Investment in productive infrastructure ranks second on the Government's list of policy drivers to lift New Zealand's productive capacity.
Strong leadership and single-minded commitment to delivery from lead ministers will be central to this task. For too long investment in New Zealand's productive infrastructure has been plagued by complex governance structures, tortuous planning, consent and regulatory processes, on again, off again, pay-go funding, and antiquated dog-eat-dog procurement processes that focus on short term cost-cutting measures but incur substantial ongoing costs of operation and maintenance.
These are the challenges Infrastructure Minister Bill English and Ministers, Steven Joyce, Gerry Brownlee, Rodney Hide and Nick Smith must address as a team if investment in productive infrastructure is to lift New Zealand's living standards. They are not insignificant challenges. They go to the core of our central and local government structures, planning and funding processes and will attract strong opposition from an entrenched bureaucracy.
You only have to look at the track record of investment in New Zealand's core infrastructure over the past three decades to see a clear legacy of boom bust cycles within an overall downward trend in investment.
Take for example the piecemeal delivery of Auckland's western ring route. The first sections of this corridor were constructed 26 years ago in 1983 with the opening of the new Mangere Bridge. By 1984 the motorway between Queenstown Rd in Auckland City and Coronation Rd in Manukau City was completed. In 1987, the 4.1 kilometre Papatoetoe Bypass was constructed and further sections were added progressively to link the motorway to the airport with the Mangere extension opening in 1997. But then progress slowed dramatically. It took 12 years for the designated 4km Mt Roskill extension to be approved, consented, funded and finally completed this May.
If all goes to Joyce's plan and Smith's RMA "call in" process works effectively, the final link, the Waterview connection, will finally be completed in 2015. That's a total of 32 years for completion of this key corridor in our largest city. Similar stories could be told about key transport connections for almost all of our major cities and towns across the country. Similarly, the investment in public transport has been lamentable. Compare it to the speed with which our Australian counterparts get things done.
In contrast to Auckland's western ring route which has been built in seven separate parts, Melbourne's 40km eastern motorway, Eastlink, was built as a single construction project. It was given planning approval by means of special legislation enacted by the state government and took just three and a half years to build.
Sydney's 110km Orbital Network comprising nine toll roads was constructed within a 20-year period from 1987 to 2007. The improved mobility and connectivity provided by the network was estimated by Ernst & Young in 2008 to have generated a net present value of A$22.7 billion over and above the cost of construction. This was approximately 15 per cent greater than the sum of the initial valuations for each of the projects undertaken prior to construction. The application of user pays funding has enabled limited public funds to be invested in other state priorities including expansion of the public transport services.
In the New Zealand context, lack of funding is often cited as a constraint. But this need not be the case. Like Australia, New Zealand could make more effective use of tolls and user pays debt financing to fund the necessary infrastructure that will lift productivity and enhance sustainable growth. This approach could easily be used to complete the seven roads of national significance and free up public funds for other transport priorities. That's the kind of action English and his colleagues need to progress. Continued reliance on pay-go funding will inevitably mean project deferral and reduction of New Zealand's capacity to grow.
On the other hand, timely investment in productive infrastructure will put us in a stronger position as the current recession abates, well placed to realise the nation's true potential. The right approach is to ensure that funding follows strategy, rather than being a constraint on growth. For these reasons, the Government must review and provide more transparency around infrastructure requirements from both a "needs" and "affordability" perspective in order to explicitly define the extent of the funding gap. Then it can utilise innovative ways of funding infrastructure "needs" including prudent use of public sector debt, bond issues and public private partnerships.
While funding is always an issue, the real constraints surrounding effective delivery of national infrastructure over the last two decades have been the lack of strategic leadership by respective governments; poor governance structures within central and local government; poor alignment between "vision" and implementation; a continuing focus on costs and cost reduction, rather than investment for growth; lack of clear responsibility and accountabilities for implementation; and unnecessarily complex regulatory and legislative approval processes.
The Government's commitment to develop a 20-year national infrastructure plan by the end of the year will be central to addressing these issues. The plan provides the opportunity to set national priorities and describe the balance between national, regional and local needs.
It must set a national context to inform regional, district and city development plans and strategies. It must map all known plans for investment in public infrastructure into one place. It must both lead infrastructure policy decisions, and the associated legislative and regulatory reforms that will be needed to deliver on those plans. Finally, and most importantly, it must instil an environment of confidence in delivery of the investment programme that will foster private sector investment in New Zealand's wider productive capacity.
Pleasingly, the Government is off to a good start. It has recognised that investment in productive infrastructure is a central platform for growth. It has made a start with committed investment to build and upgrade schools, transport, housing, hospitals and telecommunications. It is facing up to the challenges of local government reform in Auckland and commenced reform of RMA and other legislative and regulatory processes.
The Government has started this process with a sense of urgency. It is now critical that this momentum is maintained and the lead ministers work as an effective team in continuing to drive the change agenda.
* Stephen Selwood is the chief executive of the NZ Council for Inftrastructure Development