New Zealand will exercise restraint on routine expenditure in its 2026 budget while lifting capital outlays to strengthen infrastructure, defence, and energy resilience, Prime Minister Christopher Luxon said in a pre-budget speech on Wednesday. The plan marks a pivot toward fiscal repair alongside investment in critical assets amid a sluggish economy, aging infrastructure, and rising geopolitical risks. The government is targeting a return to surplus, excluding the state accident insurer, by 2028/29. Luxon said “fiscal repair balanced with careful capital investment” would define the budget, reaffirming debt reduction toward 40% of GDP. He stressed that the country could no longer rely solely on geography, alliances, or renewables to shield it from global shocks, reiterating that defence spending will rise to 2% of GDP.