New Zealand’s infrastructure is under intense scrutiny. From Three Waters to Cyclone Gabrielle, from ruptured pipes in Wellington to growing traffic congestion in Auckland, vulnerabilities in New Zealand’s infrastructure network are glaringly apparent.
National, ACT, and NZ First all made infrastructure a priority on the campaign trail. So, now that they have taken office, what can we expect from the new Government? And what are the opportunities and challenges that lie ahead?
In the short term, the Coalition will push ahead with stop-work notices on a number of the previous Labour Government’s flagship infrastructure projects:
- Three Waters (with assets returning to councils)
- Auckland Light Rail
- Let’s Get Wellington Moving
- Lake Onslow Pumped Hydro
The Government will repeal the Spatial Planning Act and the Natural and Built Environment Act – which replaced the Resource Management Act. It will also recalibrate infrastructure policy. The Government will be keen to show that it can execute where its predecessor fell short, which means an emphasis on delivering projects. It also means being a lot more careful about project selection.
The new Government has signalled that it is open to private investment and alternative funding mechanisms. These include Special Purpose Vehicles and value capture instruments. It can build on Labour’s Infrastructure Funding and Financing Act. It will establish a National Infrastructure Agency to prioritise regional and national projects of significance, coordinate funding, and oversee procurement from the private sector. The Government also intends to establish a 30-year pipeline to deliver long-term certainty.
At the same time, the Coalition agreement between National and NZ First paves the way for a $1.2 billion Regional Infrastructure Fund. This is a major political victory for NZ First in a tight fiscal environment, but whether it will generate value for money remains to be seen. How the Government will prioritise projects will matter, and it has so far provided few signals.
Opportunities
The New Zealand Initiative has long argued that red tape holds the country back from fulfilling its economic potential. In our report Prescription for Prosperity: 2023 Briefing to the Incoming Government, we advocated streamlining the consenting process and stripping away regulation to foster a positive approach to growth and development. The newly minted Ministry for Regulation will have a role here.
The coalition agreements are important first steps in fulfilling this ambition. For example, all three parties have agreed to amend the RMA to make it easier to consent new infrastructure, including renewable energy.
National and NZ First, meanwhile, have committed to fast-track consent and permitting processes for projects of major regional and national significance. The ambition is to get these delivered in one year.
But if the Government wants a credible long-term pipeline of projects, it will need to have rigorous ways of deciding what to prioritise. Otherwise, the next incoming Government will easily be able to throw them on its own bonfire.
Resource consents are a major barrier, sucking up time and capital. Over the past eight years alone, consent times have risen 150 percent, according to a recent report commissioned by the New Zealand Infrastructure Commission. Many worthwhile projects never get started, hobbling our productivity and ability to build what we need. Simplifying New Zealand’s resource consent process would make a world of difference.
Better incentives for local councils are also a winner. Currently, councils do not receive enough of the benefits that accompany new housing and development. While central government takes the lion’s share of the increased tax revenue that comes with population growth, local government must scramble to pay for new infrastructure.
ACT’s agreement with National promises to introduce financial incentives for councils to enable more housing, including consideration of GST-sharing for new residential builds. National has also stated that it will create a $1 billion Building-for-Growth Fund.
If accompanied by new tools for funding and financing infrastructure, the reforms to local government and consenting could help unlock the growth and development that New Zealand so sorely needs.
Challenges
Repealing Labour’s RMA replacement will be welcome, but the prospect of starting again from scratch is daunting. The Natural and Built Environment Act 2023 and the Spatial Planning Act 2023 would have done more harm than good. Given the unpopularity of the RMA, this is no mean feat. Labour’s reforms were blighted by vague language, lack of coherence and seemed unworkable.
But the incoming government has promised to overhaul the RMA with new laws premised on the enjoyment of property rights as a guiding principle. It would be a very welcome improvement. However, finding the expertise to draft a new resource management framework will be incredibly challenging. Labour began its reform project with a giant text produced by one of the country’s top experts within the existing system. An entirely new approach may require outside expertise.
More immediately, the Government will have to demonstrate that the $1.2 billion Regional Infrastructure Fund (RIF) is used wisely. National and ACT were critical of the $3 billion Provincial Growth Fund (PGF) that was the bedrock of NZ First’s coalition agreement with Labour in 2017, and with good reason. The Auditor General released a scathing report on the PGF in 2020, noting that it was difficult to tell why projects were funded or how they were chosen.
The politics swirling around the RIF speak to a deeper challenge facing the new Government. National and ACT have expressed their desire to bolster New Zealand’s international connections so that Kiwi businesses have the skills, capital and talent they need to succeed. By contrast, NZ First is economically nationalist. This tension will need to be carefully managed if Christopher Luxon’s Government is to succeed in delivering better housing and infrastructure. Foreign expertise in some infrastructure delivery should be welcome.
2023 took a toll on New Zealand’s infrastructure. Yet, as the new Government settles into its work, it is important to remind ourselves that better infrastructure is possible with the right policy settings.
To read the article on the NZ Herald website, click here.