Article written by Andrew Body – Company Director
In September we speculated on the post-election implications for infrastructure spend in NZ – particularly for transport infrastructure. Now that a government has been established, and Coalition Agreement(s) finalised, it is timely to revisit that assessment and set out what this Government has identified as priorities for the next three years.
We speculated that the combinations were either Labour/Green or National/Act, with both main parties setting out ambitious programmes of road and public transport investments, with anticipated increases of billions of dollars over existing budgets. Both main parties expected the additional spend on infrastructure to drive better (particularly economic) well-being outcomes for New Zealanders. The National/Act combination was expected to accelerate investment, allow for greater private sector investment and promote a more certain infrastructure pipeline. What we did not foresee was the involvement of NZ First, although from a transport perspective this has really only added some (North Auckland) icing to the transport cake.
The recent Speech from the Throne, in which the Governor General Dame Cindy Kiro outlined the new Government’s policies and legislative proposals for the next three years, set out the broad priorities for the three coalition partners. We summarise below what we see as the key points from the policy programme that are of relevance to all of those involved in the transport sector, which include:
- Spending public money carefully and with a clear purpose.
- Ensuring that public money is being spent effectively, using rigorous cost benefit analysis, where applicable.
- Axing Auckland’s Light Rail project, and Let’s Get Wellington Moving.
- Cancelling planned fuel tax increases by freezing them for three years, while also removing the Auckland Regional Fuel Tax.
- Requiring councils in major towns and cities to zone for 30 years of housing demand because getting more houses built is seen by the coalition as essential to having a more affordable housing market.
- Setting up a National Infrastructure Agency, which will coordinate government funding, connect domestic and offshore investors with New Zealand infrastructure projects, and improve funding, procurement and delivery.
- Establishing a fast-track one-stop-shop established for the consenting and permitting process for regional and national projects of significance.
- Partnering with local government to create long-term City and Regional deals so there is an agreed, visible pipeline of priority projects underway across the country, with Public/Private partnerships, tolls and other funding mechanisms considered to speed infrastructure delivery.
- Investing in better transport infrastructure including progressing 13 new Roads of National Significance, which include:
- Initial stages of National’s long-term vision of four lanes from Whangarei to Tauranga, driving growth in the upper North Island economic zone.
- Projects to tackle congestion and reduce travel times, including Mill Road in Auckland, a second Mt Victoria Tunnel in Wellington, the Hope Bypass in Tasman, and the Woodend Bypass north of Christchurch.
- Roads to unlock urban housing growth including Southern Links in Hamilton, Petone to Grenada and the Cross Valley Link in Wellington and the Hutt Valley, and the North West Alternative State Highway in Auckland.
- Commitment to a four-lane highway alternative for the Brynderwyns in Northland, including investigating the use of private finance to accelerate construction.
- Delivering major public transport upgrades including:
- A rapid transit network for Auckland, with public transport corridors in the North West, Airport to Botany, and completion of the Eastern Busway.
- Improvements to increase capacity and reliability on Lower North Island train services for passengers and freight.
Whew! This is a long, ambitious list. This Government has very clearly set out its stall as “committed to delivering; to getting things done… it wants people to see demonstrable, measurable results that make their lives easier, and help them to get ahead”. Getting things done sounds great, and there are certainly safety and economic development gains to be had from such an ambitious programme, but there can be no doubt that delivering on these goals is not going to be easy. Quite apart from the demands on the sector’s capacity to deliver an increased investment programme, it will take time and effort to stitch together the City Deals that will replace programmes like Let’s Get Wellington Moving. The demand for significant investment in our urban areas (much of it focused around improving transport corridors) does not disappear with the removal or refocusing of these programmes.
As we see it, the key challenge for the Government, and for the rest of us in the sector, is not just one of capacity and capability to deliver the ambitious programme – although that will certainly be challenging enough! We see two critical, related challenges that must be addressed quickly, and in parallel with planning and development of the physical infrastructure if the stated objectives are to be realised:
- Finding more money: The Government has committed to no increases to Fuel Taxes (and indeed to removing the Auckland Regional Fuel Tax), while at the same time adding a number of large, costly projects to its pipeline. Questions about where the money might come from are yet to be answered, and we are yet to see if this Government, unlike its predecessors, will take the politically uncertain steps to introduce wider use of road tolling and even congestion charging in an attempt to bridge that funding gap.
- Involving the private sector effectively: Aligned with the funding question comes the potential for private sector involvement, using tolls or other mechanisms to enable borrowing for large infrastructure. In the last 30 years a number of Governments have considered – and even implemented – road tolling and dipped their toes into the realm of Public-Private Partnerships. These initiatives have had varying degrees of success and have certainly not ‘stuck’. Whether this Government can find a way is yet to be tested.
What is clear is that the Government will need to inject significant funds into the transport sector (many billions of dollars over the next 3 years and beyond). These requirements are alongside the health, education, three waters and debt repayment objectives it has, so it is highly unlikely that the Consolidated Fund can stretch further into the transport space than its current NZUP injections and Waka Kotahi loans. Some form(s) of innovative financing tools will be required. If the Government is not able to progress the funding, charging and private sector policies alongside the planning and development of the physical infrastructure, we will as a country end up with more plans in the bottom drawer that we can’t afford. And that won’t improve outcomes for anyone. We will watch with much interest.
1 From the Speech to the Throne, December 06, 2023.