The New Zealand Government will cap annual local government rates increases at 4% from July 2029 to encourage fiscal discipline and reduce household costs by NZ$34/year, on average.
Councils will have to consider a 2–4% target rates increase range from July 2027, before the cap takes effect, the Government said on 25 August. They lifted rates by 6.92%, on average, in July 2026, data from the Taxpayers Union show.
The Government may exempt councils from its rates increase cap to support emergency response and recovery work. “[But] exemptions will not be granted lightly and will only be available in exceptional circumstances where there is strong justification,” Local Government Minister Simon Watts said.
“All Kiwi households and businesses … are needing to tighten their belt, and local government must do the same,” Watts added.
Local Government New Zealand (LGNZ) – which represents dozens of New Zealand’s councils – has warned that the Government’s cap could limit infrastructure and service investments.
“Local government only gets 10% of the country’s tax take, but councils are responsible for about a third of all public infrastructure investment in New Zealand,” LGNZ President Rehette Stoltz said.
“Councils can’t be expected to deliver more infrastructure, support growth and meet communities’ expectations with fewer [fiscal] levers – the maths just doesn’t add up,” Stoltz added.
Credit ratings agencies have also warned that the Government’s rates cap could hurt Auckland Council’s credit rating, according to Auckland Mayor Wayne Brown.
“Auckland has maintained its strong credit rating through prudent financial management, and a credit rating downgrade could increase borrowing costs, putting further pressure on rates, infrastructure investment and service levels,” Brown said.
LGNZ and Mayor Brown both pointed to the New Zealand Government as a driver of local rates increases. The Government’s resource management reforms are expected to cost councils NZ$840 million, LGNZ said. “[It] also pays little or no rates on many of [its] properties and facilities that Auckland Council services,” Brown said.
The New Zealand Government regularly hands unfunded operational responsibilities to councils. In 2024, the New Zealand Institute of Economic Research (NZIER) estimated that councils annually spent between NZ$34.3 million and NZ$35.3 million on work related to the Government’s National Policy Statement on Freshwater Management.
“Central government should better consider the impact its own policies have on councils, including how these impacts vary across councils, else the financial pressure [of rates] won’t be relieved anytime soon,” NZIER Chief Executive Jason Shoebridge said at the time.
By Avinash Govind