Despite our wealth - both public and private - we languish at 22nd place in the OECD for GDP per capita. Our prosperity trails far behind comparable nations like Australia and Ireland. Treasury has estimated our infrastructure needs $210 billion to reach adequate levels. Our productivity growth remains dismal.
How did we end up so asset-rich but service-poor? Part of the answer lies in how we manage our public wealth. We have settled for being passive custodians rather than making these resources work for us. The result is billions in capital tied up in an underperforming Crown and local government balance sheets while critical infrastructure crumbles.
The solution may lie in fundamentally rethinking our approach to public ownership. Whether through strategic sales, asset recycling, or new ownership structures, we could unlock billions in value without increasing debt.
The Crown alone controls an enormous portfolio of assets. Core Crown assets are worth $327bn, spanning everything from state highways and conservation land to the government’s commercial investments. Add in publicly owned assets like SOEs, schools and hospitals, and total Crown assets reach $571bn.
The Crown’s portfolio spans a remarkably diverse range. Through Kāinga Ora, the Crown owns and manages more than 72,000 houses worth approximately $45bn. The state-owned enterprise segment holds assets worth $69bn. The Super Fund manages $79bn. Various commercial enterprises and Crown entities control billions more.
Beyond the Crown’s portfolio lies another layer of public wealth: local government assets. Councils also control billions in infrastructure, from port and airport shareholdings to water networks and land.
The performance of these vast portfolios varies widely. Some entities, like the Super Fund, demonstrate real fund manager discipline. But overall, performance falls well short of the Crown portfolio’s potential. Unlisted state-owned enterprises have consistently underperformed their cost of capital, with declining revenue, earnings and dividends over five years.
Infrastructure bottlenecks also tell part of the story. Water services show the human cost of underinvestment, with ageing pipes causing regular breaks, significant water losses through leaks, and a growing maintenance backlog across the country.
But the problem is not just underinvestment. Our infrastructure spending efficiency ranks in the bottom 10% of high-income countries, with construction costs rising one-third faster than prices elsewhere in the economy. Infrastructure productivity growth lags at just one-third the rate of the overall economy. We are not just spending too little – we are getting poor value from what we do spend.
This systemic inefficiency helps explain why New Zealand faces a $210bn infrastructure deficit despite spending 5.5% of GDP on infrastructure - more than both Australia and the OECD median. It is a problem of management and delivery, not merely funding. Last year, I wrote in this column about New Zealand’s crisis of ambition - how a creeping cultural malaise has dampened our aspiration to aim high. This malaise has particularly infected our approach to asset management and infrastructure development. We have settled for modest goals when our natural advantages should propel us toward excellence.
Fortunately, things are stirring in Wellington. A year on, and the National-led coalition Government is underway with the most comprehensive reform agenda in a generation. Its proposals to dismantle regulatory barriers to foreign investment and resource management show a refreshing willingness to tackle long-standing obstacles to prosperity.
Central and local governments’ commercial portfolios present similar opportunities for fresh thinking.
In its November 2024 report “Unlocking Value”, Infrastructure New Zealand laid out how recycling public assets could help fund our infrastructure needs without increasing debt. The New South Wales experience demonstrates this approach’s potential. NSW’s asset recycling program has generated A$53bn for new infrastructure investment since 2012, with strong public support due to the clear link between asset sales and improved services.
The evidence for change is compelling. The scale of this missed opportunity becomes even clearer when we look overseas. Norway’s sovereign wealth fund exceeds US$1.4 trillion, showing how active management of state assets can build intergenerational wealth. Singapore has built world-class infrastructure through innovative financing and ownership structures.
The new government’s appetite for reform creates the opportunity for fundamentally rethinking how we manage the vast portfolio of central and local government-owned assets.
Better management could mean modern hospitals instead of crumbling facilities. Reliable trains instead of constant disruptions. Well-maintained state houses instead of properties suffering from rot and mould.
The coalition’s willingness to challenge failed orthodoxies suggests even bolder changes lie ahead. Our combined natural and public wealth provides an exceptional platform to tackle fundamental questions about how we own and manage more than half a trillion dollars in central and local government assets.
Moving these assets into more effective ownership could finally deliver the first-world public services and living standards that New Zealanders deserve.
