David Haugh
Kyongjun Kwak
Carl Magnus Magnusson
OECD Economic Surveys: New Zealand 2026
Abstract
New Zealand’s capital markets remain shallow by international standards, constraining long-term investment, innovation and productivity growth. Public equity markets have seen no major domestic IPOs since 2021, and many high‑growth firms rely on offshore investors or expensive bank lending. Limited domestic risk capital, modest private pension balances and a narrow investor base restrict the flow of patient capital needed for firms to scale. Expanding long‑term domestic savings is essential. Gradually increasing KiwiSaver contribution rates, strengthening the non‑withdrawal rule for retirement savings and reducing tax biases that favour housing over financial assets would deepen private pension accumulation. Carefully enabling modest, well‑regulated KiwiSaver allocations to private and growth assets, complemented by a new non‑retirement Equity Savings Account for listed equities, would broaden household participation and support capital raising by smaller firms. Other institutional pools, including iwi and Māori investment entities, and foreign capital, can play a larger role. Māori investors already contribute substantial intergenerational capital; targeted capacity‑building and more culturally attuned financial products would further expand participation. Strengthening the “equity ladder” from venture capital to public listing, closing later‑stage funding gaps and improving access to corporate debt markets would diversify financing options and reduce reliance on bank lending, supporting a more dynamic and innovative economy.
New Zealand’s labour productivity growth has weakened over the past two decades and remains below the OECD average and other small, advanced economies. Persistent structural challenges, low capital per worker, weak competition, declining school performance, a narrow STEM pipeline, and limited R&D and innovation diffusion, have held back both labour and multifactor productivity (Figure 4.1). This underscores the need to “work smarter, not harder” through stronger innovation and long‑term investment (NZ Productivity Commission, 2024). International evidence shows that well‑functioning financial systems are central to productivity growth by allocating capital efficiently and supporting innovation, while financial frictions, such as high listing costs, collateral constraints and inefficient insolvency regimes, can depress investment and technology adoption (Heil, 2017). Sweden illustrates the benefits of deep, diversified capital markets, which have supported innovation, firm scale‑up and strong productivity growth (OECD, 2025a). Deepening and diversifying New Zealand’s capital markets is therefore essential to improve financing for high‑growth firms, intangible assets and infrastructure, and to enhance risk‑sharing across the economy.
Contribution to annualised labour productivity growth, average 2010-2019
Source: OECD (2023), Compendium of Productivity Indicators. Capital quality refers to the contribution of the changing composition of capital stock.
New Zealand’s capital market development lags that of its OECD peers, contributing to persistently low capital intensity and the country’s ongoing productivity gap. While capital deepening has gradually progressed over the past 20 years, the level of capital intensity has remained relatively low compared with many OECD economies (Figure 4.2). Capital markets remain relatively shallow, with limited access to long-term domestic funding and a lower level of market activity compared to other high-income economies (Figure 4.3).
New Zealand’s underdeveloped capital market outcomes reflect the interaction of four core drivers: the supply of domestic saving, the allocation of that saving through financial intermediaries and capital markets, frictions that impede investment or raise the cost of capital, and the extent to which foreign capital can substitute for domestic funding. Domestic saving is relatively low, and this constrains the pool of patient long‑term capital available for equity investment, private pensions, infrastructure and scale‑up finance. The decision to abolish the private pension savings scheme in 1975 and replace it with a publicly funded, universal pension at age 60 significantly hindered the development of New Zealand’s capital markets by reducing households’ incentive to accumulate private pensions, depriving capital markets of a key source of long-term domestic funding (Coleman, 2024). As well as increasing the share of retirees being solely reliant on a low-income public pension today, this shift reduced the pool of institutional savings available for investment in domestic equities and other financial assets, in contrast to countries that maintained contributory pension schemes such as Australia. The small private pension pool also restricts options for addressing the rising costs of the public pension, New Zealand Superannuation (Chapter 1).
Capital intensity, 2024, PPP-adjusted
Note: Capital intensity is measured as the ratio of the real capital stock to potential employment. It shows capital intensity using constant 2005 PPP USD and country-specific 2005 PPPs, relative to capital intensity in New Zealand.
Source: OECD, Economic Outlook Database.
Note: Panel A shows market capitalisation for listed domestic companies. Panel B shows the value of domestic shares traded divided by their market capitalisation. This value is annualised by multiplying the monthly average by 12.
Source: World Bank; Bank for International Settlements; and OECD (2025), Global Debt Report 2025.
Allocation frictions, including heavy reliance on bank lending, thin public equity markets, limited institutional investor depth, and conservative portfolio preferences, weaken the transformation of saving into productive investment. Costly bank lending dominates, with OECD analysis of lending margins showing they are about twice the international norm (OECD, 2024a). Capital market finance, including venture capital, private equity, and corporate bonds and the share market, plays only a limited role. A long-term household aversion to investment in financial assets arising from financial market frictions is a lesser but still material constraint. High listing costs, restrictive liquidity rules for pension funds, and limited credit information raise the costs of capital. Household savings remain too concentrated in low-risk and short-term financial products, limiting “patient” capital for high-growth, innovative companies. While New Zealand is a small open economy that can draw on foreign capital, substitutability is imperfect. Many large firms already finance themselves offshore at lower cost due to foreign ownership, but small and scaling domestic firms often cannot attract foreign funding until much later, leaving gaps in the domestic capital ladder. Financial regulation has been extensively reformed and largely reflects international best practice, but the remaining scope for gains, while still meaningful is narrower than in earlier reform waves.
Despite recent progress, New Zealand still lags Australia and other advanced economies in capital market depth and dynamism. Further reforms are needed to boost market participation, and ease capital constraints for small and innovative firms and attract foreign investment. These reforms should focus on increasing the accumulation of domestic savings in pensions and other instruments (e.g., simplified equity savings accounts). International experience shows that with the right regulatory and tax settings it is domestic savings that provides funding to key gaps in the equity ladder that foreign capital will not fill, and notably investment in small, innovative and fast-growing firms that will otherwise go abroad to seek funding.
New Zealand’s taxation of capital income and savings is complex and uneven, with housing taxed lightly relative to financial assets and especially pensions, and corporate income tax among the highest in the OECD. These settings distort household and firm investment decisions and suppress the accumulation of private pensions and other long‑term financial savings, which is a critical issue not only for capital‑market development but also for retirement‑income adequacy (Chapter 1). Addressing these distortions should be a central focus of a deep and wide review of the taxation of savings and capital income, shifting the tax burden away from contributions and annual returns and toward withdrawals. Such reforms would expand the pool of patient domestic capital available for equity markets and strengthen New Zealanders’ ability to build adequate retirement savings over time. In parallel, revitalising the growth‑equity market, including through stronger business R&D and innovation policies to increase the pipeline of firms able to list, is essential, as this part of the equity ladder is the missing incubator needed to scale frontier firms and help close New Zealand’s long‑standing productivity gap with the upper half of the OECD.
Foundations for a more dynamic capital market have been laid through extensive financial regulation reforms, establishing the New Zealand Sovereign Wealth Fund, NZ Superannuation Fund (2001) providing a core of fund management expertise, and a private pension scheme, KiwiSaver (2007), and major regulatory improvements. While small size of the economy poses challenges, international experience shows these are surmountable: Sweden, with a population of only 10.6 million people, has more listed companies listed on the share market including the main and growth exchanges than any other country in the EU (OECD, 2025a). Being in the large EU market is an advantage for Swedish companies but more than 70% of New Zealand’s trade is already covered by Free Trade Agreements and Swedish growth companies often skip the EU stepping stone to go global. What Sweden has, and what New Zealand can develop in its own way, is a lower-rate, simpler and more neutral taxation system for savings that encourages greater household financial asset accumulation and participation in equity markets.
The remainder of this chapter examines the funding landscape, including domestic savings, institutional investors, foreign capital, private and public equity markets, and debt markets, and identifies reforms needed to deepen capital markets, lower financing costs and ensure capital markets lift long‑term productivity. The savings discussion focuses on KiwiSaver and the influence of regulatory and tax settings on private pension accumulation. The growing significance of the Māori economy and Māori participation in capital markets is also addressed, highlighting the unique benefits for both Māori and New Zealand. The chapter proceeds to assess financing channels, focusing on the equity market from start-up funding to public listing. It also reviews the performance of debt financing, including the securities market, and provides an update on banking sector reforms aimed at enhancing competition.
A strong capital market needs diverse funding sources for firms. For decades, New Zealand limited these flows by lacking a private pension scheme, imposing high FDI restrictions, maintaining a high corporate tax rate, and requiring large state-owned enterprise dividend payouts, thereby reducing retained earnings for investment. This was compounded by a foreign-owned banking sector focused on profitable mortgage lending rather than broader economic financing.
Reforms such as KiwiSaver, the NZ Super Fund, and Treaty of Waitangi settlements have revitalised capital markets, creating a growing funds management sector. While much investment will remain offshore for diversification, home bias and scale now offer opportunities to channel domestic funds into high-growth firms and infrastructure. Planned FDI reforms could further strengthen these flows. Ensuring sufficient funding to meet diverse investment needs requires simultaneously fostering all capital markets funding channels, from pension savings to non-retirement equity savings to foreign investment. Long-term steady investment returns mean infrastructure investments will be attractive to pension funds, while high-growth start-ups and smaller listed companies will need venture capitalists and eventually retail investors with a higher risk appetite.
4.2.1. Raising household savings and involvement in capital markets
Household savings provide the funding “backbone” of successful capital markets. In New Zealand, reflecting, in part highly favourable taxation settings, between 60 and 70% of household wealth is allocated to housing and land, including rental properties and unincorporated farms. Household financial assets excluding equity in unincorporated businesses, the majority of which are housing and land assets, is around 210% of GDP, below the size of these assets in successful capital market, such as Sweden’s (Figure 4.4).
Financial assets excluding equity in unincorporated businesses as a % of GDP, 2021
Note: Data for New Zealand is from 2021 and sourced from the Reserve Bank of New Zealand. Equity in unincorporated businesses is excluded from financial assets as a majority of these are housing and land related assets (rental properties and unincorporated farms) in New Zealand. Data for European countries excludes the “other equity” category from total financial assets, this may contain more than equity in unincorporated businesses.
Source: EuroStat; Reserve Bank of New Zealand Table C22.
KiwiSaver has been pivotal in building household savings in the form of pension assets from a low base. Although voluntary, its quasi-mandatory features have driven strong uptake. These features include automatic enrolment, minimum 3.5% contributions from both employees and employers (rising to 4% in 2028), and limited early withdrawals. Funds under management rose from NZD 24 billion in 2014 to NZD 141 billion (32% of GDP) in September 2025. Yet, private pension assets remain modest by international standards, far below Australia, where assets exceeded 3.6 trillion (133% of GDP) in 2024 and the average private pension value is around NZD 130 000 compared to around NZD 28 000 in New Zealand including KiwiSaver and other private pension assets. This is due to compulsory participation, earlier introduction, and a 12% minimum contribution rate. Average pension balances are significantly higher in Australia than in New Zealand.
Deep private pension pools can strengthen domestic capital markets and provide patient capital for infrastructure and innovation (Khan et al., 2025). This is the case even for a small economy like New Zealand, where a large share of these assets is appropriately invested offshore. This is due to the automatic spillovers from larger funds, given the usual and persistent home bias in investment allocation (Gaar et al, 2020).
Expanding private pension savings also broadens household participation in capital markets, diversifies retirement income beyond the public pension, and spreads equity ownership beyond the top income decile. This can improve financial literacy and allow more households to benefit from equities’ superior long-term returns. Finally, larger private pensions can ease fiscal pressures from ageing by reducing reliance on the public pension, making future adjustments, such as raising eligibility age or indexing to inflation, more socially acceptable (Chapter 1).
Increasing KiwiSaver contribution rates in an equitable way
Enrolment in KiwiSaver is around 90% (New Zealand Retirement Commission, 2024) but 30% of members of working age are not contributing up from 20% in 2010 (FMA, 2025a). Making KiwiSaver compulsory to join and for payments could therefore make a significant difference to pension accumulation especially of lower income groups. However, at least some of those not enrolled or not making payments are likely liquidity constrained, requiring, as discussed below, flanking measures tax or welfare measures necessary if compulsory payments were introduced. Raising the minimum contribution rate can also make a significant difference to accumulation especially, as discussed below, default settings tend to drive pension contributions in auto-enrolment schemes so that effects on other saving is minimal. The Budget 2025 increase of the default KiwiSaver contribution rate from 3% to 3.5% in 2026 and 4% in 2028 is an important and welcome step. The mandatory pension replacement rate (ratio of net pension income to net pre-retirement income) for average earners of 43.8% is below the OECD average of 63.2% and one of the lowest in the OECD (OECD, 2025b). This implies that New Zealanders need to accumulate substantial voluntary pension savings. The government should continue to gradually raise the default employee and minimum employer contribution rates. The ultimate target depends on what overall retirement replacement rate is considered necessary from private pensions savings plus public pensions (Chapter 1) and what level of public pensions households would receive.
Replacement rates for average earners and around 70% and up to 80% for lower income households in many OECD countries (OECD, 2025b), indicating that a replacement rate of 70-80% is considered adequate to maintain living standards in retirement. This would typically require a savings rate of 15–20% of gross income annually, starting in mid-20s, assuming moderate investment returns and retirement around age 65. If the household owns their own home, this reduces the required rate significantly to around 10–12% (OECD, 2024c), although drawing on retirement savings for housing may reduce long-term retirement balances. Access to the public pension further reduces the required rate significantly. For example, a median earner receiving the public pension and declining expenses in retirement would need to maintain a savings rate of 5%, with matched contributions, to have a replacement rate above 80% (New Zealand Society of Actuaries, 2025).
These considerations suggest if the public pension scheme, becomes means-tested to increase fiscal sustainability, KiwiSaver contribution rates could become income-dependent, with lower contribution rates for lower income households as they would receive the public pension, and higher rates for high income households that would need to fund their own retirement. For high-income earners with their own homes and low or no remaining mortgage debt, total contributions (including employer contributions) may need to be around 10–12%, like Australia.
Making KiwiSaver compulsory and/or further raising contribution rates carry a risk of crowding out voluntary private savings, being regressive and imposing financial hardship on low-income households. Regarding savings disincentives, a New Zealand study covering the period 2002 to 2010 suggested that KiwiSaver initially did not increase net wealth (Law and Scobie, 2014). International evidence also suggests that compulsion leads to crowding out of voluntary savings, especially for lower income household (Gebeşoğlu, Ertuğrul and Bulut, 2023). However, empirical estimates indicate this effect is partial, with voluntary savings falling 30 cents per dollar of compulsory savings according to a study in the United States (Friedberg, Leive & Cai, 2024), and between 38 and 43 cents in Australia (Ruthbah and Pham, 2020; Connolly, 2007).
Such reforms to KiwiSaver could be accompanied by additional “guard rails” to offset the stronger financial hardship and savings disincentives effects on low-income households. This could include a temporary contribution holiday due to hardship under a compulsory system. Targeted matching contributions have proved effective in boosting overall retirement savings of low-income groups in Singapore (Chan and Koh, 2018). New Zealand could introduce income-based household contribution rates, and an increase in state matching contributions targeted to low-income groups. Women often have interrupted careers by child rearing and caregiving. KiwiSaver top-ups could be made by the state for unpaid caregiving years to improve equality between women and men as women tend to be the primary caregiver for both children and ill or older people.
Restricting withdrawals from KiwiSaver
Withdrawals can be made for first home purchases and financial hardship. There have been decisions to allow withdrawal to buy a first farm or first house. Withdrawals have doubled from around NZD 100 million per month in 2023 to over NZD 200 million per month in 2025, reducing net contributions to KiwiSaver and slowing the total accumulation of funds. To avoid undermining faster asset accumulation, further exemptions to the non-withdrawal until retirement rule, as proposed in 2025, should not be created.
Withdrawal from pension retirement schemes for home deposits are used internationally (e.g., Canada and the United States). Home ownership can play a role in supporting retirement security but if the underlying policy objective is to support low-income people into home ownership then a separate instrument for this may be more effective, especially for households on lower incomes, who typically would not have a large KiwiSaver balance to draw on in any case and face other barriers. For example, segments of Māori and Pasifika society and disadvantaged groups, have low home ownership rates, partly due to low income and potentially weak financial literacy. The government should therefore also investigate tightening the KiwiSaver withdrawal criteria concerning home purchases (e.g., making only voluntary contributions above the minimum withdrawable as in Australia) and replacing it with a dedicated instrument to reducing deposit needs and/or encouraging home deposit accumulation for those on low incomes. The Netherlands, for example, uses private and public partnerships, where buyers initially buy part of a home and rent the rest from a public partner, reducing upfront deposit needs. Such programmes could be, as discussed below, accompanied by financial literary programmes targeted at lower income groups with poor budgeting skills.
Improving long-term returns by facilitating KiwiSaver investment in private assets
Historically, KiwiSaver default funds were invested conservatively, which limited long-term returns for passive members. Although the government shifted defaults from conservative to balanced funds in 2021, reviews indicate that asset allocation remains more conservative than optimal, even accounting for population with older members demanding lower risk assets (Retirement Commission, 2025).
Regulations have not impeded at least a partial movement of KiwiSaver funds towards higher returning assets, but there is room for improvement. The share of total KiwiSaver funds in growth funds (typically more tilted to equities) has increased significantly from 26% to 46% between 2014 and 2024, while the share of conservative funds has fallen from 47% to 17% (FMA, 2024). In aggregate, New Zealand assets, which account for 39% of the total portfolio of KiwiSaver underlying the importance of KiwiSaver as a funding source for the domestic but exposure to equities is modest, constituting around 40% of the New Zealand portfolio, which in part is due to the need to hold cash, debt securities and derivatives for liability and currency matching (Table 4.1). Overall equities (New Zealand and Overseas) exposure is far higher at 60%. Nevertheless, although caution is warranted and not all types of financial assets are suitable for pension savings, KiwiSaver funds appear conservative by international standards, in their limited exposure to VC, small high-growth firms equity, private equity and other more illiquid assets. For example, KiwiSaver funds allocate less than 3% to private assets including private equity and infrastructure (MBIE, 2024b), whereas Australian superannuation funds invest over 27% in other asset classes, including infrastructure and private equity. This limited exposure may limit long‑term return potential if not balanced appropriately (Mercer, 2024; Retirement Commission, 2025).
Percent of total assets, September 2025
Note: Other includes derivatives. Totals and sum of components are not always equal due to rounding.
Source: RBNZ Table H43 KiwiSaver Assets.
Limited exposure seems to in part reflect limited fund manager capability to invest in more illiquid assets. Conservative allocation also partly reflects regulatory liquidity requirements, which require KiwiSaver providers to transfer members’ account balance from one KiwiSaver scheme to another within 10 working days of a request. Liquidity is also needed to meet various permitted early withdrawals and accommodate requests to move from one KiwiSaver fund to another fund within the same KiwiSaver scheme. A gradual increase in allocations towards higher returning assets such as private equity, venture capital, public growth equity markets and infrastructure could be achieved by changing the KiwiSaver legislation and rules to allow a wider range of funds.
For example, legislation could be amended to create a “private asset” fund type within a KiwiSaver scheme, where withdrawals and account balance transfers could only be made in limited circumstances. Officials have developed policy proposals in this direction that would allow customers to choose funds that opt out of the portability rules, and/or early and permanent migration withdrawal requirements, provided those features are prominently disclosed and accepted by applicants. However, these were rejected on the grounds that no matter how prominently disclosed, some investors would not understand the conditions, and it would create a contingent liability for the Crown to make good any investor losses to maintain high current levels of trust in KiwiSaver. How the public would react in the case of losses after clear disclosures appears uncertain. The risk of a loss of trust could be further mitigated by additional stricter conditions for entering these products, e.g., requirements such as minimum investor net worth to invest. There could also be highly conservative caps, e.g., 2-3%, on the share of funds under management placed on non-listed asset exposures. However, maintaining public trust KiwiSaver is essential, and that’s why it is important to have other complementary savings vehicles, including direct retail investment in listed companies, as discussed below, to inject capital into parts of the market where it is hard for KiwiSaver to increase exposure too much, such as increasing equity flows into small high-growth firms.
Increasing the accumulation of pensions savings by reforming the taxation of savings
New Zealand’s taxation of capital income and savings including taxes on financial assets, pension savings, housing, corporate income taxes and taxes on investment is complex and uneven. Housing is taxed lightly in comparison to financial assets and especially pensions. Corporate income tax is one of the highest in the OECD, while rates of taxation on business investment are uneven. Interactions between these settings make the overall system unusually distortionary by OECD standards, calling for review of the taxation of savings and capital income. From a capital markets development point of view a key issue this review should address is how much distortions suppress funding sources to capital markets and notably the accumulation of private pensions, which also has important implications for retirement income adequacy (Chapter 1).
New Zealand operates a Taxed-Taxed-Exempt (TTE) system for income from financial assets including pensions. Only 7 out of 38 OECD countries tax the investment income of pension savings, and only three, Australia, New Zealand and Türkiye, have a TTE system, where contributions and investment income are taxed, while withdrawals are exempt (OECD, 2024). The most common system operated by 17 out of 38 countries is Exempt-Exempt-Taxed (EET) which allows the accumulation of more funds within the fund that eventually gets taxed as a pension.
The TTE system for financial savings combined with light taxation of housing in New Zealand (no tax on imputed rents and capital gains are untaxed except in easily avoided circumstances – essentially a TEE system) makes the overall system one of the most housing-biased tax systems in the OECD. This has been a strong, systematic incentive for households to allocate a disproportionate share of their wealth to owner‑occupied and investment property rather than diversified financial assets. This bias has been capitalised into higher house prices, larger new dwellings, lower ownership rates among younger cohorts, and a worsening of New Zealand’s net international asset position, reflecting reduced domestic financial capital available for firms (Coleman, 2017).
From a capital market development perspective, a critical disadvantage of TTE is that it penalises the accumulation of long‑term retirement assets, by taxing returns each year, sharply reducing compounding relative to the EET systems used in most OECD countries (Coleman, 2024). These combined effects contribute to capital shallowness, weaker productivity, and reduced depth in New Zealand’s financial markets. A more coherent approach would gradually shift the tax burden on financial savings away from contributions and returns toward withdrawals, i.e., EET, aligning New Zealand more closely with international practice. Any specific reform should ultimately be considered within a broader government review of the taxation of savings, but reductions in the taxation of returns inside KiwiSaver can serve as an illustrative example of the type of structural adjustment that can improve long‑term retirement income adequacy. Because pension saving compounds over roughly 40 years, lowering the tax burden on returns substantially increases long‑run private wealth accumulation.
The effect on total private saving is expected to be substantial if reforms are implemented inside KiwiSaver. In voluntary retirement saving systems, the international literature shows that tax incentives often lead to large reallocation of savings across instruments, with only weak increases in net saving, especially for higher‑income households that already hold diversified portfolios. Evidence from Spain finds that only up to 19 cents per euro of contributions to a tax‑favoured pension scheme represent new saving, while Danish evidence suggests around 64 percent of pension saving induced by tax incentives is offset by reduced saving elsewhere (Ayuso et al., 2019; Christensen, 2023). In such voluntary settings, the income effect frequently dominates.
However, the behavioural response in auto‑enrolment schemes is fundamentally different. Defaults dominate decision‑making, and households exhibit very low responsiveness to tax parameters. UK evidence shows that after the introduction of auto‑enrolment, pension saving elasticities with respect to tax incentives became extremely small, implying that both substitution and income‑effect adjustments are minimal (O’Brien, 2023). This means that when tax treatment improves inside an auto‑enrolment scheme, contributions largely do not fall or rise in response, and other private savings are not reduced to offset the change. The positive effects would be strongest for low‑ and middle‑income households, who have limited discretionary savings to adjust and are most at risk of insufficient retirement balances. While UK evidence does not measure changes in other savings directly, the very low elasticities strongly imply negligible portfolio re‑optimisation. In this context, removing or reducing tax on KiwiSaver returns would operate primarily through allowing greater compounding on unchanged contribution patterns, generating substantial increases in total retirement wealth.
For example, simulations removing taxation on returns, even when paired with a one-off tax at retirement age of 65 and using historical return estimates show that, by year 40, the post-tax pension value is twice as large under a one-off tax compared to annual taxation (Figure 4.5, Panel A). This is despite no change in the contribution growth rate under the new tax regime and is driven by the compounding effect of reinvesting higher annual returns when annual taxation is removed. This large increase in post-tax wealth accumulation is also despite the withdrawal tax being set to preserve the present value of government total revenue by equating the net present value (NPV) of government revenue to the NPV of annual tax flows up to the same horizon. The NPV-equivalent one-off tax rate rises with the annual tax rate, reflecting the need to replace a larger stream of foregone revenue (Figure 4.5, Panel B). The extra accumulated pension wealth and the equivalent one-off withdrawal tax are sensitive to both the assumed rate of return and as discussed in Chapter 1, the government discount rate. However, even if the tax change was not NPV revenue neutral, it could still be overall of net benefit to the government once other benefits are taken into account.
Note: The simulations assume start from a starting nominal investment of NZD 100 and gross nominal return of 8% per annum on pension savings, which is at the bottom of the range of nominal returns of 8-10% using 200 years of data from the United States, the United Kingdom and other major markets (Chambers et al., 2023). Inflation is assumed to be 2% so the assumed real return is 6%. Annual contributions grow at 4% per year starting from a base of NZD 6.3 billion. The government is assumed to have declining real discount rates of 2% up to year 30 and 1.5% from year 31 to 50, calculated for New Zealand in Parker (2025) using the social rate of time preference model, which accounts for rising uncertainty about growth and interest rates as the horizon increases. Policies like climate change mitigation or infrastructure have benefits for future generations. A high constant discount rate would undervalue those benefits. Lower rates beyond 30 years give greater weight to future benefits, avoiding excessive discounting of impacts on future generations and align with international best practice for long-term policy analysis (OECD, 2018; HM Treasury, 2022). A one-off exit tax replaces the taxation of investment returns.
Source: OECD calculations.
Reducing tax induced asset allocation distortions that impede capital market development
A review of taxation of savings should also examine the effects of widely varying income tax and treatment by asset class and location that distorts asset allocation (Table 4.2). These discrepancies encourage savers to concentrate their portfolios in tax‑advantaged assets rather than choose investments based on risk‑return fundamentals The near‑complete exemption of owner‑occupied housing from tax including no capital gains tax in most cases and no taxation of imputed rent, results in a structurally favourable after‑tax return on residential property, encouraging households to overweight housing relative to financial assets. Indeed, historically the main private savings “scheme” of New Zealanders from all backgrounds and income levels has been to purchase as much residential property as they can afford and realise untaxed capital gains. This is also the retirement income strategy of many farmers with respect to farmland. It is not uncommon for high income households to own two or more properties.
Note: Not all savings vehicles are covered and the rules shown are not exhaustive. Portfolio Investment Entity (PIE) is a legal tax structure that determines how investment income is taxed.
Source: New Zealand Treasury
By contrast, financial savings are taxed inconsistently. Bond interest is fully taxed at marginal rates, making fixed‑income products particularly unattractive, while international equities held directly can trigger Foreign Investment Fund rules that further penalise diversified global investment. At the same time, preferential treatment for New Zealand and Australian equities held through Portfolio Investment Entities (PIE), particularly the capped 28% tax rate and exemption of capital gains, creates strong incentives for high‑income individuals to channel savings into managed funds and KiwiSaver rather than hold diversified portfolios directly. This then spills into capital market development because as discussed below individuals with direct owned share portfolio can be an important source of funding for growth equity market companies.
4.2.2. Improving the role of the New Zealand Sovereign Wealth Funds
Institutional investors play a pivotal role in deepening capital markets by providing long-term, patient capital that supports both productivity-enhancing private ventures and strategic national investments. In New Zealand, the landscape is shaped by the New Zealand Sovereign Wealth Funds, growing KiwiSaver funds, insurance companies, and other specialised investment vehicles. Ensuring that these actors operate in a complementary and mutually reinforcing way is essential to mobilise the scale of funding needed to raise investment and productivity.
Sovereign investment funds play an important but often indirect role in capital‑market development. International evidence indicates that sovereign wealth funds (SWFs) can strengthen local markets by anchoring long‑term capital, improving governance standards and signalling market confidence, even when their primary mandates are not domestically focused (International Forum of Sovereign Wealth Funds, 2026). Globally, SWFs increasingly support domestic economic development as part of broader long‑term investment strategies, while maintaining financial‑return mandates (Santiso, 2008). Global SWF assets now exceed USD 11 trillion (World Economic Forum, 2023), and the OECD’s long‑term investment framework underscores how large institutional investors including SWFs can contribute to market depth through improved risk management practices, transparency, and stewardship (OECD, 2013).
New Zealand’s sovereign investment landscape comprises both the New Zealand Superannuation Fund (NZ Super Fund) and the Accident Compensation Corporation (ACC) Investment Fund, which together manage more than NZD 130 billion, placing them among the country’s largest institutional investors (Accident Compensation Corporation, 2024; PwC New Zealand, 2025). Both funds operate under statutory mandates: NZ Super to pre‑fund future pension costs and ACC to meet long‑term injury liabilities. Their portfolios are therefore globally diversified, in line with international practice, and are not designed to target domestic capital‑market development. Nonetheless, their scale and investment sophistication mean they influence governance and transparency norms, enhance market capability and provide catalytic co‑investment in selected large‑scale or strategic projects (Boubakri et al., 2023).
The NZ Super Fund has grown to NZD 85 billion as of June 2025 (around 19.5% of GDP) (NZ Super, 2025). The Fund has built a strong track record of returns, averaging 10.1% over two decades and 11.8% annual return in the June year ended June 2025 year (NZ Super Fund, 2025). The Fund also plays a benchmark role in the institutional investment landscape, influencing governance standards, risk management practices and the adoption of sustainability principles. Allocations to private market assets have also been steadily rising, similar to sovereign and pension funds elsewhere. The ACC Investment Fund, valued at NZD 48.5 billion in June 2024, is designed to meet the long‑term costs of injury claims so that levy payers are not required to fund future liabilities as they arise (Accident Compensation Corporation, 2024). As one of New Zealand’s largest institutional investors, ACC has contributed to market stability by favouring long‑duration, income‑generating assets aligned with its liability profile, providing a steady source of patient capital across cycles and reinforcing governance and risk‑management practices (Accident Compensation Corporation, 2024; PwC New Zealand, 2025).
Evidence from OECD and international markets shows that SWFs contribute most effectively to market development not by significantly increasing domestic allocations, which risks crowding out private capital, but by supporting the quality and structure of investment ecosystems, including pipeline development, co‑investment models, and best‑practice stewardship (OECD, 2015; Gordon & Pohl, 2015). While NZ Super Fund can contribute to the development of domestic capital markets, its statutory mandate is to maximise returns over the long term, subject to acceptable risk. Hence, its portfolio is globally diversified with only around 11% of assets invested in New Zealand as of June 2025 (Table 4.3). This is significantly higher that New Zealand’s share of global GDP of 0.24% but this bias brings domestic market development benefits. Given that a further substantial asset reallocation into New Zealand markets could risk crowding out other investors, NZ Super Fund should draw on its deep investment expertise to further catalyse domestic market development rather than reallocating a larger share of its portfolio to New Zealand. As such, NZ Super Fund’s role should be complementary rather than dominant: providing an anchor for selected large-scale or strategic projects, while leaving space for private capital to expand. This requires mobilising a wider pool of institutional investors and private savings alongside the Fund.
Percent of total, 30 June 2025
Source: NZ Super Fund (2025) NZ Super Fund - Actual portfolio, and Top 1 000 funds
Materially increasing domestic market depth will depend more on the growth and allocation of private savings, such as KiwiSaver and other retail equity investment, than on NZ Super and the ACC Fund alone. Whereas NZ Super and ACC Funds are oriented toward global diversification, KiwiSaver Funds have indicated a willingness to increase exposure to long-term domestic investments, by investing in private capital assets, although Crown concerns about contingent liabilities appear to be limiting this avenue in practice. Enhancing non-retirement retail equity investing can also play an important role in channelling funds to small-listed firms (see below). These institutions can play mutually reinforcing roles, with NZ Super and ACC involved sometimes as a minority co-investor, as well as helping to set governance and performance benchmarks and especially providing investment expertise, and KiwiSaver and other retail equity investing vehicles, building a broader base of local investments. For KiwiSaver this may be especially in infrastructure and other long-lived assets with steady returns that match with KiwiSaver pension payout obligations. Beyond its role in capital markets, growing demographic pressures are also intensifying the fiscal debate around the role of NZ Super in retirement income provision (Chapter 1).
4.2.3. Attracting more foreign investment to complement domestic capital
Foreign direct investment (FDI) is an important source of capital, knowledge transfer and international market access for small open economies. Attracting international capital is essential not only to supplement domestic savings but also to support the growth of productive enterprises and to deepen capital markets. However, New Zealand maintains one of the most restrictive FDI regimes in the OECD (OECD, 2024; Figure 4.6). Restrictions stem from the broad scope of sensitive assets subject to approval, relatively low screening thresholds, and the requirement to demonstrate a net benefit to New Zealand. While these provisions are largely motivated by concerns to protect sensitive land and natural resources in the national interest, they may also deter some categories of long-term and institutional investors, suggesting a need to simplify the FDI screening regime, narrowing its scope to genuinely sensitive assets, and shifting towards more risk-based assessments.
2023
Source: OECD Regulatory database.
While global investors value New Zealand’s strong international reputation for rule of law, contract enforcement and institutional integrity, preserving consistency and predictability in policy settings is also crucial. Abrupt regulatory changes, such as past shifts in the oil and gas sector, have been cited by market participants as undermining investor confidence more broadly. A key priority is therefore to avoid sudden policy reversals and to ensure transparent consultation with stakeholders. Maintaining regular high-level engagement with senior investors in key financial centres is also important to attract global capital. Such relationship-building, including enhanced investor relations activities and targeted outreach, can ensure that New Zealand’s policy direction is clearly communicated to the international investment community.
The government has accelerated reforms to make the overseas investment regime more open and efficient. Under the new risk-based approach, introduced in 2024, processing times for overseas investment consents have fallen by more than 60%, with 87% of applications completed in less than half the statutory timeframe. The Overseas Investment (National Interest Test and Other Matters) Amendment Act 2025 is expected to further consolidate and simplify screening by replacing multiple tests with a single modified national interest test. Under the new regime, low-risk transactions will be triaged and approved within 15 working days, while farmland, fishing quota and residential homes will remain subject to the existing rules. These reforms aim to streamline access to foreign capital while maintaining appropriate safeguards for national interests.
The government is also looking at “behind the border” obstacles that may deter investment. Widespread feedback from experts and market participants in capital and property markets suggests the ban on non-permanent residents or citizens buying existing residential property has been an off-putting factor for high net-worth investors. To foster deeper ties with such investors, foreign investment rules were agreed to be relaxed in September 2025, in force from March 2026, so that holders of the Active Investor Plus visa will be permitted to purchase one residential property. Eligibility for the visa requires a minimum of NZD 5 million direct investment in a New Zealand business, or NZD 10 million for financial investments in equities, bonds or property developments.
The risk of this partial exemption contributing to broader housing market pressures appears limited by the requirement for the property to have a value of NZD 5 million or more – confined to the ultra-luxury segment, which accounts for less than 1% of sales and is concentrated in central Auckland and Queenstown. Although the practical impact of the measure may be limited, it signals a shift toward greater openness in New Zealand’s approach to foreign investment. However, more comprehensive reforms to equity market functioning and institutional investment frameworks are needed to ensure that international capital is directed towards productive business ventures.
An important tax obstacle for foreign, especially venture capital (VC), investors and New Zealand entrepreneurs seeking foreign capital is the Foreign Investment Fund (FIF) rules. The FIF rules require VC investors, like any New Zealand resident taxpayer, to pay their marginal income tax rate, likely the top rate of 39%, on deemed income from foreign held assets even if they have no realised gains. Empirical work by the OECD shows that tax settings are a barrier to migrant investors, although generally the negative effect is moderate (OECD, 2024d). However, tax rules can still play a major factor for certain investor types. Notably the deemed nature of the income that is taxed under the FIF rules makes it particularly dissuasive for venture capitalists because they often hold rights to assets, for which the eventual gains are highly uncertain and not realised. As a result, these assets provide no income stream to pay a tax bill that may even be higher than the entire current income of the VC investor. In addition, if the VC investor is a US citizen, they can end up with double taxation on gains when they are realised because they will not receive imputation credits for tax paid under the FIF to offset US capital gains tax.
In a welcome move, the FIF rules will allow the Revenue Accounting Method (RAM) that would enable assets to be taxed on a realisation basis, i.e., on dividends and gains or losses on sale (Inland Revenue, 2025). However, the RAM method will only be available to investors that have been non-resident for 5 years. A New Zealand entrepreneur may also be forced by FIF rules to leave New Zealand to avoid this potentially large tax liability if, as is often the case, their foreign VC investor requires them to domicile their company in the investor’s home country. Hence, it could also be made available to business owners who remain tax resident in New Zealand but who redomicile a firm as part of an investor deal, providing the state is not classified by the OECD as an uncooperative tax jurisdiction.
4.2.4. Further increasing the involvement of Māori investors
Māori play a growing role in New Zealand’s economy, managing significant iwi assets derived from Treaty settlements as well as an expanding presence in business and community development. The Māori economy is estimated at around NZD 32 billion in annual GDP (around 9% of New Zealand’s nominal GDP) and supported by an asset base of about NZD 126 billion (including Māori self-employed NZD 19 billion, Māori employers NZD 66 billion, and Māori collectives NZD 41 billion) (MBIE, 2024; RBNZ, 2025). As of 2024, more than 5 700 Māori businesses were identified, including 1 353 Māori authorities and 4 425 other Māori enterprises, together employing over 56 000 people nationwide. Māori authorities generated NZD 5.6 billion in income and exported nearly NZD 1 billion in goods, particularly from agriculture, fisheries, and forestry activities (Stats NZ, 2025).
Māori investors are widely recognised for their long-term and intergenerational focus, emphasising stewardship, community benefit, and sustainable returns rather than short-term profit maximisation (RBNZ, 2019). Iwi (tribes) and hapū (sub-tribes) investments are particularly important for regional development, contributing to employment, infrastructure, and diversification in areas, such as agriculture, fisheries, forestry, and increasingly in housing and community projects.
The Treaty of Waitangi settlement process has been central in shaping the economic base of iwi. Since the 1990s, successive settlements have transferred financial redress, land, and natural resource rights to iwi authorities, creating a foundation for Māori-led capital (Box 4.1). These settlements provided iwi with both commercial assets and long-term mandates to manage them on behalf of their members. While the scale of settlements is relatively modest in national terms, around 1% of GDP, they have been pivotal in enabling Māori organisations to build balance sheets, establish corporate structures, and re-enter mainstream economic activity. Indeed, iwi have grown their Treaty settlement assets substantially, with iwi, such as Waikato-Tainui and Ngāi Tahu, each managing assets of around NZD 2 billion as of 2024, reflecting significant growth from their original settlement values in the 1990s. Collectively, the largest ten post-settlement iwi manage an estimated NZD 8.2 billion in assets nationwide, equivalent to roughly 70% of the Māori economy’s post-settlement asset base (TDB Advisory, 2024).
The Treaty of Waitangi, signed in 1840, is widely regarded as the founding document of New Zealand. From the mid-1970s, the establishment of the Waitangi Tribunal created a formal mechanism for hearing claims about breaches of the treaty and acts inconsistent with the principles of the Treaty and recommending redress. Beginning in the late 1980s and especially the 1990s, the government entered negotiated settlements with iwi and hapū. Settlements typically involve a combination of financial redress (cash payments or commercial assets), cultural redress (return of culturally significant lands, co-governance arrangements over natural resources), and apologies and formal recognition of Treaty breaches.
By 2025, around 80 settlements had been concluded, including Waikato-Tainui (1995) and Ngāi Tahu (1998). The cumulative financial and commercial redress transferred through settlement is estimated at around NZD 2.7 billion, or roughly 0.6% of nominal GDP (Auditor-General, 2025). These settlements have been significant for iwi development, providing seed capital that has grown substantially under iwi investment organisations. The process has also fostered stronger iwi governance institutions, though debates continue over adequacy, intergenerational equity, and the pace of unresolved claims.
Alongside these achievements and the potential of Māori capital, Māori organisations and households continue to face significant barriers in accessing capital (Cherry and Cheung, 2025). Legal protections of Māori freehold land (whenua Māori) restrict its use as collateral, complicating lending and limiting participation in mainstream finance. Information asymmetries, collective ownership arrangements, and complex or absent governance structures reduce access to capital as lenders are often uncertain about who has the authority to contract with the assets. AML/CFT legislation requires reporting entities to conduct due diligence on trust structures, including identifying key controlling parties and relevant beneficial owners. This can be onerous for Māori land trusts and iwi trusts, which may have large and complex ownership structures, further reducing access to capital. Due to these difficulties, lending secured by a mortgage over whenua Māori is rare, with many Māori trusts and incorporations effectively unable to obtain finance. Overall, Māori businesses are charged interest rates that are around 50 basis points higher than non-Māori business (RBNZ, 2022). A lack of consistent data on Māori enterprises and lending outcomes also limits the ability of policymakers and institutions to design evidence-based solutions. These barriers are particularly acute for trusts with either very large or very small ownership bases, where fragmented records, limited administrative capacity, or overlapping governance responsibilities make data collection and risk assessment especially challenging.
Estimates of the number and activity of Māori enterprises vary substantially across sources depending on methodology, reflecting differences in definitions and data coverage. For example, official counts based on self-identified Māori ownership are substantially lower than estimates derived from integrated administrative datasets. These inconsistencies highlight persistent gaps in the data infrastructure needed to accurately assess Māori economic participation and design effective policy responses.
At the household level, broader socioeconomic disparities, including lower homeownership and incomes, weaker credit histories, and lower financial literacy, compound these challenges. Trust deficits between Māori communities and financial institutions also persist, with limited Māori representation in banks and a lack of culturally attuned products and services, such as Māori-specific asset managers, iwi-led investment vehicles and tailored financing structures, although there are signs of gradual improvement.
Internationally, collective investment structures have been used to overcome some of these barriers. For example, the Indigenous Financial Institutions (IFIs) network in Canada, supported by the National Aboriginal Capital Corporations Association (NACCA), demonstrates how indigenous-led models can be scaled up. In 2023/24 alone, IFIs issued over 1 100 loans worth CAD 166 million, supporting nearly 4 600 jobs, and delivering measurable social benefits in housing, food security, and mental health (NACCA, 2025). Canada’s pooled borrowing model under the First Nations Finance Authority also illustrates how collective credit structures can reduce costs and improve access.
In New Zealand, iwi-led investment syndicates (such as Te Pūia Tāpapa), Māori-specific asset managers, Māori charitable financial intermediaries and papakāinga housing developments illustrate efforts to create culturally-aligned financial pathways. These collective investment vehicles help achieve economies of scale, overcome information asymmetries and diversify across asset classes. By pooling resources and sharing asset management expertise, iwi have been able to improve asset management quality, reduce management costs, and access larger-scale opportunities comparable to mainstream institutional investors. For example, Taranaki Iwi Holdings and Rauawa provide collaborative Māori-led investment models that combine commercial discipline with social and cultural objectives (Box 4.2).
Taranaki Iwi Holdings provides a leading example of a Māori-led investment entity combining commercial performance with social and cultural purpose. Established following the Iwi’s Treaty settlement, it manages the commercial pūtea of Te Kāhui o Taranaki through a separate board, ensuring both professional oversight and cultural accountability.
As of 2023, the Taranaki Iwi Commercial Group managed assets of around NZD 128 million, delivering NZD 2.7 million in annual distributions to Te Kāhui and achieving an average annual return of 7.9% over the past five years. Its diversified portfolio spans commercial and residential property (through the Hāpai group), agribusiness (Pūainuku), private equity (Te Pūia Tāpapa), managed funds, and local impact investments, such as affordable housing.
The dual-entity structure—Taranaki Iwi Holdings Limited Partnership and Taranaki Iwi Fisheries Ltd—enables clear separation between commercial management of assets and the distribution of income in support of wider social objectives. Investments are guided by iwi values of stewardship and intergenerational equity, balancing steady income with long-term growth. Through co-investment with other iwi, Taranaki Iwi Holdings has emerged as a model for efficient Māori commercial governance and regional economic leadership.
Rauawa provides a further example of Māori-led financial intermediation aimed at improving access to capital. Established by iwi and Māori partners, including through collaboration with the National Iwi Chairs Forum, Rauawa acts as a shared investment platform and special-purpose vehicle designed to address structural barriers to Māori participation in capital markets. It works alongside iwi, government and private capital partners to develop investment opportunities, aggregate projects to achieve scale, and design structured finance solutions suited to Māori ownership models. Through this role, Rauawa helps translate Māori investment opportunities for capital markets, reduce transaction costs and duplication, and build long-term investor confidence. The initiative illustrates how Māori-led institutional infrastructure can support coordinated investment, unlock capital at scale and strengthen pathways for Māori economic development.
Source: Taranaki Iwi Annual Report 2023; Rauawa documentation.
There may be many other iwi that join the investment vehicle originally set up as a smaller subset of iwi partners. To keep governance coordination costs reasonable, iwi may join the investment vehicle as passive investors, or the iwi joining may be assigned only one board seat regardless of the funds invested. Indeed, the effectiveness of these vehicles relies on robust governance, balancing representation among iwi and incorporating external expertise. With clear governance and lines of accountability and a proven investment returns track record, these collective investment arrangements have a high level of credibility in financial markets, helping them to overcome the barriers above. This allows them to not only access capital but also play an increasingly important intermediation function between the main commercial banks and capital markets actors and the Māori trusts and beneficiaries that are the owners of the assets.
Beyond high quality asset management, Māori collective investment vehicles can bring investment partners, whether Māori, non-Māori or foreign, strong knowledge of land resources involved in a project as well as understanding of local permit processes, and relationships with other iwi across New Zealand. This can be particularly important in sectors where long-term investment horizons and resource stewardship align strongly with national priorities, for example, renewable energy projects, such as solar and battery storage, infrastructure delivered through public–private partnerships, and sustainable food production. Facilitating Māori participation in these areas could both leverage iwi asset bases and create wider economic spillovers to the New Zealand economy.
Improving access to capital for Māori requires a combination of policy measures, market innovation, and Māori-led solutions. Capital and financial markets policy design needs to take better account of the ownership characteristics and objectives of Māori asset owners as well as their constraints. An important step in this direction is the Reserve Bank’s 2025 review of capital settings, which has opened the door to more granular risk-weighting for lending secured by whenua Māori and community housing and could ease capital requirements for banks and lower borrowing costs (RBNZ, 2025). Targeted initiatives, such as improved data collection, culturally attuned financial products, and alternative lending models can also help. In this vein, new data infrastructure is being developed. For example, the Reserve Bank’s loan-level database aims to capture detailed credit exposures across banks, with consideration of Māori identifiers, to strengthen evidence-based policy design. It is also welcome that the RBNZ and Tawhai Māori bankers Ropu released a Māori Access to Capital Snapshot in 2025, providing a baseline for monitoring progress (RBNZ, 2025).
Policy efforts should also focus on supporting Māori-led initiatives to improve access to capital markets. Strengthening Māori-focused financial intermediaries, such as iwi-led fund managers, could play a catalytic role by helping to bridge information gaps, lowering transaction costs, and providing governance expertise, thereby facilitating greater Māori participation in capital markets. This could include strengthening governance capacity across iwi by diffusing best practice on balancing financial returns with social and community outcomes, and ensuring long-term, intergenerational benefits. This should be complemented with actions to empower whānau and small enterprises to participate more fully in capital markets, such as enhancing financial literacy and education through sustained support for bilingual and culturally-grounded programmes. Evidence suggests that distrust of financial institutions, stemming from past experiences of complex or culturally misaligned engagement, can contribute to financial disengagement among some Māori communities (FMA, 2025b). More broadly, rebuilding trust between Māori communities, financial institutions and government will require sustained engagement, with an emphasis on long-term partnership and cultural understanding.
4.2.5. Improving financial education of household and business
It is important to accompany any changes to KiwiSaver and other capital markets initiatives by well targeted financial education efforts (OECD, 2022b) and continue to strengthen financial capability. Although New Zealand performs relatively well in overall financial literacy (Figure 4.7), important gaps remain. Survey evidence shows New Zealanders scores below the OECD average on foundational concepts such as risk and return, interest on loans, compound interest calculations, skills that are important for evaluating long-horizon savings products and participating effectively in equity and fixed-income markets. These gaps lead to uneven financial outcomes across population groups and reduce the ability of households to make informed choices about long-term saving and investment, poor financial outcomes for some groups. For example, many households and firms continue to hold substantial balances in low‑interest transaction and savings accounts, despite the availability of higher‑yielding, low‑risk alternatives.
Overall financial literacy (out of 100), 2022/2023
Note: 2015 data for New Zealand.
Source: OECD/INFE 2023 international survey of adult financial literacy; and OECD/INFE International Survey of Adult Financial Literacy Competencies (2016).
There is room for further improvement in financial education on retirement planning (OECD, 2024b). Improving public understanding of basic investment principles, such as the trade‑off between risk, return, and liquidity, could help households make better use of available financial products and reduce foregone income. However, any strategy to broaden interest in higher‑risk assets, including equities or corporate debt, needs to be carefully designed to avoid unintentionally promoting products that may not be appropriate for all savers. Part of this support should be targeted programmes for low-income and informal workers, who are less likely to save or plan for retirement (OECD, 2023a), women, who score lower on financial knowledge and confidence (Hung et al., 2012) and Māori and Pasifika, who have lower participation in KiwiSaver and face higher barriers to access financial services and advice (Malatest International, 2024).
There is already an impressive range of retirement calculators in New Zealand, although they could be further improved by having a home ownership toggle given that owning a home by retirement is a traditional part of many New Zealanders’ retirement plans. Financial education programmes should highlight publicly available retirement income calculators and inform participants about their KiwiSaver and other financial rights and obligations. This can help households to make financial decisions during important life changes, such as financial hardship or divorce, that can significantly affect retirement incomes. For example, KiwiSaver assets are legally part of matrimonial property for 50/50 division in a divorce, but 75% of divorce settlements do not include KiwiSaver assets, disadvantaging women, who typically have lower KiwiSaver assets. KiwiSaver assets are also not counted in a No Asset Insolvency Procedure if they remain in the Fund.
New Zealand SME owners often exhibit strong operational skills but face significant gaps in financial knowledge, particularly around capital structure decisions and equity financing options. While most are familiar with basic accounting and debt instruments, awareness of alternative funding channel, such as venture capital, angel investment, and public equity markets, remains limited. This knowledge gap constrains SMEs’ ability to scale, innovate, and withstand economic shocks, as reliance on personal savings or short-term debt increases financial vulnerability. Closing these gaps is critical for improving productivity and resilience, and OECD research underscores that targeted financial education for entrepreneurs enhances access to finance and long-term growth prospects (Atkinson, 2017; OECD, 2023a). Current SME support relies on the Regional Business Partner Network, NZTE investor readiness programmes, and digital tools such as Business.govt.nz and Digital Boost. While these channels provide valuable resources, there is still no dedicated national SME financial literacy program, highlighting the need for broader integration of capital markets education into business capability frameworks to ensure owners can confidently navigate funding options and secure sustainable growth. For example, Singapore’s SME Financial Empowerment Programme delivers in line with OECD/INFE advice (OECD, 2018), modular, certificate‑based financial education to SMEs via a digital platform, reaching more than 400 000 firms across Asia and Africa.
SME and adult financial literacy education is likely to be more successful if participants have built a foundation of knowledge at school. New Zealand’s decision to make financial literacy compulsory across Years 1–10 by 2027 is a welcome step aligned with OECD guidance that will help ensure fair, nationwide delivery and foster early, sustained financial capability (OECD, 2015a). To help ensure continuity, further improve equity and better prepare students for complex financial decisions that all adults face, financial literacy education could be made compulsory through to the end of school in Year 13.
Equity finance is a core institution of a market-based economy providing a ladder of capital funding firms needs from angel investors financing a start-up to explore a business idea to public listing on the stock exchange to become a multinational corporation. Strengthening this ladder and ensuring there are no gaps is crucial to ensure capital markets support productivity growth and expansion of the economy. This is more challenging in a small economy because the amount of capital that will be raised at each step of the ladder is a fraction of larger economies, like Australia and the United Kingdom and especially the United States. A company that successfully concludes a Series A financing round in New Zealand would typically have raised a total of USD 6-9 million up to and including that point, compared with around USD 20 million in the United States.
The New Zealand equity market is undersized relative to the economy’s scale with some strengths but also important gaps in the equity ladder. Finding finance to start a business is challenging for all SMEs as well as start-ups, with high growth potential (MBIE, 2025). As discussed below, the main banks prefer home lending and SME loan rejection rates are high. Stakeholders noted that there are very few suppliers of alternative private finance, and this is very expensive, with interest rates of 12-13% or more not uncommon. Entrepreneurs often need to take high risks with family financial security, typically initially funding their new business through savings, bank mortgages on their homes and “family and friends” financing. The barriers are even higher for individual Māori, or those from lower socio-economic background who have lower savings and lower home ownership rates. Despite these high hurdles, startup activity is strong showing strong entrepreneurial drive, but firms frequently fail to scale due to market size and growth capital constraints (OECD, 2023b; OECD, 2024a).
It is difficult or close to impossible for firms to raise debt finance for businesses from banks that is not secured against real estate assets, and therefore increasing competition in the banking sector is an important lever for improving access to finance for all SMEs. However, for start-ups with high growth potential and only intangible assets, expanding capital markets remains essential. Even a competitive banking sector does not have all the skill or risk appetite to lend to these firms. Although the hurdle is high, climbing the second rung on New Zealand’s equity market “ladder” from pre-seed finance to seed finance (Table 4.4) is becoming easier as the initial venture capital market is, as discussed below, expanding. However, there appears to be a gap in the next steps, which is impeding the expansion of innovative, growth companies and accelerating their departure to foreign economies, notably the United States and its large capital and consumer market. Even firms that manage to leap this gap in private capital markets in New Zealand are not exiting private capital markets to public listings. There has been a global slowdown in initial public offering (IPO) but the downward trend in New Zealand is even stronger. IPO activity on the publicly listed exchange, the NZX, has been very limited since around 2013-2014, when the main electricity companies were listed (Chapter 3) and there have been no major domestic IPOs since 2021. As discussed below, a new growth equity exchange, Catalist, was launched in 2021 but Catalist is a stepping stone market, with equity offerings (wholesale offers, private-market listings, existing public companies raising capital) and there have been no IPOs there and no companies listed on Catalist have progressed to the NZX.
4.3.1. Further expanding the private capital market
The private capital market includes venture capital (VC), capital seeking high-risk usually technology-based start-ups, as well as later stages private equity (PE), capital invested in unlisted firms. Worldwide, there has been a strong shift away from public listing to private capital markets, and companies are staying private longer with the median age at IPO rising to around 14 years up from 8 years 15 years ago (OECD, 2025c). Indeed, in 2024, globally USD 900 billion was raised in private capital markets (McKinsey, 2025a; PWC, 2024) although this is still far smaller than capital raised on public markets. Reasons for the rise of private capital markets include founders’ preference for retaining control and certainty about capital raised, reduced public scrutiny, lower reporting costs, and diminished director liability risk (OECD, 2019a; CFA Institute, 2025; McKinsey, 2025b).
The dominance of private capital has also been fuelled by a growing stock of unallocated private capital (“dry powder”), which increased from USD 878 billion in 2008 to USD 2.6 trillion in 2024, approximately 50% of which is controlled by United States-based firms (S&P Global, 2025). Private capital supply has been augmented by pension funds and other institutional investors allocating a higher share of their portfolios to private capital markets, and a high concentration of wealth as high-net-worth individuals tend to allocate a significant share of their portfolios to private capital. The post GFC low-interest rate environment further favoured private equity by facilitating leveraged buyouts that raise the return on equity invested.
Crowding in a new wave of VC-fuelled start-ups
With a strong innovation system and competition friendly business environment, expanding VC can play a critical role in lifting New Zealand’s labour productivity by reallocating capital to high-productivity firms (Heil, 2017). In New Zealand, VC has expanded from humble beginnings of around NZD 50 million in 2015 (0.02% of GDP) to nearly NZD 600 million (0.14% of GDP) in 2024, which is relatively high by international standards (Figure 4.8) and there is a growing ecosystem of VC firms (Box 4.3).
Value, % of GDP
Source: OECD, Entrepreneurship Finance Database.
Venture capital in New Zealand has evolved from a niche activity in the 1990s into a more structured and dynamic ecosystem today. The New Zealand Venture Investment Fund was launched in 2002 to address market failures in early-stage funding. However, the sector remained relatively small, with limited participation from institutional investors, few globally scaled VC firms and a wide gap between international VC best practice and fund structure (Lerner et al., 2005).
Since 2015, the VC ecosystem has expanded significantly. The launch of the Elevate NZ, Government Venture Fund, in 2019, helped start to fill an important gap in the Series A and B equity funding ladder. A new wave of VC firms has been established, including Icehouse Ventures, Global From Day One, Movac, Outset Ventures, and trans-Tasman players, like Blackbird Ventures and AirTree Ventures. These firms have backed high-growth New Zealand startups, such as Rocket Lab, Dawn Aerospace, Xero, and Soul Machines, helping to build a more vibrant and globally connected startup ecosystem.
Government VC funding initiatives appear to have played a significant role in scaling the domestic VC market for series A and B stages in a short timeframe. It appears to have catalysed more than NZD 2 dollars of private VC for every NZD 1 dollar invested by the government VC fund. Elevate was launched in 2019 with NZD 300 million. It has coinvested NZD 221 million alongside NZD 536 million in private capital across 9 VC funds (New Zealand Treasury, 2025). This has supported 100 New Zealand tech startups and increased Series A and B stage funding from less than NZD 100 million to over NZD 700 million. Funding levels appear to be the main constraint for Elevate. Despite the latest top-up, there appears to be significant room to expand Elevate NZ further, with the VC industry seeking an injection of NZD 300-400 million into Elevate due to its proven track record of crowding in private VC.
Elevate has a sound operating model. In line with international best practice, Elevate is a fund of funds, co-investing with the private VC sector and requiring at least matching private capital. Across the OECD, this co-investment model has improved the investment performance of government VC funds and has proven to be successful in crowding in private VC (Berger et al., 2024). Elevate funds are also managed independently by NZ Growth Capital partners, a crown Entity, and use a strict VC manager selection criteria of a proven track record and ability to raise private capital.
International experience suggests that structured, performance‑linked capital release mechanisms can help strengthen fund‑of‑funds programmes. OECD analysis highlights that many government venture capital vehicles abroad use time‑bound or milestone‑triggered tranche releases to reinforce commercial discipline and align incentives with private partners (Berger et al., 2024). While Elevate already has a strong process and applies private‑sector‑aligned due‑diligence and capital‑call processes, there may be value in periodically reviewing whether the current approach provides the strongest possible performance alignment. This is an opportunity to consider whether any elements of tranche‑based frameworks used elsewhere could further enhance Elevate’s effectiveness over time.
Elevate could also more actively work on attracting global VC firms to set up New Zealand domiciled funds, which has been contributing to the significant success of Israel’s Yozma programme, creating long-term VC market development and expanding the VC market ten-fold in a decade. This could involve promoting New Zealand thematic VC funds in areas, such as agri-tech, where New Zealand has a recognised comparative advantage, and coordinating with other policy areas, such as making it easier for foreign VC investors and business founders to operate in New Zealand through talent visas, as discussed below.
Elevate could also make greater use of loss sharing mechanisms (Berger et al., 2024; Habbel et al., 2021), such as first-loss protection that could make it more attractive for KiwiSaver funds to co-invest. The private funds matching requirement provides some protection, but this could be enhanced by making first loss protection capped and time limited. Asymmetric returns mechanisms that provide enhanced upside returns have been used successfully in the United Kingdom to attract early-stage VC and could help attract global VC firms.
Boosting R&D and innovation to increase the pipeline of VC ready companies
Business R&D in New Zealand remains low compared to innovation leaders. Beyond crowding in private VC, further expanding the stock of VC backed innovative firms also requires higher business R&D and a strong entrepreneurship pool to turn R&D into marketable products and services (Figure 4.9). OECD work on nine countries, including Israel and the United States, shows that robust VC volume growth requires not only high R&D spending but also strong innovation systems (OECD, 2025d), with firms that are integrated into innovation networks (OECD, 2023b). The effects are bi-directional. Greater VC funds amplify the effects of R&D (Paik and Woo, 2017) and more R&D helps increase the pipeline of firms with scalable innovative ideas that are attractive to VC firms (Sahaym et al., 2010), especially if providing entrepreneurship capacity is strong (Romain and van Pottelsberghe, 2003).
VC investors, both private and government backed, look for scalable, defensible ideas backed by intellectual property (IP) rights (Berger et al., 2024), making strengthening the innovation system an important complement to capital markets policy. The intellectual property regime has many strengths but the retention of IP by University Technology Transfer offices has reduced researcher incentives to commercialise. The government should implement its proposed reforms to give IP ownership to researchers, as in Canada and Finland. The industrial PhD programme, deep tech fund, reforms to make IP more researcher centred and the Prime Minister’s Advisory Council to improve coordination will all help shift New Zealand’s innovation system more towards international best practice, including in Finland. However, the innovation system needs more scale to generate a marked increase in the pipeline of VC-ready business propositions.
Since early 2025, the government has overhauled the innovation system by disestablishing Callaghan Innovation, reallocating its functions to MBIE and new Public Research Organisations, and introducing a national IP strategy. A new Prime Minister’s Science, Innovation and Technology Advisory Council aims to address long‑standing coordination gaps, while an applied Doctorate programme will strengthen knowledge transfer from universities to firms (OECD, 2019b). Crown‑funded deep‑tech commercialisation initiatives broadly follow international best practice (OECD, 2024b) but remain very small‑scale, with around NZD 10 million in annual grants. Australia invests roughly AUD 150 million (NZD 180 million) a year in comparable programmes, suggesting New Zealand underinvests relative to its ambitions. Further expansion of public support to build the pipeline of investable companies should recognise that tax incentives are better suited to near‑market projects, while early‑stage, high‑risk or strategic research benefits more from direct grants, procurement instruments and mission‑oriented programmes (Galindo Rueda et al., 2020). For priority sectors like agri‑tech, aerospace and motorsport, targeted direct support, such as challenge grants or demonstration projects, would be more effective than targeted tax incentives.
Note: OECD countries. Canada, Estonia and Israel have been excluded.
Source: OECD (MSTI database) and OECD Entrepreneurship Financing (database).
The expansion of public support for business related scientific R&D is welcome, but funding should come from other expenditure cuts (Chapter 1). Under the reforms, more finance for science and technology research will partly be funded by excluding humanities from the Marsden Fund, New Zealand’s main source of funding for investigator-led fundamental research. This risks weakening the science innovation system as humanities research underpins institutions like the rule of law and skilled public administration, upon which scientific research depends. Humanities research also helps society address the cultural, distributional, environmental, ethical and legal challenges of rapid technological change, such as the AI revolution in health (Chapter 3).
The expansion of the business R&D related innovation system is restricted by a limited supply of engineering and science researchers and talent. Countries with strong commercialisation ecosystems (e.g., Denmark) have higher R&D employment per capita and dense research networks. Talent visa programmes discussed below can help attract more foreign talent, but domestic talent will always be required to partner with migrants and is constrained by too few New Zealanders entering STEM fields due to weaker learning outcomes at school in mathematics and science (OECD, 2022, 2024b), underlining the importance of the government’s welcome and significant reforms in line with international best practice to improve the compulsory education system.
Education reform is critical to rebuilding the human‑capital pipeline needed for innovative firms and long‑term capital‑market development. OECD Surveys (2022, 2024) show sustained declines in literacy, numeracy and science, weakening pathways into STEM and reducing the talent pool for start‑ups (OECD, 2024a). Large variations between schools, an overly broad curriculum and fragmented NCEA learning have limited students’ STEM mastery. The government’s reforms aim to reverse these trends through a knowledge‑rich curriculum, structured literacy, daily instruction in core subjects, phone bans, twice‑yearly reporting and major NCEA changes. Professional learning development (PLD) has expanded sharply, and 1.1 million maths resources were distributed. Early indicators are positive: teachers and parents report improvements, and teacher confidence in structured literacy has risen (ERO, 2025). Gaps remain, especially in maths and science teaching. Strengthened Teaching Council oversight aims to improve initial teacher education. Priorities include deeper STEM content, expanded PLD, reinstated subject‑expert advisors and stronger regional pedagogical support (OECD, 2024a). These steps are needed to secure durable gains in the skills essential for innovation‑driven growth.
Widening the talent pool to help quickly scale up new firms
To provide an acceptable business case for VC in New Zealand, innovations also need to be immediately internationally scalable as the domestic market is often too small. Hence, well- designed government support for exporters and trade policies are also essential complements to capital market policies and more important than for large economies or even small ones in the EU (Chapter 1). Business founders and VC investors with the capital and the knowledge and international connections needed to enter foreign markets are also key. These are typically New Zealand born or New Zealand connected foreigners with overseas assets and experience, so barriers for them to return or migrate to New Zealand should be reduced. As discussed above, the government’s targeted reforms to reduce home buyer restrictions for foreign investors and reform the foreign income rules tax will help.
More can be done to widen the talent pool to help scale-up businesses. Policies could include making easier and more attractive to migrate to New Zealand for serial entrepreneurs, innovators, and graduate researchers who may not have the assets to qualify for an Active Investor Plus (AIP) visa but have scientific knowledge and commercial ambition or international connections and knowledge of technology and/or foreign markets to start-up a business in New Zealand or partner with New Zealand business founders.
The Business Investor Work Visa launched in November 2025 provides a streamlined pathway for capital‑focused investors and is an important component of New Zealand’s investment attraction strategy. However, it does not directly target talent‑driven founders, scientific entrepreneurs, research‑commercialisation specialists, or globally connected operators who contribute to start‑up performance through skill, networks, and execution rather than capital alone. A useful complement to the AIP would be to re-introduce a global impact (talent) type visa (GIV), that was piloted in partnership with the Edmund Hillary Fellowship (EHF) and raised NZD 550 million for New Zealand businesses and launched more than 200 new ventures in 2 years. Key elements of the success of the GIV appear to be the expert panel-based visa candidate selection process (rather than usual list criteria style approach), coupled with a point-based (ventures launched, capital raised) path to permanent residency and crucially post-arrival support for integration. These types of talent visas have been credited with attracting innovative start-up talent in several OECD countries, including Australia, Canada and France. For example, France’s Tech Visa has contributed to Paris becoming a European startup hub, with many non-EU founders and investors (European Startup Nations Alliance, 2025). Elements of the success of these talent programmes are streamlined processing of the visa, a path to permanent residency and an inclusive approach to visa allocation that allows employees, researchers, founders and investors that are all part of an eco-system of innovative and expanding start-ups.
Like other OECD countries, New Zealand also needs to make much better use of its own existing talent pool and notably women entrepreneurs. In 2024, women-only start-ups received only 3% of VC funds (similar to Australia and the United States, both around 2%), while 61% went to men-only teams with the remaining 36% going to mixed teams (Gender Investment Gap, 2024). International evidence suggests that this skewed investment allocation comes at a cost. With that the caveat that there was a relatively small sample of 92 women co-led firms and so the results may be skewed by outliers, data from 350 companies from the United States suggests that the return on investment in companies led and co-led by women was 78 cents, while male-founded companies generated 31 cents (Abouzahr et al., 2018). There appears to be several reasons for this sub-optimal allocation capital, including male-dominated VC investment firms looking for “people like them” to invest, women being subject to greater push-back, especially about the technical merits of their business case, and men tending to oversell their case relative to women.
VC firms need to increase their awareness of this bias and to institute processes to counter it. This should include expanding women in senior roles and in investment committees, and encouragingly, some VC firms are starting to go in this direction. The government could also regulate to require initial applications and long-listing of pitches to be “gender blind”, i.e., no information should be required in an initial application that identifies whether the founder or business leader is a man or a woman. Evidence from labour markets suggests this can be a tool for reducing bias against women (Goldin and Rouse, 2000), but this will be more effective if women are trained how on how to pitch their business case (Kolev et al., 2019).
Only 7% of the firms awarded funds by Elevate go to women (MBIE, 2025). The government could influence VC industry behaviour through requiring New Zealand Growth Capital Partners, manager of Elevate funds, to demonstrate it is a leader in processes to counter bias against women entrepreneurs and actively supporting female networking and mentoring support for women entrepreneurs, including on how to successfully pitch a business case in an environment of bias. Many OECD countries also operate dedicated funds for female founders, recognising that structural barriers and network effects are difficult to overcome without targeted instruments. Introducing a similar mechanism in New Zealand, such as a female founders co‑investment fund or a set‑aside allocation within Elevate, could meaningfully widen participation. The education system also has an important role to play from primary school onwards in fostering greater participation of girls in mathematics and science (OECD, 2024b). These are pre-requisites that are needed to go into higher education fields, such as economics, engineering, finance, health sciences, and IT, which are important for participating in the VC ecosystem either as a VC investor or a business founder.
Filling the gaps in the private capital market beyond early venture capital
Viable exit channels, including sale to growth private equity funds, are key to VC ecosystems (Berger, 2025). An expansion trend is not evident in New Zealand private capital beyond the early venture capital stage. The category beyond early-stage VC has fluctuated markedly between 2015 and 2024 and averaged 0.15% of GDP, significantly lower than the Baltic and Nordic countries (New Zealand Capital Monitor, 2025; Figure 4.10). New Zealand’s start‑up base has grown quickly but still operates at a smaller scale than several OECD peers, implying thinner later‑stage domestic capital pools and a greater reliance on offshore investors when firms begin to scale internationally.
1. Average for the European countries that are presented in Panel A.
Source: Invest Europe and EY (2025).
A persistent mid-size equity raising gap exists between initial VC fund raising and large private equity (PE) buyout rounds. There are various estimates of the funding range where this gap is most relevant, but it appears to be approximately between NZD 2-20 million, where many-growth ready firms seek minority growth equity to expand production, enter export markets or professionalise governance (Capital Markets Steering Committee, 2019; MBIE, 2021). Indeed, the number of private capital deals in the mid-market PE category of NZD 10-50 million fell between 2023 and 2024 and their average size rose to NZD 19 million (New Zealand Capital Monitor, 2025). As discussed above, Elevate NZ is targeting the series A and B stage and the Budget 2025 expanded its funds by a further NZD 100 million to NZD 400 million, which is helpful for tech and health‑tech scale‑ups. Nevertheless, industry stakeholders report that many firms at these stages still seek funding overseas because of deeper specialist investor networks and fund sizes offshore, consistent with broader evidence on New Zealand’s globally connected but smaller‑scale ecosystem.
The composition of later‑stage capital matters. In a small, open economy like New Zealand’s, it is realistic to expect international VC and PE to lead most post‑Series B rounds and many exits. A more impactful role for domestic capital markets is to (i) supply minority growth equity in the NZD 5–50 million range for non‑tech and industrial SMEs with credible growth plans, and (ii) to participate as a limited partners (LP) along with private investors that provide capital without managerial control, in venture and venture‑growth funds to help them reach viable scale. This could include through small “sleeves” (designated portions of KiwiSaver, insurer, private equity fund or other institutional portfolios set aside for a specific strategy such as venture‑growth). UK experience shows that a cornerstone‑LP model, where a large early investor anchors a fund and reaches a first closing (i.e. the point at which the fund legally secures commitments and can begin investing), can increase fund scale and crowd‑in other institutions. In New Zealand, a similar approach could be achieved through private‑led consortia (KiwiSaver managers, iwi investors, insurers) without requiring large up‑front fiscal outlays.
Mobilising domestic institutional capital can play an important role in filling the gap. The United Kingdom has developed a variety of funds, including the Enterprise Capital Fund and the Patient Capital Fund, tuned to firm financing needs from the bottom of the equity gap of GBP 2 million to later stage capital raising (Box 4.4). These instruments have contributed to the United Kingdom boosting its private capital funding overall and, in some sectors, narrowing the gap with the United States (British Business Bank, 2023). The UK’s Patient Capital agenda explicitly targeted long‑term pools (notably pensions) to allocate sleeves to venture/growth, with the Treasury and the British Business Bank providing the framework and signalling; the new British Growth Partnership is designed to bring UK pension funds into venture/growth on a fully commercial basis alongside a cornerstone public commitment. Adapting the same logic, through guidance and benchmarking that encourage KiwiSaver and insurers to allocate small, diversified sleeves to growth‑equity and venture‑growth funds, could help address scale constraints in New Zealand.
The British Business Bank has launched several initiatives to bridge the funding gap between early-stage venture capital and later-stage private equity buyouts, particularly targeting underserved segments of the UK economy. The Enterprise Capital Fund (ECF) programme, launched in 2006, targets early-stage UK businesses with long-term growth potential that struggle to raise equity in the GBP 2–5 million range, often referred to as the “bottom of the equity gap”. It blends public and private capital to support emerging venture capital fund managers and has backed over 675 companies across sectors like AI, and healthcare, with GBP 2.5 billion in total investment capacity. ECF is designed to lower entry barriers for fund managers and crowd-in private capital, with the British Business Bank investing on terms that improve outcomes for private investors.
At the later stage, British Patient Capital (BPC), established in 2018, addresses the scale-up finance gap by investing in venture growth funds and co-investing directly in promising UK companies. With a GBP 2.5 billion mandate over 10 years, BPC focuses on long-term, patient capital to help firms scale beyond Series B/C rounds. It has catalysed billions in private investment, improved firm valuations, and supported innovation and job creation, especially in sectors like life sciences, deep tech, and financial services.
In the United Kingdom, the Crown (via the British Business Bank) acts as a cornerstone Limited Partner (LP) in venture-growth and patient-capital funds. A lower fiscal-exposure option for New Zealand would be to convene a commercial, private fund‑of‑funds (FoF) with a private investor, without the Crown as cornerstone LP, to anchor venture‑growth managers. Such a vehicle could accelerate fund closings, improve scale and crowd-in institutional capital, while operating on a fully commercial basis and limiting direct fiscal commitments. This mirrors the British Patient Capital model: a fund that anchors VC/growth funds, helping them reach viable size and complete fund‑raising rounds more quickly. British experience shows this approach increases the supply of capital and improves fund scale, while operating on a commercial basis without distorting private incentives.
However, international experience also shows that minority public cornerstone investments can materially increase effectiveness, particularly in small markets where coordination failures, scale constraints and first‑mover risk deter private LPs. In the United Kingdom, Australia and Canada, minority public capital has helped establish credible fund scale, lengthen investment horizons and catalyse private participation, while remaining commercially disciplined. Relative to a purely convening role, minority Crown investments involve explicit fiscal costs and balance‑sheet exposure, but they also provide stronger signalling, faster market formation and more reliable crowd‑in effects.
Where government wishes to more actively address the NZD 5-50 million equity gap for growth‑ready firms, Business Growth Fund‑type vehicles combining minority Crown capital with private investors offer a proven model. Other OECD countries, including Australia, Canada, Ireland and the United Kingdom, have set up government funded Business Growth Funds (BGFs) that partner with the private sector. In 2022, New Zealand also considered a Business Growth Fund styled on the successful Australian scheme, but it failed to launch. Design features, including choosing the main retail banks as partners that had worked in Australia, did not in New Zealand. An explanation may be that although they were eventually reduced to 250%, as in Australia, the capital risk weight was initially set at 400%, curbing the banks enthusiasm. In addition, unlike Australia or the United Kingdom, no independent fund manager, like NZ Growth Capital Partners for Elevate, was proposed to allocate the funds, and the retail banks were expected to manage SME selection. The fund also appeared to have too widely targeted most SMEs in a given revenue range.
International practice shows BGFs can partner beyond banks. Canada’s Business Growth Fund (CBGF) is backed by banks and insurance companies, operates independently and provides patient, minority growth capital to mid‑market firms. BGF Ireland combines banks with the sovereign Ireland Strategic Investment Fund (ISIF). Australia’s ABGF is a public‑private partnership between the Commonwealth and six major banks, and initial policy development considered including superannuation and insurance investors alongside banks. These variants demonstrate that ownership and capital‑partner mixes can extend to insurers, sovereign funds and government, not just retail banks.
Business growth funds success factors in Australia and the United Kingdom include government funds providing minority patient capital, setting up an independent fund manager, and providing mentoring support to company boards in some cases. Experience and the interest of pension fund managers to diversify into private capital private suggests that rather than the retail banks, there may also be more success with a focus on partnering with private equity and other fund and pension managers, supported by wholesale financial advisers and advice from the highly successful NZ Super Fund. As discussed above, involving Māori capital investors as partners provides New Zealand with a unique advantage in scaling energy, natural resource and regionally based firms with strong growth plans.
Deepening public market pathways for smaller issuers would also help. New Zealand now has Catalist as stepping‑stone options between private funding and a full NZX listing. As discussed below, the Catalist Public Market is a licensed, “stepping‑stone” exchange designed for SMEs to raise up to NZD 20 million with periodic auctions and periodic (rather than continuous) disclosure, lowering cost and complexity relative to a traditional listing while maintaining regulated investor protections. Further reducing fixed transaction costs and smoothing exit pathways can make NZD 5–50 million rounds more viable. Standardised due‑diligence templates, plus “short‑form” disclosure for repeat issuers on licensed markets, would reduce per‑deal cost. Clearer stepping‑stone pathways (e.g., Catalist to NZX) could improve secondary liquidity and founder/employee sell‑down options while maintaining investor protections. Considering calibrated adjustments to, capital‑raising parameters (e.g., increasing) and secondary‑trading liquidity on Catalist could also reduce fixed costs per raise and broaden feasible issuance in the NZD 5–50 million range.
4.3.2. Public equity markets: Promoting share market listing and trading
New Zealand’s equity ladder narrows sharply at the public end, which constrains the expansion of a new wave of innovative companies in new sectors that New Zealand needs to lift productivity growth. The key to opening this channel is to develop a far more vibrant secondary growth board on the New Zealand Exchange (NZX). The New Zealand share market is small by international standards and concentrated in a limited number of sectors, with health care, industrials, and utilities making up around two-thirds of the S&P/NZX 50 Index. However, with the right regulatory and institutional settings, even small economies can have extremely dynamic and successful public equity markets. In international comparison, listing costs in New Zealand are relatively high, especially for smaller issuers.
Public equity markets have contracted over the past decade. The number of domestic companies listed on the NZX has fallen from around 170 in 2015 to about 110 in 2024. This is part of a global trend. Since 2005, more than 35 000 companies have delisted worldwide, and IPO activity has fallen in Australia, the United Kingdom and other large markets since 2021, suggesting global forces are partially responsible (Figure 4.11). This international decline partly reflects a combination of rising regulatory and compliance costs, and the growing depth of private markets, particularly private equity and venture capital, which may have reduced incentives for smaller and mid-sized firms to list publicly.
Capital raised in IPOs
Source: Calculations based on data from LSEG.
The decline in IPOs has been particularly steep in New Zealand (Figure 4.12). There have been no major domestic IPOs since Winton Land Ltd. in late 2021. We note that Locate Technologies delisted from the ASX and relisted on the NZX in December 2025. As a result, the number of companies listed on the NZX has steadily declined. Firms that successfully scale-up frequently opt for trade sales to Australian private equity firms or direct listings on the Australian Securities Exchange (ASX), where capital pools are deeper, analyst coverage is broader, and secondary market liquidity is stronger. This pattern reflects not only financial considerations but also the reputational and administrative burdens of being a listed company in a small, thin public equity market.
The NZX operates with limited depth outside a handful of large issuers. Thin liquidity discourages institutional investors, such as KiwiSaver managers, whose investment mandates typically restrict exposure to small or illiquid stocks. Low free floats further constrain index participation, and limited analyst coverage reduces the information available to investors, raising required risk premia and depressing valuations. Attempts to build SME growth segments have not gained traction, while secondary market trading is shallow beyond a small group of large names. With lower valuations and liquidity, fewer companies consider listing, which further reduces information production, market participation and investor engagement.
Source: Calculations based on data from LSEG.
Market outcomes reinforce these structural concerns. Over the past decade, firms listed on the NZX have shown relatively weaker performance than peers on major overseas exchanges, with lower profit growth than companies on the ASX or London Stock Exchange (FTSE) (Figure 4.13). This pattern aligns with the absence of new high-growth entrants and the limited depth of secondary markets. Limited analyst coverage and thin trading volumes could amplify this effect. Dividend payout ratios are comparatively high, especially for energy companies, consistent with mature cash-generative firms and limited reinvestment. In small, illiquid markets, lower price discovery weakens valuation signals, raising firms’ cost of equity and dampening incentives to invest. Over time, this can suppress productivity growth by slowing capital reallocation towards more dynamic firms, even though well-functioning public markets can generate positive externalities that private equity and trade sales alone cannot replicate.
Average compound annual growth rate, 2016-2025
Note: Calculations based on available data for companies included in NZX50, OMX30, ASX50 and the thirty highest valued companies in the FTSE.
Source: OECD calculations based on LSEG data.
A previous wave of listings shows that well-designed public offerings can deepen market capacity. In the early 2010s, the government partially floated three state-owned electricity generators and retailers — Meridian Energy, Genesis Energy and Mighty River Power — under a mixed-ownership model. Minority stakes were sold, while the government retained majority ownership. These listings increased the market capitalisation of the NZX, broadened its sectoral composition, and attracted new domestic investors.
Independent evaluations found that in the first years after listing, the mixed ownership companies achieved stronger financial performance and more efficient use of capital (TDB Advisory, 2018), with higher earnings, improved returns on assets, and strengthened balance sheets as the firms adopted greater commercial discipline and transparency. The companies also became core constituents of benchmark indices, helping to improve liquidity on the NZX. However, this momentum was not sustained. After the electricity flotations, few other large firms have listed domestically, and the NZX has not seen comparable transactions that could anchor market depth. In 2025, Fonterra chose a 100% trade sale of its consumer brand business over even a partial public listing, highlighting the challenges in revitalising the NZX.
The challenges of New Zealand’s small scale have led some commentators to suggest that listing on the ASX is the only viable route. However, relying solely on offshore listings carries risks. Experience shows that small New Zealand firms listed exclusively on the ASX often receive limited analyst coverage and trading attention, reducing liquidity and valuation performance. Maintaining a credible domestic market, even if closely integrated with the ASX, therefore plays a complementary role by providing an accessible platform for mid-sized companies to scale and enabling domestic investors to participate in national growth.
The economy-wide and social benefits of maintaining a domestic public equity market justify targeted policy interventions to make listing in New Zealand more attractive and to rebuild market depth. Importantly, the expansion of the VC market and the growing scale of KiwiSaver funds provide an important opportunity: even small shifts in institutional allocations could generate a far larger funding line than recent IPO activity.
Several structural factors have constrained new listings on the NZX. The fixed costs of preparing an IPO are high relative to firm size in New Zealand’s small economy. For example, the cost of preparing prospective financial information (PFI) alone has been estimated at NZD 150 000–500 000, while total listing expenses, including underwriting, legal and advisory fees, can amount to several percent of funds raised. Climate reporting requirements have added further costs, estimated at up to NZD 300 000, although recently agreed reforms to raise the reporting threshold, in relation to market capitalisation from NZD 60 million to NZD 1 billion should reduce these costs for smaller listed entities once implemented through legislation. Ongoing disclosure, audit and governance obligations impose heavy administrative burdens and annual costs in a range of NZD 0.5 to 1.1 million. These compliance costs weigh particularly on small and mid-sized firms, reducing the relative benefit of going public. Even firms that could meet the cost often perceive limited benefits because public markets provide few advantages over private capital in terms of speed, certainty and confidentiality. These costs are similar to those in the United Kingdom, where IPOs have also fallen dramatically, but higher than in Canada and much higher than in Sweden (Table 4.5). Sweden requires smaller boards with lower fees and fewer mandatory disclosures.
Source: Nasdaq First North Price List; Nasdaq Going Public Guide; Nasdaq First North Rulebook; District Metals Nasdaq Compliance; TSXV Listing Cost Guide; Baker McKenzie TSVX Fee Guide; ISED Canada SME Compliance Guide Cost Study; NZX Issuer Fee Schedule; NZX Listing Fees; AIM Fee Calculator; Baker McKenzie AIM Guide; One Advisory on AIM Reporting; Oxford Economics Compliance Cost Study; ASX Listing Fees; ASX Issuer Services; Australian Investor Relations Association COBL Report; ASIC Regulatory Costs; ASX Compliance Updates.
Lack of information for evaluation is another barrier. Few domestic brokerages and research houses cover smaller stocks, leaving investors with little analysis on which to base valuations. This raises perceived risk and illiquidity premia, depressing share prices and further reducing incentives to list. By contrast, firms that cross-list on the ASX can tap into a deeper analyst ecosystem and broader investor base. Low free floats on the NZX exacerbate the problem by limiting index inclusion and discouraging institutional investors that require scale, which in turn keeps trading volumes thin and bid-ask spreads wide. Attempts to create SME-focused market segments have not gained traction, leaving smaller firms with few liquid secondary-market options if they list.
Governance and liability concerns add to these deterrents. Directors of listed firms face stricter legal obligations and greater reputational exposure than those of private companies, which can deter experienced individuals from joining the boards of newly listed firms. For founders, the transition from concentrated ownership to dispersed public shareholding can also be culturally and operationally challenging. While New Zealand does not impose explicit tax disincentives to listing, it also lacks targeted incentives or streamlined regulatory processes to offset the high upfront costs and execution risks of an IPO.
The composition of the domestic investor base reinforces these barriers. Institutional mandates, particularly for default retirement savings products such as KiwiSaver, tend to favour low-fee, highly liquid global exposures rather than domestic small-cap equities. Retail participation is rising but from a low base and remains fragmented. This leaves a narrow set of price-setting investors for new listings, constraining demand and undermining valuation support for potential issuers. Nevertheless, some KiwiSaver funds have recently shown greater interest in less liquid, higher-returning private assets, and could also extend this appetite toward listed small and mid-cap equities.
Underlying market scale also limits the pipeline of firms that might realistically list. Many promising companies are acquired by private equity funds in Australia or redomicile overseas rather than pursue a domestic listing, reducing the pool of potential issuers. Cultural attitudes may reinforce this pattern, as some founders prefer the privacy and control afforded by private markets and remain cautious about the costs and scrutiny associated with public listing.
Policy options to revitalise public listings
The Swedish case, which shows that small economies can sustain vibrant public markets by enabling earlier entry for smaller firms, tailoring obligations to size with modest listing costs (Table 4.6), and fostering active retail participation, is a good example for New Zealand. Sweden recorded more IPOs than any other economy in Europe, including far larger ones in 2024. New Zealand has previously experimented with secondary market platforms, including NZAX and later NXT, which saw limited uptake and were eventually closed. More recently, Catalist has been established as a growth-oriented exchange designed to support smaller firms, although listings activity has so far remained modest. Understanding the factors behind these outcomes will be important for designing effective future market segments. This suggests that regulatory design needs to be complemented by sufficient market depth, intermediary capacity and investor participation. A targeted government programme for New Zealand—combining clearer and proportionate listing rules and tax incentives for stronger information production and liquidity, a broader domestic investor base, periodic large-cap listings, and deeper trans-Tasman links—could help restart the listing flywheel. The benefits extend beyond IPO counts as more transparent and liquid equity markets lower the cost of capital, improve price discovery, and support productivity growth.
Reducing the fixed costs of listing and ongoing compliance would help make public markets more accessible, particularly for smaller firms. Current requirements on disclosure, audit and governance are largely designed for larger issuers and can be disproportionate for mid-sized companies. Recent regulatory amendments that make the disclosure of prospective financial information (PFI) optional for IPOs are a welcome step in this direction, helping to reduce preparation costs and align New Zealand’s rules more closely with international peers. Introducing a more graduated listing framework on the NZX, such as that in Sweden, with a streamlined secondary growth board like Nasdaq First North, and simplified disclosure rules, could lower entry costs while maintaining appropriate safeguards (Table 4.6). These softer listing requirements have helped contribute to vibrant small-cap markets in Sweden. Aligning regulatory processes and timelines to provide more certainty around approval would also reduce execution risk for prospective issuers. Establishing a clear service standard for regulatory reviews could further enhance predictability. New Zealand already operates alternative market platforms with lighter requirements, such as Catalist, though their limited scale to date suggests that regulatory design alone may not be sufficient to sustain vibrant growth markets.
Source: NZX Issuer Fee Schedule; NZX Listing Fees;. Institute of Directors NZ Director Fees; MBIE Climate Disclosures; Chartered Accountants ANZ Audit Fees; NZX Regulation and Governance Rules on ESG; NZX Compliance Guide; Nasdaq First North Price List; Nasdaq First North Rulebook; Nasdaq Going Public Guide; Merit 500 Nordic Board Remuneration; Allshares Nordic Governance; District Metals Nasdaq Compliance.
Measures to strengthen information production and liquidity are also needed. Expanding analyst coverage could be encouraged through targeted support for broker research on small-cap stocks, for instance via matched public funding or tax credits. In several OECD countries, such as Sweden, the United Kingdom and Canada, targeted tax relief and cost-offset schemes have been used to help smaller firms to access public equity markets. In line with international practice, New Zealand could also consider a tax relief for companies below a certain revenue threshold that undertake an IPO, helping to offset the upfront advisory and compliance costs of listing. Such an incentive, combined with proportionate listing requirements, would make public markets more accessible for medium-sized firms while maintaining fiscal discipline and fairness. Some stakeholders note that shifts in parts of the brokerage sector toward wealth management activities may have reduced research coverage and visibility for smaller listed firms.
Improving post-listing liquidity could involve facilitating market-making arrangements and encouraging larger initial free floats to support index inclusion. This could be supported, for example, through temporary fee reductions for designated market-makers. This approach would be consistent with the practice in Sweden’s Nasdaq First North market, where lower listing costs and liquidity-support arrangements, including market-maker incentives to support continuous bid-ask quoting, have helped deepen liquidity and sustain a vibrant small-cap ecosystem. Raising the visibility of the small-cap segment, including through retail investor education campaigns, would further help reduce perceived risk premia and improve valuations. Providing structured post-listing support services, such as investor-relations training and regulatory guidance for smaller issuers, could help sustain market participation.
Concerns about directors’ liability and governance obligations could be addressed by clarifying and, where appropriate, adapting these frameworks for smaller listed firms. This could involve setting clearer proportionality thresholds—such as differentiating governance and disclosure requirements by company size, revenue, or listing board—to ensure that obligations remain commensurate with scale and risk. For example, Sweden’s Nasdaq First North applies proportionate governance and disclosure standards. Companies on these markets are not subject to the full Corporate Governance Code or IFRS reporting and typically operate with smaller boards and simplified disclosure obligations. This framework helps to lower compliance burdens for smaller issuers, while maintaining investor confidence. Complementary training or mentoring programmes for founders transitioning to public markets could also ease cultural and operational challenges. Promoting success stories of listed firms could help shift cultural perceptions and encourage founders to view public listing as a viable growth pathway. Allowing dual class share structures, as is common in comparable small advanced economies, could further alleviate founder concerns about loss of control and support greater uptake of public listings.
Widening the domestic investor base is another priority. Institutional mandates, especially for default retirement savings products, such as KiwiSaver, could be reviewed to ensure they do not unduly discourage exposure to domestic equities. Facilitating the development of small-cap focused investment vehicles could help broaden the set of price-setting investors. Greater participation by retail investors could be supported through measures that improve market access, transparency and investor confidence, alongside continued efforts to strengthen financial literacy. Incentivising domestic institutional investors to anchor listings of high-growth local firms could also help build a stronger pipeline of companies that remain in New Zealand rather than relocating abroad.
Deepening international connectivity could improve market scale and depth. The NZX already maintains cooperation with the ASX, allowing for dual listings and information sharing under the Trans-Tasman Mutual Recognition of Securities Offerings (MRSO) framework. This arrangement has helped New Zealand firms access a wider investor base, but differences in listing fees, liquidity, and analyst coverage still favour the ASX. More could be done to strengthen the operational links between the NZX and the ASX, such as harmonising disclosure templates, coordinating trading hours, and exploring cross-market clearing or settlement mechanisms, under the Single Economic Market agenda to allow New Zealand firms to reach a larger analyst and investor base while maintaining a domestic presence.
Developing closer ties with other regional exchanges, for example, the Singapore Exchange (SGX), could further expand access to capital. Existing cooperation, such as joint initiatives between NZX and SGX in derivatives markets, demonstrates the potential for deeper exchange linkages. Singapore’s common-law framework, English-language business environment, and role as one of the region’s leading financial hubs make it a natural partner for attracting regional investors and facilitating cross-border listings. Such links could open new capital channels for New Zealand firms seeking growth in high-potential Southeast Asian markets, while reinforcing the credibility of New Zealand’s market architecture. In parallel, the central and local governments could consider selectively using partial listings of large, widely held enterprises to anchor market depth, drawing on the experience of the electricity company flotations in the early 2010s.
Introducing an Equity Savings Account
A key element of Sweden’s highly successful public equity market with more small firms accessing public equity markets than far larger countries is its Investment Savings Account (ISK account) (Box 4.5). The ISK account has significantly increased retail investor participation in capital markets, including younger and first-time investors, with over 4 million ISK accounts in 2024 and half the adult population having an ISK. The ISK helping to channel household savings into listed equities (OECD, 2025a).
Sweden has developed one of the most dynamic and inclusive equity markets relative to its economic size in Europe and across the OECD. Despite being a small, open economy, Sweden consistently outperforms much larger markets in terms of both IPOs and the number of listed companies. A key driver of this success is the Nasdaq First North Growth Market, launched in 2006 as a secondary board under the main Nasdaq Stockholm exchange, becoming a major entry platform for high-growth companies.
There are around 640 companies listed on First North and other growth markets, compared with around 390 in France and 120 in Germany (Table 4.7). This is among the highest number of listings per capita in Europe and compares favourably with the leading countries on a growth market listings per capita basis, such as Australia and Canada. First North’s success reflects significant retail capital inflows facilitated by the Swedish equity savings account, ISK, proportionate disclosure and governance requirements, lower listing fees, and lighter ongoing compliance compared with the main market, while still providing sufficient transparency to support investor confidence.
Source: OECD (2025), Equity Markets for Growth Companies, OECD Publishing, Paris, https://doi.org/10.1787/bbffd4f7-en. (See Table A. A.1).
These features have enabled firms to access public equity earlier in their growth trajectories. The number of listed companies in Sweden has more than doubled since the early 2000s, with most new listings occurring on First North. Liquidity has also improved, supported by an active domestic retail investor base and a dense ecosystem of analysts, brokers and small-cap funds that specialise in growth stocks, making Sweden one of global leaders in connecting SMEs to public equity markets.
The ease of access to the ISK account and the replacement of capital gains taxation with a simple annual tax on the accounts value have made it attractive for retail investors to engage in more frequent trading and small-scale investing in smaller growth companies. Indeed, Swedish brokers have integrated ISK accounts, giving access to secondary board listings and often promote IPOs of smaller firms making it easier for retail investors to participate. This has helped boost liquidity in small cap shares, which in New Zealand often suffer from low trading volumes.
To support capital market development especially for small firms and growth market listings and encourage retail participation in IPOs and ownership of New Zealand firms, consideration should be given to introducing a non-retirement New Zealand Equity Savings Account (NZESA). As discussed above, Catalist, the growth equity market has not scaled and international experience suggests this is in at least in part because the existing sources of funding prefer to go elsewhere, into private equity, trade sales, large highly liquid stocks etc. Like the ISK, an NZESA could be limited to exchange traded equity and debt securities with derivatives, private equity, commodities, crypto currencies not being held in the NZESA. Like an ISK, the NZESA could be simple retail equity savings account to help fill the equity funding gap for small, innovative, fast-growing listed companies, but with a New Zealand specific tax design to help a core New Zealand’s savings tax problem: the large bias towards housing.
An NZESA could be a useful short to medium-term savings instrument complement to KiwiSaver and other funding sources. An NZESA could be a retail source of funding for a new wave of secondary board small company listing as all existing other funding sources from KiwiSaver to NZ Super to foreign investors appear to face mostly appropriate constraints, such as liquidity risk and rules, diversification considerations and lack of familiarity with the market that curb their funding to New Zealand public equity growth markets. While KiwiSaver funds can also be an important funding source of funding for smaller companies, e.g., as limited partner in a fund of funds, their stake is likely to be limited by KiwiSaver fund manager priority on liquidity and diversification and keeping risk exposure reasonable, given KiwiSaver’s purpose is retirement savings. An NZESA could complement KiwiSaver, helping reinvigorate retail investor interest in equity markets and attract funds away from low-yielding bank deposits and cash and house price speculation. For example, in Sweden only 10% of household financial assets are allocated to deposits and cash, the lowest share in Europe, compared to 20% in New Zealand. An NZESA could also provide a simple, transparent vehicle for investing in exchange traded, liquid, high-growth, small listed companies for retail investors. The NZESA would help existing retailer investment platforms, like Sharesies, “re-democratise” equity investment while also providing investor protection. Unlike public listed equities, lower net worth households cannot access private equity investments. High net worth individuals are classified as wholesale investors and therefore have very little protection when they invest in non-listed private equity entities, the reliability and performance of which is highly variable according to professional wholesale financial advisors.
The Swedish ISK experience underlines that simple tax treatment adapted to the country’s overall tax system is key to incentivising retail investors (OECD, 2025a). Sweden has a more comprehensive capital gains tax on realised gains. This made the very low-rate tax on the value of assets held in the ISK a very attractive feature for Swedes. By contrast, New Zealand households rarely pay tax on capital gains on equity sales. However, as discussed above, New Zealand does have a large tax bias towards housing investments and away from financial assets. To increase the attractiveness of an NZESA for households, taxation of NZESA, as part of a wider reform of taxation of savings, including KiwiSaver, could be shifted from the standard TTE regime to a tax on withdrawals only, i.e. EET. As well as making NZESA attractive to investors this would help reduce overall tax distortions in the economy by reducing the bias towards housing investments and thereby draw capital away from housing.
A simple tax on the value of assets in the NZESA and no trading activity reporting to the tax authorities would avoid complicated revenue calculations based on the location of the assets and encourage more trading activity by removing the concern of being classified as a trader and therefore liable to capital gains tax. The ISK is limited to exchange traded equity and debt securities and derivatives; private equity, commodities, crypto currencies cannot be held in an ISK. Transparency, monitoring and tax collection could be facilitated by compulsory reporting on NZESA accounts to the Inland Revenue Department.
An important risk of immediate access to funds in an NZESA is that it would attract investors away from KiwiSaver. This risk of diversion could be mitigated by KiwiSaver being compulsory. However, as discussed above, there is evidence that default settings are the key driver of contributions levels to auto enrolment pension schemes. KiwiSaver also maintains a large advantage of employer and in some cases government co-contributions. Finally, under current KiwiSaver liquidity rules, NZESA would be complementary to KiwiSaver in offering access to a wider range of assets and notably listed small firms on the New Zealand growth equities board but with a higher risk-return trade-off than KiwiSaver, while KiwiSaver retains its place as the trusted pre-eminent private retirement savings vehicle. These factors should help informed investors self-select into KiwiSaver or KiwiSaver plus NZESA.
Further developing retail equity investor platforms
Sweden has the highest retail equity participation per capita in the world. Easily accessible ISK accounts on the retail investor platforms, such as Avanza and Nord net, have been important in widening the take up of the ISK and linking retailer investors with an ISK especially to investment opportunities in smaller listed companies. In New Zealand, the Sharesies retail investor platform, introduced in 2017, could play such a role alongside other potential providers in operationalising an eventual NZESA, whether as additional account for investors or integrated into existing platform accounts. Sharesies has many desirable features, offering fractional shares and access to the NZX, ASX, NYSE, Nasdaq and ETFs. It has already had success in building retail investment in equities with 860 000 account holders across New Zealand and Australia and recorded NZD 3.1 billion in trading activity in 2024Q4.
Swedish experience suggests further simplifying tax compliance where relevant, for example through automatic direct reporting and tax payments to the Inland Revenue Department by the retail investor platform would also help reduce administrative burdens for investors. A simple flat tax on the asset value in the NZESA as discussed above would facilitate this by making it simple for the retail investment platform to calculate and pay tax on behalf of the investor. Retail investment platforms, like Sharesies, could also enhance access to SME equity and IPOs by broadening or systematising account holder participation in IPOs as well as new or revitalised public growth equity board companies.
The New Zealand bond market, including government and corporate bonds, is small in international comparison but has the pre-requisites for expansion. The New Zealand Debt Management Office (NZDMO) has established a deep and liquid central government bond market, maintaining a yield curve out to 30 years and using inflation-indexed bonds. This provides a solid foundation for expanding the smaller corporate debt market (Table 4.8). Several other strengths open a window of opportunity for expanding capital markets debt finance for firms with high growth potential. These include successful local government debt pooling arrangements by the Local Government funding Agency (LGFA), the Financial Markets Authority (FMA)’s innovative approach to financial regulation and an emerging FinTech industry and growing interest by KiwiSaver funds in investing in a wider range of assets.
Note: Data from June-September 2025 sources.
Source: New Zealand Treasury, Local Government Funding Agency, and NZX.
Expanding the corporate debt market could play a key role in breaking down high barriers for firms to access external debt finance due to over reliance on lending by a few retail banks, which are largely focused on home mortgage lending. Indeed, high-growth firms (HGFs) have limited access to external debt finance and are heavily reliant on personal funds and retained earnings. Most HGFs are SMEs and bank lending to firms tends to be short-term focused and procyclical and SMEs have limited access to countercyclical finance (NZ Treasury, 2025). Lending to SMEs declined sharply in 2023 and 2024 as the economy weakened, and shorter, small-scale financing has become more common, crowding out long-term lending for investment. Bank lending is also asset-based, and firms face high collateral requirements (OECD, 2025e). This limits lending to high-growth tech and other firms with intangible assets, which acts as a major constraint on innovation and productivity growth (IMF, 2025). SMEs including HGFs often lack the scale or documentation to meet traditional bank lending criteria (MBIE, 2021), contributing to loan rejection rates that are higher than the OECD average (Figure 4.14).
When loans are granted, they come at a high cost (Figure 4.15). The interest rate spread between loans to large and small firms is around 450 basis points, which is one of the highest in the OECD. During 2022, monetary policy tightening contributed to the rise in the average interest rates for SMEs from 8.5% to 11.2% (OECD, 2024e).
2023 or latest
Source: OECD (2024), Financing SMEs and Entrepreneurs 2024: An OECD Scoreboard.
Difference between loan interest rates for large firms and SMEs 2023¹
1. 2022 data for Canada and 2016 data for New Zealand.
Source: OECD (2024), Financing SMEs and Entrepreneurs 2024: An OECD Scoreboard.
Weak competition between the main retail banks also contributes to a high cost of bank credit (Box 4.6). Retail bank focus on home mortgage lending and declining share of their lending going to business contributes to little competitive pressure on the private credit market, where private credit funds and other institutional investors provide debt finance to firms. Competition is further constrained by the small scale of the private market, which limits the interest of offshore private debt funds in New Zealand private credit markets. As a result, HGFs are often charged interest rates over 10% and up to 15% for private credit.
New Zealand’s banking sector is highly concentrated. Four large Australian-owned banks account for around 90% of total banking assets and generate profits equivalent to roughly 3% of GDP, among the highest in the OECD (OECD, 2024; Charles, 2024). Their similar business models, limited differentiation, and low volatility of returns indicate weak competitive pressures. High profitability and interest margins largely reflect the dominance of mortgage lending and limited contestability in the business-lending segment.
Such concentration constrains innovation and the availability of credit for smaller firms. Total credit to non-financial corporations amounted to around 70% of GDP in the fourth quarter of 2024, down from nearly 80% in the corresponding quarter in 2019 (Figure 4.16). This is well below levels observed in many advanced economies, including Sweden (166%) and Canada (117%), albeit slightly above Australia (61%). Even when broader private-sector credit is considered—about 160% of GDP in 2024—New Zealand’s ratio remains moderate, and most lending continues to be directed to housing and household borrowing. Bank credit to the private sector, at around 132% of GDP, is similar to Australia’s but again reflects the dominance of mortgage lending.
Credit to the corporate and private sectors, % of GDP
Note: Data refer to Q4 values for each year.
Source: Bank for International Settlements.
Recent government initiatives, aiming to address these long-standing structural constraints, are welcome. In December 2024, the government announced measures to boost competition by strengthening Kiwibank as a domestically owned challenger to the four large Australian banks and directing the Reserve Bank of New Zealand to place greater emphasis on competition in its financial policy remit. Plans included providing Kiwibank with access to additional capital—potentially through private institutional investment—and reviewing capital thresholds and entry barriers for new lenders. KiwiBank announced in December 2025 that the reduction in RBNZ core equity capital requirements together with a NZD 400 million Tier 2 subordinated notes placement gave them sufficient capital room to continue growing without the need to raise equity capital. In May 2025, the government took further steps by designating the banking sector under the new Customer and Product Data Act, paving the way for the introduction of open banking by the end of 2025. This framework will enable FinTech firms to access customer data (with consent), encouraging innovation, faster switching, and lower borrowing costs. In parallel, the Reserve Bank’s consultation in September 2025 on the use of the term “bank” under the forthcoming Deposit Takers Act aims to modernise the regulatory framework and ensure that all licensed deposit takers, including smaller institutions, can compete on a more level playing field. Together, these ongoing reforms are expected to make the banking system more contestable, enhance consumer choice and gradually rebalance credit towards more productive business lending.
4.4.1. Improving credit information
New Zealand lacks a unified, mandatory SME credit‑information system. SME credit data are fragmented across banks and non‑bank lenders and are not shared in a standardised way, limiting competition and reinforcing collateral‑heavy lending as well as impeding SME loan securitisation. Private actors cannot on their own mandate reporting or common data standards. Credit information systems can play an important role in increasing SME access to capital markets debt finance and public credit ratings can reduce transactions costs (Thomson et al., 2018; OECD, 2025e). International experience suggests that a domestic credit rating agency or official sector provided ratings of SME debt, such as Banque de France’s FIBEN system or Germany’s Credit reform or Italy’s Cerved reduces information asymmetries, supports bank risk assessment, and underpins SME access to capital‑market debt (e.g., Italian “minibonds”) (Galindo and Miller, 2001; OECD, 2024e; World Bank, 2019; Iannamorelli et al., 2023; Table 4.9).
Source: Banque de France (2023); OECD (2020); Cerved Rating Agency (accessed 6 October 2025).
New Zealand should establish a central domestic credit register focused on high-growth small firms. A New Zealand register would entail compliance costs and privacy safeguards, but European evidence shows these costs are outweighed by lower risk premia, more contestable lending, and greater SME capital‑market participation. The register should focus on SME, and notably high-growth firm credit, only, not run-of-the mill SMEs or households. Alignment with market use is essential. Data templates should be interoperable with NZDX listing requirements and private placements to support bond issuance, securitisation and warehouse financing. It could be, for example, modelled on Banque de France’s FIBEN system adapted to New Zealand. Establishing a register would require mandating banks and non-bank lenders to report SME credit data. Ratings could be based on financials, payment history and qualitative assessments. FIBEN ratings are also used in regulatory capital calculations reducing the capital charge on highly rated SME debt (Banque de France, 2023). To ensure the register facilitates debt capital markets development, it would also be important to align reporting requirements with NZX rules to enable the use of ratings in bond issuance, securitisation and private placements as discussed below, while keeping these requirements proportionate to the size of the companies.
4.4.2. Opening up the corporate bond market to high-growth small firms
High capital requirements appear to have contributed to weak business lending compared with Australia and reforms to lower them would likely help (Chapter 1). However, the high profitability of home mortgage lending and the small capital market in New Zealand compared to Australia mean that the main Australian-owned retail banks are unlikely on their own to lead expanding debt financing for firms in New Zealand, where SMEs account for 98.8% of all firms (OECD, 2024e). Large corporates already issue offshore and use owner loans or private placements but SMEs lack scale to access these channels. Offshore bonds and shareholder loans play an important role for large issuers, but SMEs lack the scale, ratings and documentation capacity to access these channels efficiently. As discussed below, an enhanced domestic ecosystem consisting of a credit register, more standard document templates, a pooled SPV for SME and especially high-growth firm debt and a streamlined process for private placements would help lower the cost of term debt for growth firms. It could alongside equity market measures, discussed above, contribute to filling the financing gap for firms in the NZD 5-50 million range.
There are 145 debt instruments listed on the New Zealand Debt Market (NZDX), with a market value of NZD 55 billion. Investment grade rated debt (S&P A and above) accounts for around 60% of listed debt. Large corporate borrowers (banks, utilities, infrastructure and state-owned enterprises) enjoy good access to bond markets in New Zealand and offshore at tight spreads over the similar duration sovereign bond rate. Being foreign owned also helps large corporate access offshore debt markets. There is depth in these segments of the domestic market, with reasonable liquidity and tight bid-ask spreads. However, overall, the market is fragmented, and corporate bond issuance is one of the lowest in the OECD (Figure 4.17). SME access to the corporate bond market is rare due to small scale, high issuance costs and regulatory complexity (OECD, 2025e). A targeted policy mix should reduce fixed costs and broaden investor access while maintaining proportionate disclosure.
2024
OECD (2025), Global Debt Report 2025: Financing Growth in a Challenging Debt Market Environment, OECD Publishing, Paris, https://doi.org/10.1787/8ee42b13-en.
Securitisation already exists in New Zealand, including RMBS and asset‑backed structure, but issuance volumes are small. The Australian Securitisation Forum’s NZ dashboard confirms ongoing (but limited) New Zealand issuance, and legal and practice guides describe a mature framework (trust-based SPEs, warehouse funding, listing options). The main constraints are lack of scale, standardisation, and loan‑level transparency. New Zealand could develop a pooled SME‑loan vehicle (SPV) and standard templates, widely used in OECD countries, including France, Ireland, the Netherlands the United Kingdom, and the United States. The SPV would aggregate SME loans from banks and non‑bank originators (including digital lenders), issue tranched notes to institutional investors, and publish loan‑level data. This requires credit‑enhancement layers (equity/mezzanine/senior) and standard reporting, not blanket guarantees. The goal should be to reduce execution risk and make institutional‑grade SME credit investable at scale.
International experience suggests a pooled debt instrument for SME loans adapted to the New Zealand financing environment could significantly improve access to external debt finance for SMEs (Table 4.10). Pooling would allow retail banks and other FinTech loan originators to transfer credit risk to capital markets and free up capital for further SME lending. This would lower SME borrowing while giving investors the opportunity to diversify into SME credit exposure (OECD, 2015b).
Strong credit enhancement via layers of loss absorption may mean no or a limited government guarantee is required. In Australia, the government’s role has generally been as a temporary market buyer in stress (e.g., during COVID‑19) and through an SME securitisation fund (ABSF), not as a standing guarantor. Commitments under the SFSF have expired, leaving a private system in place.
Source: OECD Secretariat. NZX Listing Debt; Mayne Wetherall Structured Finance; United States Securities and Exchange Commission Asset-Backed Securities; United States Small Business Administration SBA Guide; Australian Office of Financial Management; Twenty Four; EIF Guarantees and Securitisation; EIB SME Initiative; ECB Loan-Level Requirements; British Business Bank FinTech; British Business Bank Partnership; Tech Funding News.
An SPV can also help isolate SME loan assets from a loan originator’s balance sheet, protecting investors if the originator fails. While the retail banks in New Zealand have strong capability in origination and should remain central participants, their reluctance to lend to business makes FinTech (digital SME lenders) origination a particularly attractive complementary option. These lenders already operate in New Zealand and can reduce origination costs, improve speed and reach underserved SMEs with limited collateral (OECD, 2022c).
FinTechs use automated credit scoring and alternative data (e.g., accounting software and e‑commerce platforms) to assess creditworthiness, accelerating approvals and reaching underserved SMEs. Experience from the United Kingdom, a global leader in FinTech, shows that FinTech platforms, working with the British Business Bank, delivered loans quickly and to a wider range of SMEs during COVID‑19 (OECD, 2022c). Publicly listing SPV notes, similar to the EU EIF ABS model, would enhance liquidity, price discovery and investor confidence by improving exit options for institutional investors.
New innovation tools, including a regulatory sandbox, could provide an enabling environment for developing SME credit instruments. Within the sandbox, lenders and issuers can test automated credit‑scoring models, alternative data sources, streamlined disclosure approaches for wholesale investors, and standardised reporting templates suitable for securitisation or pooled SPV structures. These tools help reduce fixed compliance costs, support experimentation with digital origination and enhance loan‑level transparency, creating regulatory certainty for both FinTech and traditional institutions and enabling scalable SME credit markets.
4.4.3. Making more use of private placements of SME debt
Ensuring that SMEs can access external finance at reasonable cost requires a diversified set of instruments, not only bank lending and securitisation but also flexible bilateral options (OECD, 2022d; OECD, 2025f). Private placements, targeted to wholesale investors under the Financial Markets Conduct Act, offer a lower‑cost, lower‑disclosure alternative to listed bonds. A Schuldschein‑style instrument, structured as a bilateral loan documented by a promissory note, could be readily implemented under New Zealand law. Standardised documentation and a simple placement workflow would allow repeat issuance and facilitate secondary transfers among institutional investors.
These instruments are widely used in Germany by Mittelstand (specialised SMEs with global reach) firms and are increasingly adopted in Austria, France, the Netherlands, Switzerland and the United Kingdom. Their appeal lies in combining flexibility for issuers with predictable documentation standards and access to a broad base of professional investors. For New Zealand’s mid‑sized firms—often seeking NZD 5–50 million and too small for listed bonds but too large or fast‑growing for traditional bank loans—private placements can offer a practical route to longer‑term funding at competitive rates.
The FMA’s innovation tools can be used to pilot standardised documentation, loan‑level reporting and streamlined wholesale‑investor disclosure for private placements. These improvements would help reduce fixed deal costs, support secondary transfers of privately‑placed SME loans and improve price discovery. A more liquid and transparent private‑credit channel would make these instruments more attractive to institutional investors, including KiwiSaver providers, and help fill the financing gap for mid‑sized New Zealand firms.
4.4.4. Mobilising capital market finance for infrastructure investment
New Zealand’s general government investment reached around 4.9% of GDP in 2025, among the highest in the OECD, reflecting a prolonged period of under‑investment and the need for significant renewal across core networks (NZIC, 2021). A large share of spending is directed to social infrastructure, health, education, housing, which is consistent with central government’s broad service‑delivery role. Significant challenges remain in water, social infrastructure, and uneven rural digital connectivity. Ensuring a secure, low‑emissions electricity supply will also require material new investment (Chapter 3).
Transport is a major urban bottleneck. Multiple assessments confirm that Auckland experiences some of the highest congestion levels in Australasia, with 29 million hours lost annually, peak‑hour speeds falling below 25 km/h, and the city ranking 77th out of 500 globally for congestion (EY-ARUP, 2025). Fiscal tools (e.g., congestion charging) and targeted investments can help moderate these problems (Chapter 1) although they cannot eliminate these congestion pressures. The New Zealand Infrastructure Strategy and the National Infra structure Plan (NIP) highlight that future demand for land transport capital is expected to decline from historic levels, with greater emphasis on maintenance, resilience and targeted improvements rather than major network expansion (NZIC, 2022; NZIC, 2026).
Fiscal constraints mean that private capital can complement public funding where projects generate durable revenue streams or measurable long‑term cost savings. Capital‑market finance is most suited to sectors with stable cash flows, for example, energy generation and networks, telecommunications, water services operating under long‑term contracting models, and demand‑managed or tolled transport corridors where legislation allows revenue collection. Mobilising private finance can support more rigorous commercial evaluation, stronger cost‑benefit analysis and clearer performance incentives, while maintaining public oversight (OECD, 2021; OECD, 2024f; IMF, 2020; World Bank, 2012). However, private financing cannot substitute for public funding where no revenue model exists and may create additional fiscal risk if poorly structured.
Recent institutional reforms have strengthened the environment for private capital. The 2025 Investment Summit showcased projects to international investors, while the establishment of National Infrastructure Funding and Financing Ltd (NIFF) in December 2024 created a specialised entity for structuring PPPs and assessing their value‑for‑money. The revised PPP framework aims to increase programme certainty and improve risk allocation, consistent with OECD guidance. Most major private‑financing arrangements in New Zealand have relied on availability‑payment models that sit on the government balance sheet, highlighting the importance of robust fiscal management.
Despite these institutional strengths, institutional investor allocation to infrastructure, particularly through KiwiSaver, remains low relative to international peers. KiwiSaver funds allocate less than 3% to infrastructure, though the data includes a mix of domestic and international assets and is not directly comparable with large overseas pension funds, which face lower liquidity pressures and less member switching (MBIE, 2024b). The core constraint is therefore not a shortage of finance, but a shortage of investible, revenue‑supported projects.
There are three key barriers to overcome. First, finance‑sector stakeholders note insufficient capacity to prepare investment‑grade business cases, especially at the local‑government level. Second, project fragmentation and limited pipelines in commercially viable sectors reduce scale and investor visibility. Third, local‑government revenue and debt‑ceiling constraints restrict councils’ ability to undertake investments regardless of funding source, whether via the Local Government Funding Agency (LGFA), New Zealand’s successful pooled‑borrowing agency, or private markets (NZIC, 2024). Most local‑government assets, stormwater, local roads, parks and community facilities, do not generate commercial revenues, and councils typically avoid higher‑cost private finance where LGFA rates are lower but covenants binding.
Improving local‑government business‑case capability, through strengthened appraisal, clearer evidence bases and more consistent methodologies, can enhance investment quality, but cannot resolve structural borrowing constraints. Tools created under the Infrastructure Funding and Financing Act allow for off‑balance‑sheet financing through NIFF, but uptake has been limited due to higher interest costs, administrative complexity and long transaction lead times. More durable solutions lie in broadening local‑government revenue capacity through growth‑responsive tools, targeted rates, or user charges, to ease debt‑to‑revenue ratios and expand borrowing headroom. Treasury provides extensive Better Business Case guidance, cost-benefit tools, and optional Gateway assurance reviews, but councils are not required to apply these frameworks, and uptake varies.
International experience suggests that pooling smaller or regionally aligned projects can help create investible scale for institutional investors. Multi‑council investment platforms, as used in the Netherlands, can bundle water, waste, digital or resilience projects into portfolios with clear governance, credit structuring and reporting. ESG‑aligned frameworks, such as extending the LGFA sustainable‑bond programme, can help attract specialised ESG investors where compliance costs are proportionate and aligned with genuine investor demand. ESG elements should remain voluntary and applied only where a clear commercial or strategic rationale exists.
Private capital will flow most readily into sectors with predictable revenue streams or legislated charging mechanisms. Recent amendments to the Land Transport Management Act expand opportunities for tolling in parts of the state‑highway network, though local roads lack equivalent tolling powers. New congestion‑charging provisions could also support commercially structured investments. The Water Services Act 2025 allows long‑term contracts with private entities while retaining public ownership and price‑setting authority. Mobilising additional investment will therefore depend less on new financial instruments and more on expanding and stabilising the revenue frameworks in sectors where commercial returns can realistically be achieved.
New Zealand’s capital market regulation was considerably reformed in the wake of the collapse of the local non-bank deposit taking finance industry (2006–12) and the Global Financial Crisis (2007–09). Reforms remain ongoing. The current regulatory regime has many strengths, including high levels of investor protection, transparency and overall strong alignment with IOSCO and OECD financial market regulation principles. However, structural constraints, such as market shallowness, fragmented licensing, limited FinTech scale and uneven policy–regulator feedback loops, continue to weigh on capital markets development (Figure 4.18). Addressing these constraints aligns with the Government’s 2024–25 response to the Finance and Expenditure Committee Inquiry into Banking Competition, which highlights the need for greater regulatory coherence and strengthened conduct oversight.
New Zealand Financial Regulation, Agencies and Licences
Note: Bubble is an agency, solid lines show overlaps; dashed lines show coordination and dotted red lines policy to conduct linkages. Ministry of Business, Innovation and Employment (MBIE); Commerce Commission (ComCom), Reserve Bank of New Zealand (RBNZ); Financial Markets Authority (FMA); Council of Financial Regulators (CoFR); Financial Service Providers Register (FSPR).
Source: OECD Secretariat.
New Zealand’s regulatory model broadly resembles large-market twin peaks (separate conduct and prudential regulators) frameworks in Australia and the United Kingdom, though operating on a smaller scale and with a more complex distribution of responsibilities. There remains separation of policy and conduct regulation, and conduct regulation is split across multiple agencies. The Ministry of Business, Innovation and Employment (MBIE) leads on policy, while the Financial Markets Authority (FMA) is the independent conduct regulator, and the RBNZ handles prudential regulation, and the Commerce Commission has historically overseen credit regulation. Ongoing reforms will streamline this architecture. The Credit Contracts and Consumer Finance Amendment Bill transfers responsibility for credit regulation from the Commerce Commission to the FMA, while the Financial Markets Conduct Amendment Bill consolidates conduct licensing into a single regime. Coordination is fostered by the Council of Financial Regulators (CoFR) which adopted a revised, leaner and more strategic operating model in December 2025. Coordination challenges persist but do not require structural integration The AML/CFT supervisory structure is also being simplified under the Anti Money Laundering and Countering Financing of Terrorism (Supervisor, Levy, and Other Matters) Amendment Bill, which establishes a single AML supervisor and streamlines compliance processes for some categories of reporting entities.
While global minimum prudential standards (Basel Core Principles) imply baseline regulatory and supervisory costs, New Zealand’s regulatory system retains elements of fragmentation (Figure 4.18). Historically, overlapping conduct oversight and multiple conduct approvals have increased compliance costs. For example, a full-service bank may require several different approvals, including Financial Advice Provider (FAP), Managed Investment Scheme (MIS), Conduct of Financial Institutions (CoFI) licences and Credit Contracts (CCCFA), in addition to Anti-Money Laundering and Counter Financing of Terrorism (AML & CFT) registration. OECD governance principles emphasise that policy and regulatory execution should be separated implying that policy should remain with MBIE and the Treasury, while regulators provide structured advisory input (OECD, 2014). In a small, shallow market this separation heightens the importance of effective coordination mechanisms to ensure policy settings are well‑calibrated to sector needs.
The government should implement its proposed reforms to simplify this structure, including establishing a single conduct licence, consistent with practice in small EU economies such as Estonia, Finland and Sweden, and with the transfer of CCCFA oversight to the FMA (Box 4.7). There, remains scope to strengthen coordination and policy effectiveness. Unlike some small economies that integrate policy and conduct regulation, New Zealand should maintain separation in line with OECD governance standards, establishing more structured channels for regulator and industry input into policy making. Some mechanisms already exist, for example, the Financial Markets Conduct Act requires consultation with the FMA before regulations are made (section 549). However, these could be complemented by more systematic arrangements, such as standing joint work programmes, formal policy‑development phases with early regulatory input, and regular industry roundtables coordinated through the Council of Financial Regulators. More focused joint work programmes for the Council of Financial Regulators, such as current work on insurance affordability and payment system reforms, would improve the calibration of regulatory settings while preserving clear institutional roles. International experience shows that small markets benefit from deeper, more formalised joint work programmes in areas in areas such as FinTech, SME capital access and KiwiSaver where regulatory settings have high technical content and where policy must closely track market innovation. Strengthened joint work programmes also help maintain sectoral expertise within policy agencies, reducing the risks associated with small market scale, staff turnover and rapidly evolving technologies such as AI, tokenisation and new forms of digital advice. Embedding structured collaboration mechanisms therefore enhances policy effectiveness.
Experience from small jurisdictions that have moved to a single conduct licensing regime (including Estonia, Finland, Ireland, Malta and Luxembourg) highlights several practical transition lessons. Early implementation typically creates temporary licensing bottlenecks as firms migrate to the new regime. These countries mitigated early backlogs through phased transition windows, dedicated implementation units and early publication of transitional guidance, including tools showing how previous authorisations map onto the new single licence. Transparent reporting of licensing timelines, combined with quality‑review processes, also helped ensure consistency in early supervisory decisions.
Successful transitions also invested in staff capability by seconding staff across agencies and drawing on industry expertise to address specialist gaps. Small firms adapted more easily where regulators provided targeted support such as drop‑in clinics, model templates and simplified guidance. Ministers in the first two years of implementation typically monitored a concise set of indicators: licensing processing times, the reduction in duplicate obligations, consistency of supervisory decisions and the impact on compliance costs, particularly for smaller providers. These early metrics helped maintain momentum while longer‑term market‑deepening effects emerged more gradually.
The regulatory regime is innovative in intent but limited in scale. The FMA’s introduction of a regulatory sandbox in 2025 to support FinTech experimentation is in line with international best practice. International evidence shows that sandboxes are most effective when integrated into a wider innovation ecosystem that includes early-stage funding, university partnerships, business support programmes and access to appropriate data assets. When embedded within such an ecosystem, sandboxes can support innovations that address SME financing gaps, alternative equity funding mechanisms and Māori participation in capital markets.
New Zealand could accelerate growth of its emerging FinTech industry by selectively expanding its innovation support tools, while keeping costs proportionate and focusing on areas where scale constraints limit market development, such as SME capital market access and retail investor access to diversified investment products. This could include enhancing role the innovation hub. For example, like the United Kingdom, offering dedicated support to firms developing new business models, such as a single contact point for innovators and pre-application guidance. Developing digital testing environments aligned with the Consumer Data Right framework could help support experimentation and new entrants. Targeted innovation challenges or Techsprints on themes, such as SME equity market access, could complement these initiatives.
The FMA uses a principles-based approach to regulatory guidance together with practical guidance tools but coverage is uneven. The FMA already provides practical tools, including case studies, FAQs and co‑developed guidance, for example, the Reasonable Grounds for Financial Advice guidance, and has established the Financial Advice Regulatory Panel to strengthen two‑way engagement with advisers and industry experts. OECD regulatory principles support clear, proportionate and accessible guidance. Stakeholders identify scope to apply these tools more consistently across regulatory domains. Stakeholders report that while the FMA provides detailed practical guidance in some domains, guidance is lighter or more conceptual in others, resulting in uneven interpretability across obligations. Smaller providers noted that, where case studies or examples are unavailable, principles‑based standards can be more resource‑intensive to operationalise More systematic use of worked examples and templates would support smaller providers in interpreting obligations, reduce compliance costs and enhance competitive intensity.
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