Cost pressure funding at Budget 2024
Budget 2024 included an increase in baseline operating funding to meet health cost pressures for Vote Health. This will be staged over three budgets, with $5.720 billion in additional funding over the four-year forecast period made available through Budget 2024 ($1.430 billion a year) and a further pre-commitment of $5.480 billion ($1.370 billion a year) to be made against each of Budget 2025 and Budget 2026.
Health New Zealand’s (Health NZ) Budget 2024 cost pressure uplift is higher than overall demographic and inflationary pressures. The Government funded Health NZ cost pressures were in line with the planning assumptions issued for Health NZ in March 2023. These parameters were disclosed in Treasury’s 2023 Economic and Fiscal Updates. The inflation component of that was based on Treasury’s Half Year Economic and Fiscal Update 2022 (HYEFU 2022) inflation forecasts and captured both CPI (consumers price index) and wage inflation elements. Since HYEFU 2022, the Treasury’s forecasts of inflation (both CPI and wage) have eased.
Health NZ’s cost pressure uplift is 6.2% across all of Health NZ's operating budget, compared with the Treasury’s CPI inflation forecast of 2.2% for the year to June 2025 (from the Budget Economic and Fiscal Update 2024). Note that the cost pressure uplift includes funding for inflationary pressures (both wage and price).
Other components of the Vote Health package at Budget 2024
In addition to cost pressure funding, the Budget 2024 Vote Health package included new initiatives. These primarily comprised the Government’s commitments, including funding for increased emergency department security and extending the free breast screening programme. The Budget 2024 package also included support for training new doctors and critical capital projects. The package also addressed time-limited funding and progressed savings initiatives.
2024/25 Vote Health funding compared to 2023/24
The baseline for 2024/25 cannot be compared directly to total funding in 2023/24. A large number of time-limited and one-off funds were provided in the 2023/24 year that are no longer required. These funded initiatives such as the backdated impact of pay equity commitments (over $500 million), and historical COVID-19 vaccine purchases that were one-off in nature (almost $300 million), or they represented funding transferred forward from the 2022/23 year to finish projects that had flowed into the 2023/24 year (eg, $110 million for Planned Care catch up, and over $300 million of funding for the COVID-19 response). The total amount of time-limited and one-off funding in 2023/24 was $1.358 billion.
For full details of all factors that have an impact on the level of funding in Vote Health appropriations, please refer to the Estimates of Appropriations for 2024/25 (PDF, 993 KB). The Estimates provide, for each appropriation, a detailed reconciliation in the ‘Reasons for Changes for Appropriation.’
OECD comparisons for health spending
In the recent past, Vote Health has remained at a relatively static proportion of Gross Domestic Product (GDP) (varying between around 5.3–5.6% from 2000–2022 and rising to about 6% post-COVID).
The latest OECD data shows New Zealand’s health spending (as a share of GDP) is well above the OECD average. Our spending per capita is also above the OECD average.
Health expenditure as a share of GDP, 2022 (or nearest year)
Source: OECD (2023), Health at a Glance 2023: OECD Indicators: Health expenditure in relation to GDP.
Health expenditure per capita, 2022 (or nearest year)
Source: OECD (2023), Health at a Glance 2023: OECD Indicators: Health expenditure per capita.
