Road tolls and congestion charges may be alternatives for city.

Auckland has been cautioned not to take its foot off the pedal when spending on infrastructure like roading and water otherwise it risks choking its own economic growth.

Richard Forgan, a partner with business advisory firm PwC, says such a scenario could stifle investment in the city and discourage people from living there.

"While a whole load of past investments are now paying off and making a real impact - the Waterview tunnel has shrunk journey times between the airport and CBD for example - the need now is to keep on investing and managing demand.

"Whether we like it or not," he says, "Auckland is the economic and employment centre of New Zealand. Insufficient investment in its infrastructure risks choking off not only its own economic growth but placing limits on the growth of the country as a whole."

Advertisement

Forgan says failure to act could drive people away from Auckland and the country: "We have a very mobile population which thinks nothing of moving across the Tasman - it's easy to bring people in, but it's also easy for them to go."

Forgan says user pays solutions like congestion charging or road tolling should be considered as "demand management devices".

"The experience around the world shows most money raised through congestion charges needs to be sunk back into public transport to replace cars," he says. "The benefits lead to less congestion on the roads and reduces the need to build more roads."

Auckland mayor Phil Goff recently warned the city's infrastructure shortfall has risen to $7billion because of faster than expected population growth.

This surge is not expected to ease. Statistics New Zealand's (SNZ) latest projections show the city's population expanding from the current 1.6 million to over 2 million by 2028 and to more than 2.5 million by 2043 - just 26 years away.

Conservative estimates already put the city's housing shortage at up to 35,000 homes (nationally the figure is closer to 60,000) but SNZ figures show Auckland alone may need 60,000 new homes every five years until 2043 if its "high" population projection (this would see Auckland's population reach 3 million) comes about.

Forgan says these numbers have massive implications for Auckland where growth is occurring at a significantly faster rate than elsewhere in New Zealand. He says this will result not just in a need to fund infrastructure for new suburbs, but to upgrade existing infrastructure as development intensifies in inner city suburbs and in areas like the central business district (CBD).

He says the most pressing needs are around transport and housing infrastructure: "But water is also important and is often overlooked because the pipes are underground."

Congestion charges for Auckland - where 800 cars are added to the roads every week - are being investigated and the government has introduced a $1b infrastructure spending spree to fund roading, bridging and water projects in Auckland, Hamilton, Tauranga and Queenstown to support 60,000 new sections over the next 10 years.

But Forgan says hindsight has shown a higher rate of investment should have been maintained over the last 20 to 30 years: "If this had occurred, then perhaps the infrastructure would have supported population gains without as much stress as we now experience."

Forgan believes New Zealand should be looking at an annual investment in infrastructure (some experts say this should be up to $10 billion) and maintain it decade after decade after decade.

"Are we prepared to adopt a 25 to 50 year view; to invest to keep ahead of the curve rather than always running to catch up? If we don't we are just buying more problems along the way."

Forgan says measures like the $1b infrastructure scheme all help, but the key is to maintain a consistent rate of infrastructure investment.

One method of funding infrastructure could be through public-private partnerships (PPPs) which establish long-term contracts between the public sector and private companies - although most of our roading projects have been funded by central or local government.
"These have generally worked well, but they are not suitable for all projects," he says.

"Some are too risky or too small for PPPs to work, so options like congestion charging, road tolling and user levies need to be considered. No one method is a silver bullet on its own but put together they can all help."

Auckland is not alone in facing this problem: governments and authorities worldwide are grappling with spiraling costs and budget deficits in trying to pay for infrastructure.

The Global Infrastructure Hub (GIH), a body set up in 2014 by G20 (the international forum of the world's 20 leading economies) said in a report released in July the world is facing a $15 trillion deficit in infrastructure spending over the next 22 years.

This is nearly a fifth of the $94 trillion needed by 2040 - an amount that risks being unfunded unless spending rises from 3 per cent to 3.5 per cent of global gross domestic product. The report said $3.7 trillion needs to be spent every year to meet demand - an amount equivalent to the annual economic output of Germany, the world's fourth largest economy.

It identified the United States as having the largest gap in infrastructure spending - $3.8 trillion - while China has the greatest demand at $28 trillion.