NZ First has proposed a 50% accelerated depreciation allowance in the first year for new plant, machinery and equipment in manufacturing and select export sectors including mining, aquaculture, forestry, farming and fishing.
NZ First leader Winston Peters announced the policy on 23 October 2026 during the election campaign. The measure aims to boost productivity and capital investment in high-impact areas.
Peters said international evidence shows front-loaded depreciation works. He added that like-minded economies already have such policies and New Zealand needs to remain competitive.
International evidence clearly shows front-loaded depreciation works
New Zealand faces persistent challenges in business investment and productivity. Private business investment excluding dwellings fell 2.5% in the year to March 2025, according to MBIE data. Total gross fixed capital formation declined 5.0% over the same period.
A deepening capital gap
Capital intensity in New Zealand sits 52% below the OECD average. The country ranks 33rd out of 38 OECD members on this measure.
Labour productivity growth remains weak. It averaged 0.1% annually in the measured sector from 2020 to 2024. Growth averaged 0.2% over the decade after 2013, down from 1.4% between 1993 and 2013.
How the policy would work
The NZ First proposal targets a 50% first-year deduction for qualifying assets. It applies only to manufacturing and value-added export sectors. The policy is positioned as complementary to, not an expansion of, the existing Investment Boost scheme.
Investment Boost, introduced in Budget 2025, offers a 20% upfront deduction for a broad range of new assets. Inland Revenue estimates its annual fiscal cost at around $1.7 billion. A Deloitte analysis of Inland Revenue survey data from December 2025 showed 40% of aware investing firms reported increased spending due to the scheme.
Peters described the NZ First measure as more focused and aggressive than the current 20% rate. The party aims to double the size of the New Zealand economy by 2050 through higher productivity and investment.
Targeting versus broad expensing
Critics argue targeted incentives create complexity. Taxpayers' Union Head of Policy James Ross said NZ First has "clocked the right problem" with weak business investment and anaemic labour productivity but criticised the sector-specific approach. He preferred full capital expensing instead.
International precedents show effects from front-loaded depreciation. The US made 100% bonus depreciation permanent in 2025. Projections indicate it will lift long-run GDP by 0.6% and capital stock by 1%, according to Tax Foundation analysis. The UK's full expensing regime is estimated to boost GDP by 0.7-0.9% and investment by 1.1-1.5%.
NZ First's proposal would likely add to the fiscal cost beyond the $1.7 billion already attributed to Investment Boost. The party has separately proposed a 20% company tax rate for SMEs with turnover under $30 million, estimated at $1 billion in cost.
Current IRD rules allow immediate write-off for assets under $1,000. Buildings generally receive 0% depreciation since 2025. The new measure would deliver a larger first-year deduction for targeted assets while preserving the total deduction over the asset life.
A resilient manufacturing sector
The policy arrives as manufacturing shows resilience. The BNZ-BusinessNZ PMI reached 56.5 in September 2026, marking the 15th consecutive month of expansion.
Implementation would require Inland Revenue to administer sector-specific rules. Success depends on complementary factors including skills availability and infrastructure, analysts note.
Treasury forecasts GDP growth of 1.6% in 2026 and 2.3% in 2027. The depreciation incentive could support capital deepening in priority sectors over a three-to-five-year horizon if uptake follows patterns seen under Investment Boost.
Broader effects could include improved cash flow for SMEs in manufacturing and primary industries. Regional economies reliant on these sectors may see benefits through increased output and modernisation.
