The Labour Party has promised to increase New Zealand’s foreign aid spending as fiscal conditions allow, while National plans to slash it.
But both parties have said they would prioritise the Pacific – Labour to shift spending towards climate resilience, and National to “protect it” from cuts.
Labour foreign affairs spokesperson Vanushi Walters said that the Pacific would remain a priority for the aid programme, which it would raise as close as possible to a target of 0.7 percent of gross national income, or around $3 billion.
This is in line with a target set for wealthy countries by the OECD, which has reported plummeting aid levels globally as the US and Europe pull back.
Walters stopped short of making any year-by-year promises.
“We know that that is a significant commitment, which is why we’ve said it’s a horizon commitment,” she said.
“I’m not saying that we would take steps to that toward that in the next year… we are firmly focused on addressing the cost of living for New Zealanders here.”
The government raised aid spending slightly this year to $1.2 billion in Budget 2026, funded by a $162.5 million underspend in 2024.
In nominal terms, the current government has run a three-year aid budget (a triennium) comparable to Labour’s most recent term – around $3 billion.
Additionally, $110m in aid spending for the Indo-Pacific was set aside for the next triennium. Pacific Islands countries receive roughly two thirds of the total aid budget.
Aid ‘not a priority’ for current government – Treasury
In contrast to Labour, National has pledged to divert aid spending – outside of that allocated to the Pacific region – to fund bowel screening and medicines at home.
This election policy carved out $431.2m in IDC and admin costs, a ten percent cut overall, over the next three years. It would also seek a further $45.6m in savings from departmental costs within MFAT.
The party nevertheless promised that the Pacific “will be fully protected, reflecting the importance of our closest neighbours and strongest interests.” It did not say whether this differentiated bilateral aid direct to the Pacific from multilateral aid – to the UN, for example – that would impact the region.
Examples of “wasteful” aid spending provided by the party included “smart agriculture systems in Latin America and the Caribbean, workshops with indigenous farmers in Patagonia, and installing livestock emissions equipment at universities in South Africa,” among other things.
National leader and Prime Minister Christopher Luxon told reporters today that it’s “just not right” that aid money is being spent in areas that don’t serve New Zealand’s national interest.
“I think this is a very sensible tradeoff,” he said, adding that like economies such as the UK and Canada have made very similar choices.
“We’re going to be more choiceful, a little more intentional about how we deploy a billion dollars worth of aid budget each and every year.”
But the foreign minister, NZ First’s Winston Peters, called it “both desperate and dangerous” and said it would jeopardise international relationships.
Meanwhile, National will push ahead with the government’s current defence plans. Budget 2026 upped the defence budget by $3.5 billion this year, with a government commitment to increase defence spending to 2 percent of GDP – $12b – over eight years.
Advice to Finance Minister Nicola Willlis from Treasury ahead of Budget 2026, released last month, emphasised that defence was a key priority for the government this year, while foreign affairs, and thus aid spending, was not.
Treasury officials advised Willis to disregard the 0.7 percent OECD standard for aid entirely.
“We disagree with the approach of providing spending uplifts in line with GNI, as this would create fiscal pressure… spending should be justified in terms of its value-for-money, outputs, and outcomes.”
A separate document revealed that MFAT had tried for the absolute maximum aid spend possible ahead of the budget. The original bid for aid was $740.35 million over the next four years, which was whittled down to just $238.50 million – 68 percent less.
“If investment in Pacific resilience is a high priority we would recommend funding is focused on more responsive and targeted initiatives (including where outside of IDC), or defence spending,” officials told Willis.
No ‘ad infinitum’ defence spend – Labour
Vanushi Walters said that Labour was concerned New Zealand’s external priorities would drift towards “militarisation” under the status quo.
She said Labour supported a tempered increase in defence spending, coupled with a shift in focus towards areas like disaster relief.
“I do think that regional security requires that, but certainly not at the cost of development and aid.”
“We will not shift one eye from that focus on development and climate. We must keep that horizon objective front of mind so that it doesn’t become solely an objective of increasing defence funding.”
Vanushi Walters
VNP / Phil Smith
Walters said aid and defence would be regarded as equal priorities.
“We cannot get pulled into this idea that you have to spend two or three percent of your budget on defence. I think that defeats the purpose of our spend in the Pacific, which is really ultimately to protect the Pacific’s interests.”
“Pacific leaders are telling us that is about energy resilience, that is about climate, that is about about development and infrastructure.”
Asked directly by RNZ if National’s policy prioritised militarisation over diplomacy, Luxon said no.
