Private capital expenditure on machinery and equipment

IBISWorld forecasts private capital expenditure on machinery and equipment to rise by 0.2% in 2024-25 to $17.12 billion. As the New Zealand economy recovers from the COVID-19 pandemic, businesses are expanding their operations and investing in new equipment to meet increased demand. This could include investments in new production lines, automation technologies, or upgrades to existing machinery. The manufacturing sector is also a significant contributor to the New Zealand economy and investments in machinery and equipment help boost productivity and competitiveness. As businesses seek to modernise their operations, they invest in new technology to improve efficiency, reduce costs and develop new products.

Meanwhile, the government plays a crucial role in encouraging investment in machinery and equipment through policies like tax incentives, grants and infrastructure development. Tax incentives can enhance the financial appeal of business investments. For example, New Zealand's R&D tax incentive offers a 15% tax credit on eligible R&D expenditures up to $120 million. Also, infrastructure improvements open new opportunities for business expansion, often necessitating acquiring new equipment.

Overall, private capital expenditure on machinery and equipment has increased because of the rising capital intensity of many industries in New Zealand. Businesses have looked to enhance productivity by incorporating more capital equipment per worker. IBISWorld forecasts private capital expenditure on machinery and equipment to grow at a compound annual rate of 1.1% over the five years through 2024-25.