Projected health funding falls short to maintain status quo

Health economists say the government will need to spend an additional $1.405 billion on health in Budget 2026 if it is to maintain the country's current level of service.

The number is in a new report, commissioned by public health campaigners Kaitiaki Hauora, titled How much funding is needed for Health in the 2026 Budget? by Dr Jacqueline Cumming and Dr Bill Rosenberg.

Cumming, an independent health economist, said it considered factors like rising labour market costs, population growth, and the fact the population is aging.

"This is how much money we actually need to deliver the same set of services as we did last year," she said. "If we get less than $1.405 billion for Vote Health next week, then we're going backwards."

Last year, the increase was $1.37b, bringing total health spending in 2025/26 to $32.7b.

Rosenberg, a former Council of Trade Unions economist and now part of Kaitiaki Hauora, explained: "So this is the amount that would just keep the current health system running at its current state, which many people would say is running down. It is enough to meet costs and population pressures."

As Budgets tend to cover four-year periods, two previous budgets have now promised another $1.37b increase this year to cover what the government describes as "funding for core demographic, volume and price pressures for frontline health services delivered by Health New Zealand Te Whatu Ora to maintain current health policy settings".

Last year was a "record investment in healthcare", Health Minister Simeon Brown said at the time.

But this number falls short of what these economists say is needed to fully fund the current system - and Rosenberg said it would leave any new initiatives unfunded.

How do we compare to other countries?

New Zealand usually spends less than the OECD average on health, aside from one year during the Covid pandemic, where our spending peaked later than the rest.

According to Rosenberg and Cumming's report, Vote Health - that is, the portion of the Budget going towards health spending - was currently $1.1 billion below average.

But between 2010 and 2017, that gap was as wide as $3.2 billion per year on average (in 2025 dollars).

University of Auckland health policy professor Tim Tenbensel said when compared to other high-income countries, New Zealand used to rank quite well, up until about 2009.

"And then as the 2010s progressed, we fell behind, and we fell further and further and further behind over the course of that decade."

There had been some significant increases in Budget 2022, Tenbensel said, "but now early indications are that the gap is opening up again".

The UK was a useful comparator. They, too, began to drop off in the 2010s, but New Zealand more steeply. In contrast, Australia's health spend as a proportion of GDP had increased during the 2010s.

"You see the effect of that in workers choosing to go to Australia for better salaries, for example."

Where should we spend it?

Currently, wages made up about two-thirds of the operational cost of health.

Health economics professor Paula Lorgelly said the best bang for buck would come from investing in primary care - "putting things much further upstream to avoid any kind of downstream costs".

GenPro, the association for general practice owners, has already called for an increase in investment in primary care from the current six percent of total health funding up to 14, in-line with international WHO/OECD benchmarks.

Cumming agreed. She said with hospitals under a huge amount of strain, "the tendency is to put the money into there, but where we really need it is in primary care and prevention services so that we actually try to keep people well, out of hospital".

Te Whatu Ora was currently spending just 1.76 percent ($510m) of its overall budget on "population health", Cumming said - that included things like cancer screening, vaccinations, pandemic prepardness and health initiatives involving tobacco, alcohol, food, and physical activity.

"We would like to see it move up to five percent," she said.

In Australia, that made up about 4.8 percent - with the caveat that it was often hard to know exactly what services other countries were counting in their estimates.

Evidence pointed to "very high cost-benefit ratios of spending on population health", Cumming said. "You get back what you put in."

Hauora Māori service spending also needed to go up, according to the report.

Current spending was 2.68 percent of the total Vote Health - or $773m - and the authors say that needs to increase to five percent to address current inequities.

How long would it take to see a difference?

Tenbensel said increases in funding could take up to 15 years to start showing effects in health outcomes.

Cumming explained increasing vaccination rates would have almost an immediate effect, but investment in tobacco, smoking, cardiovascular disease and diet would take a lot longer.

Cancer screening programmes would take somewhere in the middle, she said. "It's not going to happen immediately, but it's even more reason why we need to do it, because every year we leave it is another year that our population health is not doing great."

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