Source: New Zealand Government
Introduction
Good morning to you all, and thanks for having me bright and early today.
I am absolutely delighted to be the Minister for Infrastructure alongside the Minister of Housing and Resource Management Reform. I know the Prime Minister sees the three roles as closely connected and he wants me to use all the levers at my disposal to fix our planning laws, build more houses, and address our infrastructure deficit.
A couple of weeks ago I outlined the government’s Going for Housing Growth agenda to the Wellington Chamber of Commerce, and last Friday I talked about our ambitious programme of reform in Resource Management.
Today I’d like to talk about what we’re doing in infrastructure policy.
The economic context
Let’s be real. Times are tough.
As Nicola Willis said a couple of weeks ago, in recent years, Kiwis have endured a prolonged cost of living crisis, interest rates have risen sharply, the Government books have dived into the red, debt has soared and growth has slowed.
Last week’s GDP figures for the December 2023 quarter is real evidence of that.
The Coalition government’s view is that New Zealand can be much wealthier and so much more productive than it is today. That’s one of the reasons why we were elected in October last year.
If we’re honest with ourselves, in recent decades, New Zealand has slipped on almost every measure that matters.
Whether it’s global competitiveness, labour productivity, capital intensity, real incomes, student achievement, infrastructure sufficiency, housing affordability – all have slipped relative to the countries we like to compare ourselves with.
While the past six years have been especially bad, in reality New Zealand’s low-growth predicament is the product of several decades of slide.
We are determined to turn this situation around and infrastructure is a big part of that.
Our infrastructure agenda
I don’t need to tell you that infrastructure is crucial to lifting economic growth and growing New Zealand’s prosperity.
High-quality infrastructure connects our communities, drives economic growth, and supports the services we all rely on every day.
Infrastructure powers our homes – and our devices! It delivers water to our homes and businesses (or sometimes not, in Wellingtn’s case) and takes away our waste.
Infrastructure gets us from A to B whether it is by road, rail, sea or air.
Infrastructure educates our kids in schools and heals us when we’re sick or injured in hospital.
Infrastructure gets freight to and from other countries, linking us to the world and supporting prosperity through trade.
Infrastructure – and renewable energy in particular – will also play a major role delivering our climate change targets.
Our infrastructure deficit
New Zealand has a significant infrastructure deficit. Estimates vary but let’s call it $100 billion or so. That’s about 80 Transmission Gully motorways.
This deficit is a major drag on our economic performance.
Fixing the deficit is not just about more spending.
It is about smarter investment – getting every dollar of public and private capital to its highest value use, lowering the cost of infrastructure, and cutting through the red tape that is holding us back.
It’s also about fixing the systems which led to the deficit in the first place, including government procurement and delivery.
This deficit has not come about by accident. It is the product of decades of poor practice across successive governments.
This lack of attention to our infrastructure and investment management is costing us. It’s costing us time, money, and ultimately our standard of living.
The way we invest in, build, and manage infrastructure is deeply inefficient and has to change. We simply can’t go on the way we’ve been going.
The Coalition Government is committed to getting the infrastructure system back on track.
What we need to do to close the infrastructure deficit
In my view there are five things we need to do to close the infrastructure deficit:
- First, we have to do a better job of maintaining existing assets. That means funding both the up-front cost and ongoing maintenance of infrastructure over the life of the asset.
- Second, we need a credible pipeline of infrastructure projects to attract the capital and talent we need to get building.
- Third, we need to reduce barriers that are holding back infrastructure delivery and growth. RMA reforms are already underway to get nationally and regionally significant projects fast-tracked.
- Fourth, we must improve value for money. Reducing the cost for each metre roads or rail will help close the deficit, improve resilience, and lift productivity.
- Fifth and finally we need new ways to fund and finance infrastructure. Investment must be financially sustainable, which means each asset can wash its own face over its economic life, directly or indirectly, rather than depend on generous cross-subsidies.
The challenge before the government is to close the infrastructure deficit while responsibly managing the public finances. That challenge requires new and innovative funding and financing tools and new ways of operating.
My priorities
I have six major priorities in infrastructure. I’ll give you the six and then talk in more detail about a couple of them.
First, we’ll be developing a 30-year National Infrastructure Plan. National campaigned on this at the election and we intend to deliver it.
Second, we’ll be establishing a new National Infrastructure Agency, to connect offshore capital with New Zealand infrastructure opportunities, amongst other jobs. More on that in a moment.
Third, we’ll be developing a new consenting framework for infrastructure investment. It’s time to put an end to the obstruction economy.
Fourth, we have a big job to do improving infrastructure funding and financing, including more use of tools like value capture, tolls and public-private partnerships.
Fifth, I’m very concerned about the state of our health and education infrastructure, and there are a suite of improvements we need to make there. My Parliamentary Undersecretary Simon Court, who is here today, is doing a lot of the behind-the-scenes work on this, alongside other Ministers.
Sixth, the Prime Minister has specifically asked me to work alongside his officials on strengthening the resilience of critical infrastructure.
I only have limited time today, so I will focus on the immediate actions I am taking as Infrastructure Minister: the 30-year plan, the National Infrastructure Agency, and Funding and Financing.
Developing a 30-year National Infrastructure Plan
I have instructed the Infrastructure Commission to develop a 30-year National Infrastructure Plan by the end of 2025.
The 30-year Plan will include priority problems, projects, and non-built solutions – using a spatial approach where possible.
The purpose of a 30-year Plan is to demonstrate a pipeline of major projects that makes New Zealand a place worth doing business.
We need talent and capital in this country and part of achieving that is to demonstrate the scale of the opportunities in the coming decade.
The 30-year plan has three main parts:
A National Infrastructure Pipeline. This will provide a national view of infrastructure projects which are planned and being planned. This will provide a look at what is coming up over the next 10 years.
This covers projects in all sectors and builds upon the existing pipeline from the Infrastructure Commission.
An assessment of Infrastructure Priorities: This will be a structured independent review of infrastructure proposals and problems. This is also intended to include initiatives that avoid the need for investment. This will provide a look at what is coming up over the next 5-15 years.
This is the time horizon we must get to if we are to enable the private sector time to gear up to work with us.
Not everything in this time horizon will necessarily be something our Government is actively planning to build.
Instead this will provide a menu of quality-assured proposals that governments can choose from. This will provide greater confidence that infrastructure projects will deliver as expected.
An Infrastructure Needs Assessment: This will be an analysis of long-term infrastructure needs at a sector and/or regional level. This will provide a look at what is coming up over the next 5-30 years.
This will outline the outline the scale of New Zealand’s future investment needs – and what we can afford – as our population grows and changes, our assets age and our incomes rise.
It will also help identify the policy, process, and practice changes we need to deliver New Zealand’s infrastructure well.
The 30-year plan will be broken down by city and region.
I know there’s a lot of excitement out there about City and Regional Deals, which is another government commitment we intend to advance this term.
Simeon Brown and I have started the work on developing the framework. The basic concept is a simple one: a joint partnership between local and central government, centred on economic growth and productivity, with long-term funding commitments by both parties on projects that will help move the dial locally and nationally.
We want to promote the use of funding and financing tools like PPPs, road tolling, congestion charging, rates, levies and value capture.
These tools are being developed and will be used when they are the best tool for the job for each project.
Simeon and I will have more to say about City and Regional Deals later in the year.
Establishing a National Infrastructure Agency
Let me turn now to our commitment to establish the new National Infrastructure Agency. I want the NIA up and running by 2025.
The public sector infrastructure landscape is a crowded one and there are overlapping roles and functions, with quite a bit of duplication.
Rather than rushing into establishing a new agency, I’ve commissioned a piece of work to fully understand what the Crown wants and needs from a high performing infrastructure system, who is doing what in the system currently, and what might need to change.
I want to get the functions right first and then the form can follow.
Treasury is leading this work with support from the Infrastructure Commission. Treasury has recently appointed an Expert Advisory Panel to guide functional design and shape the work here.
The panel is chaired by former Minister of Finance and Infrastructure (among other things) Steven Joyce, with Fiona Mules, Ross Pennington, Sarah Sinclair and Sean Sweeney as panel members.
I want to get this right. Our overriding goal is to improve government procurement and delivery.
To be frank, government procurement is not performing well and has not performed well for some time. In particular, risk management, the quality of business cases and the procurement process are all in need of attention.
I want the Crown to become a commercially competent infrastructure procurer that delivers value for money.
The work by Steven and the team at Treasury is being done at pace and I expect to say more in a couple of months.
Infrastructure Funding and Financing
I spoke earlier about how essential it is that we look after the infrastructure we have and how poor a track record we have in that regard.
The availability-based PPP projects procured under the last National Government show that we can do better.
Those PPPs, now in their operating phase, have embedded whole of life asset management, with discipline that drives optimisation.
These are performance-based contracts that define infrastructure success by its service delivery not just its construction.
The Coalition government is very open to opportunities for the private sector to invest its capital to deliver high quality infrastructure for New Zealanders.
These projects leveraging private finance obviously need to stack up, based on cost benefit analysis and public good.
To pave the way for more projects that leverage private finance, I am asking officials to modernise the Crown’s infrastructure governance, procurement, funding and financing, and asset management policies and frameworks.
Through my Housing and Resource Management portfolios I’m also intending to enhance the Infrastructure Funding and Financing Act, explore new funding and financing tools that support councils, and create incentives for councils to facilitate the construction of more housing.
Infrastructure and Investment Ministers Group
Finally, let me give you a quick sense of how all this fits together from a Ministerial point of view.
We’re a Coalition government and this is a team effort. I’ve recently established an Infrastructure and Investment Ministers Group that will be overseeing a cross-government work programme around what I’ve talked about today.
That group is me as the Chair, Finance Minister Nicola Willis, Transport and Local Government Minister Simeon Brown, State Owned Enterprises Minister Paul Goldsmith, Regional Development Minister Shane Jones and Parliamentary Undersecretary Simon Court.
One of the functions of this group will be to oversee the performance of investments throughout their lifecycle. We’re going to really get into the weeds of Crown infrastructure investments and hold agencies to account for capex decisions they’re making. Frankly if Ministers were doing a bit more of this in the last six years we wouldn’t have ended up with disasters like light rail, the Auckland harbour cycle bridge and IREX.
My colleagues are already working on solutions to the challenges we face.
Simeon has already published the new draft GPS on Transport and is making progress on our Local Water Done Well reforms.
Shane is in the process of establishing the new Regional Infrastructure Fund, to which the National/NZ First Coalition agreement commits $1.2 billion in capital funding.
Paul Goldsmith is working with Nicola to sort out the mess left from the IREX ferry decision.
Simon Court, my undersecretary, is working alongside me on RMA Reforms and as I said earlier, health and education infrastructure.
Conclusion
Let me close by saying that New Zealand’s infrastructure challenge goes well beyond Government – success means leadership from officials and local government and communities and iwi and individuals and businesses – in other words, from many of you here in this room and beyond.
We need to think seriously about the problems which confront us if we are to find solutions that work. As the Prime Minister recently said, we will have to make tough choices.
It will be hard. Let’s not pretend otherwise. It’s going to be a slog.
But the good news is, with a good plan and a clear target our goal to fix the infrastructure deficit and lift productivity and growth is absolutely doable.
We can – we will – solve this country’s enduring infrastructure challenges once and for all and in doing so lift the prosperity of current and future generations.
Thank you.
