure that all New Zealanders can take advantage of the opportunities in a digitally connected world, we need dedicated infrastructure and investments to close the digital divide.”
Under-16 ban funding
The Budget did include $30.8m to “develop policy and possible regulatory options to improve children’s online safety” which comes as the Government prepares to introduce legislation for a ban on under-16s accessing social media, which Prime Minister Christopher Luxon has said will “follow the Australian model”.
It follows a recent Department of Internal Affairs job ad for “an experienced Programme Implementation Director” for “the establishment of the Phase One operational service model for the under‑16 social media restrictions”. The $182,000 per year role would have “four to six direct reports”.
After complaints about recruiting for a role before legislation had even been introduced, the job was re-advertised with a generic policy development title.
Boosting Health NZ’s cyber defences
The $153.6m to boost Health NZ’s cyber security over the next five years “will maintain current protections, provide resources and specialist skills to address threats and vulnerabilities identified through the National Security Operations Centre, and implement critical safeguard improvements highlighted during recent security incidents and audits,” the Government says.
Those recent audits include Privacy Commissioner Michael Webster’s report into the Manage My Health breach that saw 100,000 sensitive records stolen.
Webster was sharply critical about Health NZ’s role relating to the incident, and called for a more front-foot approach to identifying security gaps.
R&D tax changes: Tougher on software, easier on miners, energy
Budget documents say the Crown will save $87.2m over four years by lowering the cap for software claims under the Research and Development Tax Incentive (RDTI) from $25m to $3m.
“For larger claimants, software development can be a major part of claims and the lowering of the cap on the level of software claims that can be made will limit the effectiveness of the regime for those businesses,” Deloitte tax partner Robyn Walker said.
Walker said there were also positives.
“The regime is also improved by allowing credits to be made during the year rather than at the end of the year. This will provide welcome cashflow relief to claimants.
“It is pleasing to see a number of improvements taken up to make the regime more effective.
“Currently, if a claimant makes an administrative error associated with filing an RDTI return they can get locked out of the regime. The Budget confirms that Inland Revenue will be given discretion to overlook such minor errors.”
Walker added, “One change that might be lost in the detail is to allow miners to be eligible for the scheme. There are currently restrictions on the mining and oil and gas industry accessing the RDTI.
“With a need for the industry to transition to more sustainable options it is pleasing there could be some assistance for the R&D being undertaken by those industries.”
$10m for venture capital
The Crown-owned NZ Growth Capital Partners is getting $10m for a new “fund of funds” that will invest in “selected emerging and first-time fund managers who invest in start-up companies”.
Budget documents say the move, “Aims to address a structural gap in the start-up ecosystem by helping selected funds to build capacity, develop scale, and establish a track record”.
The funding is modest next to the $300m allocated by the previous Government to NZGCP’s Elevate fund for more established companies ($270m of which arrived via the NZ Super Fund) and Willis’ $100m Elevate top-up with Budget 2025.
There was also a swings and slides move, with NZGCP’s Aspire seed for emerging companies moving from self-funding to receiving $6m per year from the Crown – balanced out by a requirement for NZGCP to pay the Government a $6m dividend each year.
“We are delighted that the Government continues to support the NZ start-up landscape with funding to enable us to launch an emerging manager fund of funds to drive more private capital into early-stage investments and with additional funding for NZGCP to enable it to continue investing through its Scout (pre-seed) and Aspire (seed) start-up investments and help develop these markets and the next generation of start-ups,” NZGCP chief executive James Pinner told the Herald.
“This shows great commitment to continuing the momentum that NZ tech companies are delivering.
“While we still have a long way to go, demonstrating how far our tech ecosystem has come.
“The amazing progress that the likes of Halter, Tracksuit, Partly, Ivo AI, OpenStar, Zethos and many, many, more are making in the footsteps of the Rocket Lab and Xero’s before them is an amazing good news story for New Zealand and this is what will drive long-term economic growth.”
Extra funding for tech-focused business incubators, which some in the industry had been expecting, failed to appear.
But many in the tech and venture capital industries got another item on their wishlist: as the Herald foreshadowed, the Government will change the Foreign Investment Funds (FIF) regime to support New Zealanders and recent migrants with money invested in offshore assets, like shares.
These changes will benefit investors to the tune of $73m over four years with the threshold at which investors will become part of the regime, lifted from $50,000 to $100,000.
Accountants saw the previous regime as a “quasi wealth tax” that punished people with assets offshore, penalising the types of wealthy investors that the Government has been trying to attract to New Zealand, or lure home.
The Government also confirmed a number of pre-announced measures, including the $16m Defence Technology Accelerator and the $174m Defence Capability Plan that will benefit local drone maker Syos, among others.
Do you have questions about the Budget? Ask our experts – business editor at large Liam Dann, senior political correspondent Audrey Young and Wellington business editor Jenée Tibshraeny – in a Herald Premium online Q&A here at nzherald.co.nz at 9.30am, Friday, May 29.
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.
