Infrastructure: Price of a world-class infrastructure system

Dr Alan Bollard. Photo / Nick Reed

The figure was stark. Building its way out of current and future public infrastructure challenges will cost 9.6 per cent of national gross domestic product over a 30-year period — equivalent to about $31 billion a year and almost double what the country currently spends.

This was the view of the Infrastructure Commission, chaired by former Reserve Bank governor Dr Alan Bollard, in its draft strategy which was presented to the Minister for Infrastructure Grant Robertson.

So how does New Zealand create a world-class infrastructure system over the next 30 years?

The commission suggested five ways:

• Good decision-making is critical for getting the most from infrastructure: We need to prioritise the infrastructure that will make the biggest difference to economic, social, cultural and environmental wellbeing and support a high quality life for all New Zealanders.

• Infrastructure is not free and someone must pay: There are many ways to fund — prices or user charges are standard practice in some sectors, while public subsidies are more common in others.
Funding and financing tools should also reflect the period of time over which infrastructure assets deliver services.

• An enabling planning and consenting system is essential: To deliver on affordable housing, net-zero emissions economy and others, the planning process needs to be co-ordinated, equal to the urgency of the challenge, and even overhauled — this would make it faster and cheaper to build new homes.

• Greater use of technology, such as artificial intelligence, will improve the delivery of infrastructure and the services it provides: There is significant opportunity to increase the speed and uptake of technology, and greater use has the potential to improve productivity, infrastructure delivery and services, raise wages and improve skill levels.

• We need the right people at the right time with the right skills to build and run the infrastructure: New Zealand is competing for skills that are highly sought after as international demand for infrastructure accelerates. By 2024, the country will need some 118,000 more construction workers, for instance.

The commission said a credible infrastructure pipeline will become essential to give firms the confidence to invest in skills development and training.

Measures to smooth out infrastructure across business cycles are also important for deepening labour pools and giving confidence.

"We now find ourselves facing hard decisions about how we keep up with the increasing demands of a growing population (set to increase by more than 1.7 million within three decades, the size of another Auckland).

"These choices and decisions come with a price tag.

"We have to spread these costs fairly, both across and within generations, so that those who are benefiting are paying.

"At the same time, we can use the way we pay to manage demand and get more efficient use out of our existing infrastructure, such as (congestion) charges for using our busiest roads at peak times," the commission said.

Established in September 2019, the commission made 67 recommendations to central and local government and the infrastructure sector.

But there were no lists of priority projects.

Instead, the commission suggested world-class infrastructure would involve multi-modal transport; people living close to work; upgrading technology in power, wastewater, drinking water, rail and fibre; zero waste to landfill; connections for tele-health and online learning; off grid solutions; and solar and wind production.

This would connect rural communities and producers; create reliable, resilient networks (electricity, water, rail, road and internet); and produce globally integrated digital citizens; affordable, healthy homes; beautiful connected and inclusive neighbourhoods; getting around more easily; good jobs; carbon neutral in 2050; and efficient, liveable cities powered by clean energy.

The commission said "by harnessing our low-emissions energy resources alongside other complementary technologies like hydrogen, we could treble our annual electricity supply."

Electric vehicles are projected to grow from less than 1 per cent of the light vehicle passenger fleet to 93 per cent within 30 years — and the vehicles would account for more than half of the additional electricity needed by 2050.

The commission is waiting to receive feedback from the Minister for Infrastructure — Robertson needs to respond by the end of the year.

The final strategy will then be delivered to Robertson by March next year.

In the meantime, the commission continues to analyse, engage and complete environmental scanning.