2025-2030 Funding Agreement
Between
The Minister of Finance
And
The Reserve Bank of New Zealand
1. This Agreement is made between the Minister of Finance and the Reserve Bank of New Zealand (Bank) under section 209 of the Reserve Bank of New Zealand Act 2021 (the Act).
2. This Agreement comes into effect on the date it is signed by the Minister and the Bank and it applies for the period of 5 consecutive financial years commencing on 1 July 2025 (Agreement Term).
It is agreed that:
Total expenditure for period 2025-2030 (section 210(1)(c) and (d))
3. The total amount that may be paid or applied in meeting the expenditure incurred by the Bank for the period of 5 consecutive financial years within the Agreement Term in performing or exercising its functions or powers under the Act or any other legislation is $775.6 million, comprising:
Total operating expenditure of $750 million;
and Total capital expenditure of $25.6 million.
Operating expenditure (section 210(1)(b) and (d))
4. The amounts that may be paid or applied in meeting the operating expenditure incurred by the Bank in each financial year in performing or exercising its functions or powers under the Act or any other legislation, are:
$155 million for the year commencing 1 July 2025
$145 million for the year commencing 1 July 2026
$145 million for the year commencing 1 July 2027
$150 million for the year commencing 1 July 2028
$155 million for the year commencing 1 July 2029
Capital expenditure (section 210(1)(b) and (d))
5. The amounts that may be paid or applied in meeting the capital expenditure incurred by the Bank in each financial year in performing or exercising its functions or powers under the Act or any other legislation, are:
$13.6 million for the year commencing 1 July 2025
$4 million for the year commencing 1 July 2026
$3 million for the year commencing 1 July 2027
$3 million for the year commencing 1 July 2028
$2 million for the year commencing 1 July 2029
Excluded expenditure (section 209(5)(b))
6. This Agreement does not include the following expenditure by the Bank:
a Expenditure described in section 209(5)(b)(i) to (vii) of the Act; and
b The following expenditure agreed by the Minister of Finance and the Bank to be exempt expenditure under section 209(5)(b)(viii):
i Expenses, costs or losses arising from the Reserve Bank Staff Superannuation and Provident Fund;
ii Expenses, costs or losses arising from litigation;
iii Expenses, costs or losses relating to property management;
iv Security custodian expenses;
v Bank and broking fees;
vi Expenses, costs or losses associated with the provision of ESAS and NZClear services;
vii Costs and expenses directly associated with the production, management and removal of currency, including that incurred by the Bank in performing or exercising its functions or powers under sections 149 to 151 of the Act, up to a maximum of $65 million over the Agreement Term;
viii Costs and expenses incurred by the Bank to prepare detailed business cases and subsequent costs and expenses for the following capital projects:
- 2 The Terrace refurbishment or replacement;
- New cash vaulting infrastructure; and
- Central Bank Digital Currency;
ix Costs and expenses incurred by the Bank referred to in sections 199 and 230 of the Deposit Takers Act 2023;
x Costs and expenses incurred by the Bank in response to a failure of the cash distribution system that results in the Bank's direct involvement in the transport or distribution of cash; and
xi Costs and expenses incurred by the Bank in respect of the Deposit Takers Act implementation project delivery, in accordance with the Board approved business case, and up to a maximum of $15 million in the period 1 July 2025 to 30 June 2028.
No carrying over of underspends without variation to Agreement
7. If the expenditure forecast to be incurred by the Bank in a financial year is less than an annual expenditure amount as set out in paragraphs 4 and/or 5 (an Underspend), the Bank is not permitted to apply the Underspend to a subsequent financial year unless there is an agreement between the Bank and the Minister by way of a variation under section 209(4) of the Act.
Process for requesting variation to carry over an Underspend
If the Bank wishes to apply an Underspend to a subsequent financial year then the Bank must give Treasury reasonable notice prior to the end of the particular financial year of any anticipated Underspend and set out why the Bank considers it desirable to be applied to the subsequent financial year.
Material change in Bank's operating environment requiring redetermination of expenditure
A material change in the Bank's operating environment for the purposes of section 210(2)(b) of the Act, such that the level or levels of expenditure in this Agreement will be redetermined between the Bank and the Minister, includes any amendment to the Bank's functions or powers under the Act or any other legislation or any change in how the Bank is funded to carry out those functions or exercise those powers (including via any new fees, charges and levies).
Funding proposal 2025-2030
This was the RBNZ’s original five-year funding proposal submitted to the Treasury in September 2024, designed as a starting point to Five Year Funding Agreement (FYFA) negotiations between the RBNZ, Treasury and the Minister of Finance.
This proposal was developed in line with the Minister of Finance’s April 2024 Letter of Expectations to the Chair of the RBNZ Board, which set out the Minister’s expectation that the RBNZ align its 2025-2030 FYFA proposal to the Crown’s fiscal sustainability programme. To meet this expectation, RBNZ applied a 7.5% reduction to our baseline funding, which was our budget for the 2024/25 financial year, extended over the period of the next funding agreement, including allowance for inflation.
Through the course of the negotiations, we worked with Treasury to go further in reducing our funding for the 2025-2030 period.