Finance Minister Grant Robertson has been beavering away on his $12 billion infrastructure package this month. Photo / File
Finance Minister Grant Robertson has been beavering away on his $12 billion infrastructure package this month. Photo / File
COMMENT:
It is tempting to think of Grant Robertson as a political stealth bomber.
Let's consider just how the Finance Minister has played a long game to arrive at the point where he (and other key Cabinet Ministers) are now poised to unveil the detail of the $12 billion spend-up on infrastructure before Waitangi Day. This will be to welcome acclaim in an election year and thus put the Government's key opponent, National, on the back foot.
All of this also to the broad approval of credit ratings agencies such as Fitch, which this week upgraded the NZ sovereign foreign currency outlook to "positive" from "stable", noting that the significant new infrastructure investment would boost short-term growth.
Robertson, new in the role of Finance Minister, was having to face down the rote criticism of Labour-led governments that they are all about "spend and hope".
He put the goal of getting core government debt (note the word "core") down to 20 per cent of GDP and sidelined a number of National's "shovel ready" road projects that Auckland business, in particular, wanted done, arguing the former Government had not funded them.
Meantime, Auckland's ever-increasing congestion had become ever more irritating to motorists and businesspeople alike. Media commentators argued Robertson was nuts to stick to his debt target and should just get on and borrow up large at historically low interest rates and get more roads and houses built.
All the while the Finance Minister was not for turning.
Come 2019, the clamour had increased.
The Prime Minister's Business Advisory Council gave this columnist a copy of its own report, which showed the 15 hand-picked council members had privately told the Government "infrastructure was at a crisis point".
New Zealand needed a master plan. The Government's preference for new public transport projects had drained available funds. Auckland's dreadful congestion was affecting business productivity. The self-imposed fiscal straitjacket needed to be bust.
And in a master-stroke the council threw Robertson's own language back at him, saying the failure to address infrastructure priorities was also affecting "social wellbeing".
For a Finance Minister who had just unveiled the world's first Wellbeing Budget, this was on the nose.
The Government countered that it was tackling many of the recommendations in an accompanying "Top 10" wish list from Infrastructure New Zealand, including establishing an independent Infrastructure Commission.
Publicly, the Finance Minister was again not for turning.
But even before that May Budget, Robertson had given a signal that he was prepared to be pragmatic with his decision to announce a relaxation of the core debt target to a range of 15-25 per cent of GDP.
Behind the scenes, work was under way. Private-sector consultants and Treasury had been beavering away on how to finesse overall debt limits via what could be construed as a very sophisticated sleight-of-hand — by talking with ratings agencies about specific mechanisms the Government could use, such as special-purpose vehicles to fund specific projects. Some of them done in conjunction with local government and private infrastructure firms would effectively keep those projects off the balance sheet.
"The cost of borrowing is low, the projects are there to be done, the books are in good shape, and the economy can do with it," says Robertson. Photo / File
At the same time, proposals were being geared up for Housing NZ to step up issuance of "social wellbeing" bonds to fund a massive expansion of housing developments. Kāinga Ora was formally established on October 1 and pulled together the three existing agencies: Housing NZ, its subsidiary HLC, and KiwiBuild. It will also be able to investigate and fund specific development projects with Robertson's approval.
The Herald's 2019 Mood of the Boardroom survey underlined the political imperative when CEOs rated the Government's performance on policy execution at 1.69 out of a possible five, with transport at 1.57/5 and housing at 1.55/5.
Robertson heard that message too.
He outlined the broad-brush numbers last December when he unveiled plans to borrow another $12b to invest in infrastructure.
Transport was the big winner, with $6.8b to be injected into funding new road and rail projects. Auckland mayor Phil Goff was quickly ready with his wish list, lobbying Government to get on with two projects in the Auckland Transport Alignment.
One was the $507 million Mill Road Corridor. This will increase access to Drury, where 23,000 more houses are to be built in Auckland's biggest greenfield housing development, in effect creating a satellite city.
Also high on Goff's agenda is the $200m Penlink project at the Whangaparāoa Peninsula, where successive governments have spurned private sector overtures to get on and build a road to be funded through tolls.
Goff's priorities also include the third main heavy rail trunk line from Britomart to Wiri ($172m).
There are a raft of other areas which will get investment:
• $400m for schools (already announced) • $300m for the regions • $300m for hospitals • $200m to assist with decarbonisation of public assets • $4b of unallocated funds is tucked away for later
It is tempting to think that $4b would provide an easy mechanism to either invest in relocating Auckland's port (if Cabinet agrees) or to refill the Provincial Growth Fund if Labour is in the position post-election where it needs a new electoral accommodation with NZ First.
The $4b unallocated slush fund will also give NZ First electoral leverage when Cabinet comes to make the call on the proposal to shift Auckland's port to Whangārei, when it considers the recommendations put forward by businessman Wayne Brown's Upper North Island Supply Chain Strategy.
The "public public partnership" proposed by the NZ Super Fund for Auckland's long-delayed light rail project goes in front of Cabinet early in March.
While this has been promoted as shifting much of the cost off balance sheet, there are concerns about the potential for contingent liabilities to turn up on the Crown's books.
The final factor easing the way for Robertson's about-face is the frequent urging last year by Reserve Bank governor Adrian Orr for the Finance Minister to invest more in infrastructure to take the pressure off monetary policy.
Robertson maintains there was no collusion between the pair.
There didn't have to be. The verbal semaphore was obvious.
The Finance Minister has been beavering away on the infrastructure package this month.
As he now puts it, "the cost of borrowing is low, the projects are there to be done, the books are in good shape, and the economy can do with it".
It has been a pragmatic and well-executed stealth raid on what National would have felt was its territory.
