KEY POINTS:
The way towards recovery is to stop turning the infrastructure tap on and off.
The recent reaction to the snarl-up at the end of Auckland's new Northern Gateway and the calls to get on with the extension to Warkworth underlines the need for good transport and infrastructure planning. It highlights the dangers of projects being promoted as a knee-jerk reaction to a congestion problem on a particular holiday weekend.
Projects of this magnitude and expense need to be planned in a coherent and co-ordinated way.
The new National-led Government is developing a 20-year national infrastructure plan that will set a clear direction for national infrastructure, including top priority projects. This focused foresight is exactly what is needed.
The 20-year plan idea has been successfully used in southeast Queensland. This has provided funding certainty for the construction sector to recruit and train the people they need and purchase the required materials and machinery.
This type of plan also provides a level of certainty for the communities who may benefit from or be affected by these projects.
For the various industries involved, planning and certainty also relates to the level of funding. What we do not want is the continued turning of the tap off and on again.
This happened when transport funding for new works was very low in the mid-1990s at about $200 million a year and it wasn't until 2005 that a more realistic level of $600 million a year was reached.
Turning expenditure off and on is about to be repeated with the national electricity grid capital expenditure which was only $100 million in the early 2000s, and is forecast to be $800 million in 2010. Is it any wonder Transpower had to face a major skill shortage?
Similarly, proposals to boost broadband and cellular network expenditure from $1 billion per year to $2 billion per year have led to the telecommunications industry flagging to Government that their capacity to deliver fibre to the home isn't available in New Zealand.
An analysis of the total current planned expenditure across the main areas of infrastructure (roading, electricity, gas, telecommunications, and water) highlights the problem: This shows the impact of roading capital expenditure ramping up from 2003, and the massive expenditures planned for broadband, electricity generation and transmission escalating up from 2009/10. Adding these sectors together also masks the fluctuations in each of the sectors.
Planning infrastructure also needs to be co-ordinated across these various sectors - sectors funded from varying sources - by central government, local government, and the private sector.
This is the beauty of having an Infrastructure Minister with the role of developing the Infrastructure Plan.
The role could be very effective in bringing together the common issues - infrastructure development is driven by similar growth demands, in some cases infrastructure is able to share the same routes (eg, transmission lines down transport corridors), and the Government could compare the best value for money of capital investment across the sectors.
Very importantly, the construction of infrastructure draws on the same pool of semiskilled people, tradespeople, and highly skilled people and highlights the need for sound workforce planning.
An infrastructure plan needs to avoid the risk of becoming a straightjacket - it needs to be reviewed regularly, remain flexible and be responsive to changing circumstances.
Infrastructure spending is being seen of value to boost the economy, and to support employment and improve productivity. In times of high growth in the economy infrastructure capital expenditure is needed to respond to increases in demand.
Thus there is a good argument for a consistent level of investment in infrastructure both in good times and in bad.
Governments need to get out of an annual funding mentality for infrastructure. There are compelling reasons for maintaining a reasonably consistent level of funding, with co-ordination across the sectors, so that the various industries are able to efficiently deliver on the Government's aspirations.
Tim Davin is director of public policy for IPENZ (Institution of Professional Engineers New Zealand.)
