Greg Lowe. Photo / Supplied
Majority of leaders have given a vote of confidence to new Infrastructure Commission, writes Tim McCready.
The Prime Minister's Business Advisory Council was on the money when it warned Prime Minister Jacinda Ardern that New Zealand is at an "infrastructure crisis point".
Some 86 per cent of CEOs and directors responding to this year's Mood of the Boardroom survey agree: Just 7 per cent disagree, 7 per cent are unsure.
Roads, ports, hospitals and mass-transport systems frequently appeared among comments from respondents as areas that need urgent attention.
Beca chief executive Greg Lowe says New Zealand's current infrastructure — on many fronts — is struggling to meet current demand and is falling further behind in regions that are growing. "We need to be catching up on the infrastructure backlog, not letting it get bigger," he says.
A dairy industry chief executive makes the case that infrastructure is an enabler for a thriving and productive economy that impacts on everything — from people's mindsets, productivity and life balance, through to the flow of goods and services. "Make it easy to be productive and get things done."
Waste Management's managing director Tom Nickels suggests "if we do not address our inadequate infrastructure, we risk becoming a nice place to visit providing you don't mind second rate amenities".
A transport chief executive says the infrastructure challenges are more acute in some regions over others, "however the country is years behind and must not only catch up — but get in front of the curve".
The significance of infrastructure as a concern to our top business leaders can be demonstrated from a question respondents were asked about business confidence.
Asked how concerned they are about the impact of infrastructure constraints on business confidence (on a scale of 1 to 10 where 1 = no concern and 10 = extremely concerned), they scored it 7.39/10.
This was the second highest constraint among those polled, the constraint of highest concern was congestion in Auckland — also linked to infrastructure — which scored 7.60/10.
The head of a major education institution reckons "crisis" is the new buzz word. "A bit overdone in places," he says. "Not sure it is a crisis — but it is certainly challenged," says an energy boss. Local Government Funding Agency chair Craig Stobo suggests "New Zealand's infrastructure is a big bucket … I'm not sure that all of it is in crisis."
The Government recently appointed Alan Bollard to chair a newly launched Infrastructure Commission.
The Independent Commission will have two broad functions — strategy and planning, and procurement and delivery support:
• It will provide expert advice, planning and strategy, and support the delivery of major infrastructure projects across the country.
• It will also be a one-stop shop for investors, including publishing a pipeline of infrastructure projects.
• As an autonomous Crown Entity with an independent board, the commission will have the credibility and influence required to effect real change. Ministers will retain final decision making rights, as is appropriate.
Some 7 per cent of respondents were very confident that the Bollard-led commission would help address New Zealand's infrastructure challenges.
Some 58 per cent were quite confident. But 35 per cent had no confidence the commission would make an impact.
Bollard is a former Governor of the Reserve Bank and Secretary of Treasury. The five other members of the board are: Infrastructure New Zealand's former chief executive Stephen Selwood, MinterEllisonRuddWatts chairwoman Sarah Sinclair, Watercare Services chief executive Raveen Jaduram, former banker and independent director Sue Tindal and Simpson Grierson special counsel David Cochrane.
The Government has shifted transport infrastructure focus from roading to public transport and rail, including the recent announcement of funding for the construction of a Hamilton-to-Auckland passenger rail service. Though when asked to rate the Coalition Government on its performance in addressing transport constraints on a scale where 1 = not impressive and 5 = very impressive, respondents gave a grade of just 1.57/5.
Many of those responding to the survey specifically mentioned roading improvements as essential to the country. A quarter of those surveyed that suggested building more roads to reduce congestion should be a "top three" priority for the Auckland mayoralty.
Waste Management's Nickels says congestion in Auckland remains a major constraint on productivity and quality of life in general.
"The movement of goods and services have become extremely challenging. Our drivers' unproductive time is increasing and it is becoming more difficult to meet customers' needs in a timely way," he says.
"We must invest in roading infrastructure to free up traffic over the next decade or two in support of the forecast growth of greater Auckland. For the longer term we also need to invest in our rail system."
On rail, an agribusiness boss disagrees: "Where railway works best is between large population centres, over huge distances with straight lines and limited hills to climb, carrying consistent cargo on a large gauge and with a modern rolling stock — New Zealand has none of these."
He suggests the answer has to be getting the roads right: "Imagine the benefit of a two-lane highway from one end of the country to the other. The new two lanes could be built where the railway lines currently are. We need to stop half-doing both."
The boss of a lobbying firm says that "with Twyford in charge and no money spent on roads anymore, no one is surprised that we're at a crisis point".
The Business Advisory Council's damning indictment of New Zealand's infrastructure regime says there is "no overarching vision or leadership in New Zealand for infrastructure development".
"This means there is no nation-building narrative upon which to build a strategic direction," it says — although it acknowledges the problem at hand was not created by the current government but is instead intergenerational.
Barfoot & Thompson's Peter Thompson agrees, adding that many of the existing issues have been around under prior governments before. "It is a matter establishing what are the essential ones and to actually get on and rectify such," he says. "Costs of fixing won't come down, so the longer they are put off the more the costs will go up."
Says the managing director of a large investment firm: "It was at a crisis a decade ago and National did bugger all."
Funding rail
Some 55 per cent of CEOs felt rail investment in NZ could be bolstered through an in increased share of the National Land Transport Fund (petrol excise tax and road user charges). But 30 per cent felt this mechanism had no role to play in rail investment.
A similar number (55 per cent) felt rail investment could be stepped up through the public purse: an increased share of funding from general taxes to fund health and environmental benefits of rail; 35 per cent were opposed.
There was two-thirds support however for bolstering investment through commercial, industrial and residential land development adjacent to rail.
CEOs rate Infrastructure NZ's top 10 priorities.
• Deliver national long-term investment pipeline — 4.31.
• Reform NZ's antiquated planning laws, local government structures and funding — 4.21.
• Private investment in infrastructure/release capital through asset recycling — 4.13.
• Develop aligned national planning and development framework — 4.12.
• Scale development of housing and infrastructure to meet growth — 3.96.
• National review of resilience of NZ's strategic networks — 3.96.
• Road pricing to optimise traffic flow and raise revenue — 3.79.
• Independent NZ Infrastructure Commission (underway) — 3.75.
• Accelerate Housing and Urban Development Authority — 3.61.
• Price water service delivery — 3.51.
Scale 1-5 where 1 = unimportant and 5 = extremely important.
When asked which of the following options would be the most effective pathway to improving water service outcomes across New Zealand, respondents said:
• Establishing a nationally regulated model across asset owners that are not local authorities (similar to Watercare) 46%.
• Establishing national regulation across a shared services model with water assets still owned by local authorities (similar to Wellington Water) 29%.
• Establishing national regulation across the current local authority ownership model 14%.
• Leaving water services provision as it is under local council control 8%.
Independent director Dame Alison Paterson says we are infants when compared with the Netherlands' management of water, and "there is a need for careful consideration of how we manage our water resource, followed by a strategy to best manage, monitor and fund implementation".
Beca's Greg Lowe says: "Expertise and capacity in the water sector is thinly spread across a large number of local authority asset owners, who cannot adequately fund future infrastructure needs. Asset consolidation into sensible groups would allow prioritisation of infrastructure investment year-on-year to address community demands. This needs to come with a simpler and more effective funding model — the obvious choice being paying for water and waste services directly rather than through a regional council water rate."
Managing Director of Fulton Hogan Cos Bruyn thinks we "need to have five or less water authorities across New Zealand to create scale and efficiencies".
Whereas a chair reckons none of the above are suitable. "Following the electricity and telco models, we should corporatise and privatise the provision of water services," he says.
Says a tech boss: "Water is NZ's most precious resource and its management needs sorting out on delivery, environment and infrastructure levels.
"It is WRONG on every level that water can be extracted and exported at low/no cost while Kiwis languish in some areas with unsafe or inaccessible water."
The trial involved 17,000 customers, shifting water heating to off-peak times.