Sarah Sinclair, chair of the MinterEllisonRuddWatts’ legal partnership and a construction, infrastructure, and energy specialist, says the work ahead is daunting.
Sinclair, who also serves on the board of the New Zealand Infrastructure Commission — Te Wai hanga, emphasises the critical role infrastructure plays in delivering social and economic outcomes that improve people’s lives. However, she acknowledges the reality: “We face a huge infrastructure deficit, and we can’t fix that tomorrow.”
“Infrastructure is critical. It is all about delivering the social and economic outcomes that make people’s lives better,” says Sinclair.
“However, we can’t just put a million people on to the job to speed things up.
“Which means we face a series of trade-offs and that requires a better understanding of what our choices are to guide our decisions. We also have to make sure the decisions are made transparently, in a way that gets things going.”
The politics can be tricky
Says Sinclair: “When we make those hard trade-offs and difficult decisions, we need to be mindful that we’re in a small country.
“We want to be prosperous; we want economic growth; we want productivity to improve.
“But we are not always going to agree on how to achieve these things, yet we must be respectful of each other’s views and roles. We must make sure that everybody can work collaboratively. It’s important to keep our eyes on the prize.”
She says people in both the infrastructure sector and government are looking at those national priorities: “We can’t build every project on our wish list, but some are more important than others.
“Identifying them is important as they would be the best place to start. Then, once we’ve settled on our priorities, we need to consider the consequences of our decisions.”
Those consequences throw up questions:
“Are we ready for greater intensification and are we happy with infrastructure being built in our backyard?
“Yet, the most important question before we get to those is to ask how do we fund all this work? Are we up for paying the bill?
“There are lots of investors out there who will lend us the mortgage but are we prepared to pay it back?”
It’s not just about new projects.
The Infrastructure Commission found that, in round numbers, for every $40 we spend on building new infrastructure, we need to spend a further $60 on asset maintenance and renewal.
Sinclair says spending on that maintenance is just as much a priority as creating new infrastructure.
If we don’t maintain existing assets, it means, in effect, we are borrowing from our existing asset base and that can prove to be expensive in the long term.
Sarah Sinclair. Photo / Supplied
Forging political consensus
New Zealand’s infrastructure planning has been hampered in the past by short political cycles leading to changes of direction in a sector that needs consistency.
Sinclair says that is now being addressed. “There is the work being done by the Infrastructure Commission on a 30-year plan that is both a needs assessment and a qualitative review of projects and work programmes to make sure they meet a strategic need. You now hear Chris Bishop, the Minister for Infrastructure, talking about this a lot.”
At the same time there has been a move towards a more bipartisan approach on infrastructure planning.
Sinclair cites the language now coming from Bishop, the Labour Party infrastructure spokesperson Barbara Edmonds and her colleague Kieran McAnulty who handles regional development and housing: “They are all starting to talk about reducing the flip-flop changes. “There is more consensus around needs and around the strategy, while acknowledging that the government of the day is always going to be the decision-maker.
“The Infrastructure Commission work will assist by giving decision-makers, whether they are currently in power or in Opposition, better information and better tools. It also helps when it comes to thinking objectively about issues like climate change, decarbonisation and sustainability, which play into infrastructure prioritisation”.
Sinclair says City Deals are an opportunity to show the way. These are long-term contracts between a region and central government that identify priority infrastructure projects and opportunities. “They help determine our priorities and what we are prepared to do in order to unlock the projects. One of the keys is how central government and local government work together; we need to bring iwi and community into this debate”.
Every key area of infrastructure in New Zealand is either in deficit or faces massive change. “Roading and public transport are in deficit. We are seeing health and education infrastructure falling behind. Energy is a huge area of change. We could allocate our entire infrastructure budget to any one of those areas and even then it might not be enough to fix it.”
The problem is even when there is plenty of money in the economy, the options for funding infrastructure remain limited. Sinclair says it usually only comes from taxpayers, ratepayers, or from charging users and beneficiaries.
“There is a lot of capital sloshing around, but that is the people lending us the mortgage, it has to be paid. If you are talking about projects in Queenstown or Auckland that benefit tourists, then we should consider using a visitor or tourist levy. We can use tolls and congestion charges to fund roads.”
One innovative funding method is value capture, where private landowners pay a tax or rate when public infrastructure projects increase the value of their property. According to Sinclair, research by the Infrastructure Commission shows that New Zealanders are supportive of this approach.
“They found there is a range of views about the fair way to pay for infrastructure and some charges (like water and electricity) have greater social acceptance than others — but people’s support for different ways of paying can change once they see the benefits of doing so. The government has made it quite clear that any new road projects will be paid for by tolls. If you happen to be a business that benefits when new infrastructure goes in, then you’ll be expected to contribute to its cost.”
