Fran O-Sullivan: Infrastructure duo tighten grip on portfolio


Bill English and his infrastructure team are looking forward to a single Auckland council.

Fran O'Sullivan. Photo / Paul Estcourt
Fran O'Sullivan. Photo / Paul Estcourt

Infrastructure Minister Bill English acknowledges the $500 million of publicly-funded projects that the Government fast-tracked in response to the impact of the Global Financial Crisis will "run out" shortly.

When the Key Government swept to power it unveiled plans to invest $7.5 billion over a five-year period to build and upgrade schools, roads, housing, hospitals and telecommunications.

Its four top infrastructure priorities are:

* Broadband and rolling out a $1.5 billion fibre-to-the-home scheme;

* Building seven Roads of National Significance;

* Boosting NZ's faltering electricity transmission network;

* Ensuring vital infrastructure is in place for next year's Rugby World World Cup.

After a lengthy domestic recession which had strongly impacted on the fortunes of major building companies like Fletcher Construction, Fulton Hogan, Mainzeal Property, Hawkins Construction and Leighton Contractors (NZ) the Government's fiscal stimulus was a welcome fill-up.

English produces figures - see accompanying graphic - which indicate the extent to which the Government has, in effect, sustained local industry and notes infrastructure operators have indicated that 70-80 per cent of the large projects on the industry's books are government funded ("The large scale private stuff has run right off").

English - who is also Finance Minister - chuckles that the upshot is that the Government has been able to get attractive margins for its projects -"it has turned out to be good timing". But the stimulus package will run out shortly, to the consternation of the construction industry which is also concerned that forthcoming local body elections - particularly those to elect the new Auckland Super City council - will cause a decision-making hiatus.

English observes there has been a general surge in infrastructure spending on refurbishing housing stock and schools, which have also suffered from the leaky building syndrome.

He notes the core policy issue when it comes to the Government's housing stock is that 30 per cent of it is either the wrong size or in the wrong place.

Increased disciplines are being injected for project planning and approvals.

For instance, the exercise that the Corrections Department embarked on to assess whether the upcoming Wiri prison project should be structured as a public-private partnership (PPP) has ensured the department "now had a much better grip" on demand forecasts and had led to a reduction of forecast bed numbers.

English indicates that this approach is now being percolated through other departments including Defence, where former State Services Commissioner Rod Deane is running through the work done by the "strategy boffins" to isolate which assets need to stay in Crown ownership.

The Infrastructure Minister - the first Cabinet Minister to hold this portfolio - is looking forward to the establishment of the new Auckland Council and the council controlled organisations (CCOs) that will be charged with implementing major local infrastructures.

He says a lot of thinking is going into just what is the best role for the Government in dealing with the new council on vital infrastructure issues and the formation of the spatial plan for Auckland.

"In the past a lot of issues have been fudged because it was hard to get a decision - under the Super City we'll be able to get a decision."

English expects to see more focus on issues like where the Government wants to build its own roads, schools and hospitals and prisons.

"I would hope we would develop something from a common framework - so we can be reasonably clear about how decisions are going to be made and where costs will fall - quite apart from decisions on actual projects."

He believes it's important to get the basics right. Instancing the much talked-about CBD rail loop ("horrendously expensive") he says there needs to be clear understanding about just who is going to pay for such projects "so people can see the consequences of their decisions in their own pocket".

Asked how Auckland ratepayers could make sure their flash new council doesn't go spending too much on big projects, English replies, "Don't elect a mayor who is nuts for a start."

Proposals for a local authority bond bank to finance infrastructure projects are on the drawing boards.

But English says large councils like Auckland strictly do not need them because they are large enough to do their own debt issuance.

Steven Joyce who holds the Transport and Communications and is English's associate on infrastructure is widely-acknowledged by business leaders as a "shoulder to the wheel" Minister who has acted quickly to remove bureaucratic roadblocks on major roading projects.

Joyce readily acknowledges the previous Labour Government got the ball rolling in Auckland by scheduling well-overdue projects - particularly with rail and roading networks.

He is confident the projects will come in on time and well within Budget so that Auckland can put on its best face when it plays host to the hordes of travelling rugby fans late next year.

Other issues moving on to the Government's infrastructure agenda include:-

* Water - which English says is an issue for irrigation and consumption. The Government is in the process of working towards a more coherent framework;

* Pricing road usage - the Government is not leading this debate but it is open to talking about more refined models that petrol taxes and road user charges.

It is working through the first Infrastructure Plan; making sure the investment programmes get up and running and decisions are made on the ultra-fast broadband network.

"We need to see that through further development of the infrastructure plan - we get refinement of policy and a better handle on the implications of growth for infrastructure demand," says English.

"There is not a big queue of new stuff floating out there to be done."

- NZ Herald

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Head of Business for NZME

Fran O'Sullivan has written a weekly column for the Business Herald since its inception in April 1997. In her early journalistic career she was a political journalist in Wellington and subsequently an investigative journalist who broke many major business stories including the first articles that led to the Winebox Inquiry in both NBR and the Sydney Morning Herald. She has specific expertise in relation to China where she has been a frequent visitor since the late 1990s. She is a former Editor of the National Business Review; has twice been awarded Qantas Journalist of the Year and is a multiple winner of the Westpac Financial Journalism Supreme Award.

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