Budget 2026 is a restrained, back-to-basics package with no major new forestry-specific spending. However, for forest owners and forestry businesses, the real action is in the details: lower Emissions Trading Scheme (ETS) costs, significant infrastructure investment that will affect how you move logs, rising employment costs, and tax changes that apply across the board.
Here is what you need to pay attention to and what you should do about it.
ETS costs drop again for forest owners
The Government has proposed lowering the annual ETS charge for post-1989 forest land from $14.90 to $10.25 per hectare per year. This represents a 66% reduction in the annual charge since the National-led Government took office, down from the $30.25 per hectare that was in place under the previous government. Updated settings are expected to take effect from mid-2026.
For forest owners with large registered areas, this is a meaningful saving. On a 500-hectare block, the annual charge drops from $7,450 to $5,125, a saving of $2,325 per year. The Government is also introducing eight new targeted service fees for specific activities and is consulting on an alternative reduced charge for forests that no longer need to report carbon stock changes.
If you have not already reviewed the consultation documents, do so before the new settings take effect. Understanding which fees apply to your specific situation could make a real difference to your annual ETS costs.
Forestry exports are strong, but the global outlook is uncertain
New Zealand’s forestry exports are forecast to reach $6.3 billion in the year to June 2026, a 2% increase on the previous year. The food and fibre sector as a whole is expected to hit a record $62 billion in exports.
Those numbers are encouraging, but the sector faces headwinds. Subdued construction activity in key overseas markets, particularly China, continues to weigh on log demand. The Middle East conflict has pushed up fuel and shipping costs, and global trade uncertainty is not going away soon.
Budget 2026 does not offer direct subsidies or grants for forestry exporters. The Government’s position is clear: spending restraint now, surplus by 2028/29. For forestry businesses, that means any margin improvement will come from your own operational efficiency and market positioning, not from government support.
Rail and road investment: better infrastructure for log transport
The capital spending in Budget 2026 is relevant to forestry businesses even though it is not labelled as forestry spending. The Government has allocated $705 million in capital and $477 million in operating funding to renew and upgrade KiwiRail’s network from 2027 to 2030. A further $400 million has been committed to state highway resilience upgrades, including roads that are critical freight corridors.
For forestry businesses that rely on rail to move logs to port, the KiwiRail investment is positive. For those using road transport, the highway resilience package could improve access on routes that have been vulnerable to weather-related closures.
If your forestry operation depends on specific transport corridors, it is worth understanding which routes are included in the upgrade programme and planning your logistics accordingly.
Rising employment costs across the forestry workforce
The employment cost increases that took effect on 1 April 2026 are hitting forestry businesses directly. The minimum wage has risen to $23.95 per hour, KiwiSaver minimum employer contributions have increased from 3% to 3.5% (with a further step to 4% from April 2028), and the ACC earners’ levy has risen from 1.67% to 1.75%.
Forestry already carries high ACC levy rates given the physical nature of the work. The earners’ levy increase adds another layer on top. If you employ planting crews, harvest workers or truck drivers, your payroll costs are higher this year, and they will go up again in 2028.
The Government’s decision to scrap final-year fees-free and redirect funding to trades training offers a partial offset. Budget 2026 provides $69 million to double the number of Trades Academy places to 20,000 by 2030, alongside additional Youth Guarantee places. A stronger pipeline of trade-trained workers should help ease the skills shortage in forestry over time, but the benefit will not be immediate.
FBT simplification: good news for forestry vehicles
The proposed FBT changes in Budget 2026 are particularly relevant for forestry operations. The new category-based system, expected to apply from 1 April 2027, will classify vehicles by their level of private use rather than vehicle type. Under the proposed framework, vehicles used mainly for business purposes with only commuting as private use would attract an FBT inclusion rate of just 20%, and vehicles used across multiple worksites with no other private use would attract 0%.
For forestry businesses that provide utes and work vehicles to staff, this could reduce both compliance costs and FBT liability. The removal of the logbook requirement alone will save time and administrative effort.
What should forestry businesses do now?
- Review your ETS position. Check whether the reduced annual charge and new targeted service fees apply to your registered forest land. If you have forests that no longer need to report carbon stock changes, explore the alternative reduced charge option.
- Update your employment cost forecasts. Model the full impact of the minimum wage increase, KiwiSaver step-up and ACC levy change on your workforce costs. Factor in the 2028 KiwiSaver increase as well.
- Assess your transport logistics. Understand which rail and highway routes are included in the Government’s infrastructure upgrade programme and plan your log transport accordingly.
- Prepare for FBT changes. Classify your fleet against the proposed vehicle categories and assess the potential savings from the new system before it takes effect in April 2027.
- Keep a close eye on your margins. With no direct government support and rising costs across the board, your profitability depends on getting your operational settings right. Regular financial reviews are worth the investment.
Budget 2026 is not a forestry-focused budget. But the combination of lower ETS charges, infrastructure investment, rising costs and tax simplification adds up to a set of changes that affect every forestry business in New Zealand.
How Moore Markhams can help
At Moore Markhams, we work with forestry businesses and rural landowners across the country. Whether you need help with ETS compliance, workforce cost modelling, tax planning or financial forecasting, we are here to guide you through it. Talk to your local Moore Markhams adviser here.
