Infrastructure Commission – Building New Zealand’s future – 150 years of infrastructure investment

Kiwis are spending more than ever on our infrastructure, according to a new report by the New Zealand Infrastructure Commission, Te Waihanga.

“We estimate that 50 years ago, the average New Zealander was spending about $3,000 per year on infrastructure – our roads, hospitals, schools, water networks and more. Today, that figure is closer to $5,000 and is rising rapidly,” Peter Nunns, General Manager – Strategy, says.

“But we also have more to show for it. The value of our infrastructure networks has grown substantially in inflation-adjusted terms. For instance, in 1950, we had around $20,000 worth of infrastructure assets per person. As of 2022, it was just under $70,000.”

“Building infrastructure networks can take decades, but like most other countries, New Zealand hasn’t had a clear understanding of what we’ve spent on infrastructure over a long period of time. A short-term view on infrastructure investment doesn’t give us an accurate picture of how much is being spent and on what,” Nunns says.

“Our newest report – Nation Building: A Century and a Half of Infrastructure Investment in New Zealand – sets out to address this knowledge gap by collating 150 years’ worth of infrastructure data and tracking how our networks were built and shaped over time.

“We find that while the dollar value of investment has grown over time, the ‘share of our wallet’ we’ve spent has been relatively stable over the long-term. Despite wars, earthquakes, depressions, recessions and population changes, our infrastructure investment has averaged about 5.6% of GDP over the last 150 years,” Nunns says.

“Things like population and income growth do appear to change our investment patterns a bit up or down. But the big booms in investment usually follow transformative technological innovations that require building new networks from scratch – from electric motors to indoor plumbing to broadband internet.

“In the National Infrastructure Plan that we’re currently developing, our 30-year forecast suggests we’ll need to invest about 5.8% of GDP per year on average to meet our infrastructure needs, which is slightly higher than the 150-year average but still well within the band of what we’ve previously spent on infrastructure.

“The future is always uncertain. But most challenges facing infrastructure networks, such as demographic change, economic growth, technology change, and political and policy change, have historical precedents. Understanding how we’ve responded to past challenges can help guide our thinking about the future,” Nunns says.

• Overall infrastructure investment has averaged 5.6% of GDP over the last 150 years. When averaged over 30-year periods, investment levels have never been higher than 7.3% (1949-1978 average) nor lower than 5.0% (1978-2007 average).
• Infrastructure investment over the last two decades has consistently been close to the long-run average at 5.8%.
• We identified four periods where infrastructure investment as a share of GDP was sustained at a considerably higher level than the long-run average. We define these periods as infrastructure investment ‘booms’.
• The Vogel boom, from around 1870 to 1887, includes Premier Julius Vogel’s public works schemes for network infrastructure (road, rail, telegraphs).
• The pre-war boom, from around 1904 to 1914, was a period of higher investment following recovery from the Long Depression. This was a time when the economy was being reshaped by refrigeration.
• The inter-war boom, from around 1927 to 1940, was a period of higher investment following the recovery from the First World War and continuing through the Great Depression public works programmes.
• The post-war boom, from around 1949 to 1979, is the longest period of consistently above-trend investment that we observe. It coincides with the period of population and economic growth after the Second World War.
• We have identified 14 sector-level booms over the last 150 years. Some sectors experience multiple booms like land transport, while others have a single large boom (hospitals, education, social housing). We estimate that the telecommunications, tertiary education, and water sectors are currently in a boom cycle.