1. INTRODUCTION
1.1 This submission on the proposed rates target model for New Zealand is made by The New Zealand Initiative (the Initiative).
1.2 The Initiative is a Wellington-based think tank supported primarily by major New Zealand businesses. We undertake research that contributes to the development of sound public policies in New Zealand, and we advocate for the creation of a competitive, open, and dynamic economy and a free, prosperous, fair, and cohesive society.
1.3 A well-functioning local government system is vital for democratic accountability, fiscal prudence, and sustainable economic growth. The Initiative has published extensively on these issues, most recently in Making Local Government Work (December 2024) and in our submission on the Local Government (Systems Improvements) Amendment Bill (August 2025).12
1.4 We share the Government’s concern about rates affordability. Average rates increases reached 15 percent in draft 2024/25 Long Term Plans, with 2025/26 averaging around 8 percent.3 Local authority rates inflation reached 12.2 percent in the year to June 2025 – the highest in decades.4 These are not sustainable trends, and households struggling with cost-of-living pressures have legitimate grievances.
1.5 However, we submit that the proposed rates target model addresses the wrong side of the problem, risks entrenching infrastructure underinvestment, and should be replaced with measures that strengthen local democratic accountability rather than centralise fiscal decisions in Wellington.
