By Steve Mooney
As New Zealand faces ageing infrastructure and fiscal constraints, asset recycling is re-emerging in policy discussions. The concept is simple: sell or lease mature public assets and reinvest the proceeds into new, productivity-enhancing infrastructure. Done well, it can unlock capital without increasing debt or taxes.
Australia has long been the poster child for asset recycling. Their federal government’s 2014–15 incentive scheme offered states a 15% bonus payment for reinvesting proceeds from privatized assets into new infrastructure. The result was an influx of capital into projects like Sydney’s light rail, Melbourne’s level-crossing removals, and Brisbane’s airport link.
New Zealand’s situation is more complex. The pool of significant, revenue-generating public assets is smaller — think major ports, airports, electricity distribution networks, and possibly water assets under the evolving Water Done Well reforms. Many of these are locally owned by Councils, politically sensitive, or integral to regional identity.
Moreover, the political appetite for large-scale asset sales has waned since the contentious partial privatizations of the early 2010’s. Any mention of “recycling” risks being heard as “privatization by stealth.”
Yet the economic case is compelling. Infrastructure deficits across transport, housing, and water could exceed $200 billion in coming decades. At the same time, public finances are under pressure from post-COVID debt, demographic shifts, and climate adaptation costs.
With the right governance, asset recycling can help bridge this gap. Transferring mature, low-growth assets to private or mixed-ownership models allows reinvestment in higher-impact projects. The priority must be to ensure that recycled value exceeds the long-term benefits of continued public ownership.
Australia’s success was underpinned by federal incentives, independent valuations, and transparent reinvestment frameworks — not ideology. These elements helped build public trust and align public and private interests.
For New Zealand, this challenge runs deeper than transaction design. It also requires strong asset management capability — the ability to understand not just what an asset is worth today, but what it costs to maintain over its full lifecycle, and what service outcomes it delivers for communities.
Without robust lifecycle funding models, recycled assets risk being replaced by new ones that repeat the same cycle of deferred maintenance and underinvestment. Reinvestment should therefore be guided not simply by financial opportunity, but by a clear understanding of service outcomes, whole-of-life cost, and community benefit. Asset recycling should be seen as a catalyst for better asset management — not a shortcut around it.
Asset recycling also raises questions of intergenerational equity and stewardship. Selling or leasing long-lived public assets delivers immediate fiscal relief, but it transfers control over future revenue streams. The challenge is to ensure that today’s financial decisions do not erode tomorrow’s capacity to fund essential services.
Embedding stewardship principles — such as the New Zealand Infrastructure Commission’s (Te Waihanga) long-term infrastructure strategy — into asset recycling policies could help balance short-term gains with long-term sustainability. Proceeds could be ring-fenced for projects that improve resilience, productivity, and quality of life for future generations, rather than being absorbed into general expenditure.
Local government assets may offer a pragmatic starting point. Councils under fiscal strain often hold valuable commercial assets — ports, airports, carparks, and property — that could be recycled to fund essential infrastructure like water networks. Developing national guidelines for councils to assess asset recycling within their long-term financial and asset management plans could support consistency and public confidence.
Some agencies, and councils, review value for money of these assets against what they really need. For example, the Auckland Council and Eke Panuku portfolio optimisation programme looks at Auckland’s whole asset and services network and identifies ways to release capital while maintaining or improving services. But these examples are isolated and only rarely consider the whole asset system.
Another example of asset recycling is Hawke’s Bay Regional Council’s 2019 sale of its minority share of 45% in Napier Port to fund the development of a new wharf. The IPO raised $234 million which allowed for the construction of the new wharf (completed in 2022 ahead of schedule and within budget) and a fund to invest in Hawke’s Bay residents. In 2018 the 100% holdings were valued at $291 million, and following the sale, the remaining 55% holdings were valued at $330 million on the Council’s balance sheet.
Investor appetite is strong. Global infrastructure funds are actively seeking long-term, stable investments in transparent, well-regulated markets like New Zealand. A predictable policy framework is key to unlocking this capital.
Ultimately, asset recycling is as much about courage as financial engineering. To work, it demands honesty about trade-offs: who owns what, who benefits, and how proceeds are used. It requires governments and councils to resist the temptation to plug fiscal holes and instead channel funds into long-term, productivity-enhancing infrastructure.
For the public, it requires reassurance that recycling is not code for losing control, but a means to maintain and build future assets without burdening future rate payers and taxpayers. Success should be measured not only in balance sheet gains, but in whether recycled capital improves asset performance, resilience, and service outcomes.
