When New Zealand was installing new electrical infrastructure early in the last century, local governments held referendums on whether the significant capital investment was justified.
“It turned out that people really wanted a big level of service improvement like electrification, and so the outcomes of the referendums were 85% to 90% yes,” says Geoff Cooper, Chief Executive at Te Waihanga, the New Zealand Infrastructure Commission.
“It shows that expensive, but high-quality infrastructure services can garner broad-based support.”
Today, however, opinion polls have shown that while New Zealanders are often dissatisfied with the nation’s infrastructure, “there is a real reluctance to pay more”.
Cooper says, “That might be frustrating for those planning new infrastructure services – but it is not all that surprising when you consider that New Zealanders actually spent more per capita than any other OECD country between 2010 and 2019.
“There is a high bar to ask New Zealanders for more – and when it comes to projects: the proof has to be in the pudding,” says Cooper.
This perceived lack of delivered value is only one part of New Zealand’s infrastructure dilemma, even though there are some positive signs of change.
For example, Cooper says the sector is having “more sophisticated and joined-up conversations” around what has to be done to make projects investable.”
There’s also a growing appetite for greater consensus on projects and long-term decision-making.
“There is recognition that continuing to switch between project portfolios is expensive,” says Cooper.
“Project and reform oscillation has probably shown us that we can’t always walk, chew gum and juggle all at the same time.”
Despite the challenges, Cooper points out that New Zealand’s infrastructure networks measure up well when compared against other small, high-income countries with similarly challenging terrain and small and dispersed populations.
New Zealand has about as much road network, electricity generation, and water and wastewater pipes per person as its peer countries. In some cases, like fixed broadband network and school infrastructure, New Zealand has better infrastructure than its peers.
“New Zealand also has significant social licence to invest in infrastructure.
The country is just outside the top 10% among OECD member nations for infrastructure spending over the last few decades, “but we are rated among the lowest 10%” for the efficiency and outcomes from this investment.
There are several reasons for this which Cooper says are unique to New Zealand.
“New Zealand has a population about the size of Greater Sydney, but we are building infrastructure over a much greater area and much more challenging terrain,” he says.
This is a physical challenge which is difficult to overcome, but Cooper is more optimistic on the chances of jumping another long hurdle, which is in reforming the operating environment to make infrastructure projects more financially sustainable.
He says that with some major projects, a key problem has been that they are under-utilised or do not have the right regulatory framework.
“We build a NZ$5 billion City Rail Link but we don’t let people live around the stations,” says Cooper.
“We might get frustrated that assets like Eden Park in Auckland can’t cover depreciation expenses – but when you stand back and look at the operating environments, a different picture emerges.
“We don’t make it easy to utilise our assets. Limits on the number of concerts Eden Park can hold; making it illegal to build more than 6 stories around rapid transit nodes in Auckland; or restricting operating hours for Queenstown Airport. Each is an example of an operating environment that hampers the feasibility of infrastructure and oftentimes results in discussions for building more assets, which themselves might be underutilised.”
The lesson from these dilemmas is that New Zealand has often struggled to get the most from our infrastructure investment.
These issues have been at the heart of resource management reform – and in many ways, are problems that are broadly acknowledged. It’s one reason why there has been such a long-standing and broad consensus on the need to reform the RMA [Resource Management Act] – even if the path to that is contested.
Cooper says that addressing the broader infrastructure deficit, however, is actually less about new capital investments and more about looking after existing assets.
“If you look at projected spending over the next 20 to 30 years, the thing that hits you in the face is that maintenance and renewals is the vast majority of everything: roughly 60 cents in every infrastructure dollar,” he says.
“It may not make the front pages, but the numbers are unequivocal: maintenance is the biggest game in town. Ignore it and the infrastructure deficit will grow. That’s because if you stop painting the house, at some point you’ll need to replace the weatherboards – and that is far more expensive.”
New Zealand also faces challenges from climate change, which requires an investment in resilience, and also from demographic change which creates issues in funding infrastructure.
“By 2070 for every one person over 65 we will have only two working age people; in 1960 that ratio used to be seven to one,” says Cooper.
“We’ll need more infrastructure to serve an ageing population, and we’ve been investing less in this over time.”
With all these competing priorities, Cooper says New Zealand needs a “big national discussion at a high level” on infrastructure.
This will require an understanding of how much infrastructure New Zealand can reasonably afford, what the appropriate mix is between competing priorities and how private capital can be mobilised to better incentivise things like quality asset management and operation.
“That is our motivation for developing the National Infrastructure Plan: to provide a deeper understanding of the drivers of investment and how they will change. This might sound obvious, but, in general, it is not current practice,” says Cooper.
“That, to me, paints a clear picture of where infrastructure in New Zealand needs to go – from reactive to proactive.
The Infrastructure Commission’s work on the National Infrastructure Plan recognises this need and is based on research and engagement, but they are keen to get feedback from the sector. They plan to share a draft Plan and seek feedback later this year so please keep an eye out and have your say. Consistent with the Commission’s legislated role, the final National Infrastructure Plan will be the Commission’s advice to Government.
