Sarah Sinclair with Energy Minister Simeon Brown. Photo / Mark Mitchell
Sarah Sinclair with Energy Minister Simeon Brown. Photo / Mark Mitchell
Opinion by Sarah Sinclair
Sarah Sinclair is a partner at MinterEllisonRuddWatts specialising in construction, infrastructure and energy.
THE FACTS
New Zealand ranks high in infrastructure spending but low in efficiency and asset management.
A Draft Infrastructure Plan lays out scenarios for New Zealand’s population reaching nearly eight million by 2050.
The Building Nations conference is being held on August 6 and 7 in Wellington.
New Zealand aspires to grow and thrive - and infrastructure is a fundamental building block for the economy and living standards that we aspire to. But we are falling behind our peer countries and investors have been questioning whether we are up for what it takes. While weare in the top 10% of OECD countries for the amount of GDP spent on infrastructure, we rank near the bottom for efficiency and asset management.
So now we have a choice to make: are we going to do what it takes to really thrive or are we happy bumping along as we are?
The suite of policies, legislative reforms and delivery agencies now in place or emerging has laid the groundwork for a more strategic and responsive approach to our infrastructure needs. But policy is only the beginning.
The Government – in fact both sides of the House – have heard the cry for a credible infrastructure pipeline and there have been lots of announcements. New Zealand’s first Health Infrastructure Plan was released in April. The Draft National Infrastructure Plan, released for consultation last month, provides a long-term roadmap for investment, identifying priority areas and systemic gaps. City and Regional Deal discussions are underway with Auckland, Western Bay of Plenty and Otago Central Lakes, with the first deal to be agreed by the end of this year. The Government has also announced plans for major infrastructure projects, including 17 Roads of National Significance.
There is also – rightly – a growing recognition of the need to make the most of what we have got and to invest in asset maintenance and renewal. Government is now talking about the need for asset management plans – and we should all be loudly supporting this. We need to make asset maintenance as sexy – if not sexier – than the big new projects. We must prioritise our infrastructure spend on looking after what we already have so that each of us can drop our kids off to warm, dry classrooms, driving on pothole-free roads (not flooded by water from leaky pipes) and have access to well-maintained hospitals. This is just as important as the big new projects and political announcements on long-term programmes to look after our assets should be celebrated.
Sarah Sinclair. Photo / Supplied
Government is now talking about the need for asset management plans – and we should all be loudly supporting this. We need to make asset maintenance as sexy – if not sexier – than the big new projects.
These developments mark a significant shift toward a more co-ordinated and proactive infrastructure system. But they are not, in themselves, sufficient to guarantee delivery.
In June, MinterEllisonRuddWatts hosted Adrian Dwyer, chief executive of Infrastructure Partnerships Australia, along with other representatives from the construction and infrastructure sector in Australia. We heard that there is an opportunity right now to capitalise on the outgoing tide of infrastructure investment in the Australian transport sector to redirect skill and delivery capability to New Zealand. We have a window of opportunity to attract the capability and capacity of the Australian market but we need to move fast.
So, what’s required to move from planning to delivery? The focus must be on translating our project pipeline into execution getting projects off the drawing board and into the ground and on locking in asset maintenance and renewal programmes that make the most of what we already have - and both need to happen quickly.
To achieve delivery momentum on infrastructure projects we need to focus on certainty and collaboration:
Certainty to give the necessary confidence ...
Of pipeline: There is no doubt that the sector needs a stable. long-term reliable pipeline with political consensus. We have heard from Australian sector participants that it is pipeline and political credibility that enables the market to plan and resource. Investors just need to know what is coming in the next five years and that they are “real” projects. This should include the new capital projects as well as long-term asset maintenance and renewal programmes – so the whole supply chain can confidently invest in people, equipment, technology and other resources.
Of funding: the credibility of the pipeline relies heavily on funding certainty - longer-term funding certainty is needed for projects and long-term maintenance programmes so businesses can invest in capability, technology and resources. And if we are serious about encouraging the private sector to bring ideas, then showing the pathway to how market-led proposals (previously known as unsolicited bids) are able to be funded – and how new funding tools will be used - would really show a commitment to encouraging innovative solutions.
This requires a frank discussion of how, as a nation, we are prepared to pay. We can’t announce projects without being clear as to how we are going to pay for them. There’s no particular magic to this: we have to pay for the infrastructure we need, so what is the best and fairest way to do this? Is it through user charges, tolls, land sales, asset sales, targeted rates, levies, normal rates or national taxes? The chances are it will be a mix of these in a way that reflects the value to our communities and the benefits that infrastructure brings both directly and indirectly.
Of regulation: For infrastructure delivery, regulatory certainty is essential. Investors and developers need to know what rules apply, how long approvals will take, and what conditions will be imposed. This circles back to bipartisan support as we need to achieve a degree of certainty that legislation will not be overturned every three years.
Of risk: Projects can falter because of complex, risk-heavy procurements. One key lesson from Australia is that sustainable contractual frameworks and appropriate risk allocation attracts the market. Similarly, de-risking early has contributed to Canada’s success.
Collaboration
Between political parties: Industry participants have long been calling for a bipartisan approach to infrastructure delivery. There are encouraging green shoots from both sides of the House as politicians appear to recognise this as a roadblock to attracting private investment (with their experience and resources), but more concrete agreement is required in the form of a finalised long-term infrastructure plans and announcements.
Between central and local government: We also need better collaboration between central and local government. Regional deals are an opportunity to achieve consensus on infrastructure priorities and funding tools that will provide local benefits. Transparent criteria and public engagement will be key to building trust in these decisions.
With the private sector and iwi: Attracting private capital (and most notably the experience and capability it brings) is simply essential to addressing New Zealand’s infrastructure deficit. We need a fundamental mind shift towards embracing private capital, whether it be international or local. And let’s think about how private capital can play a part in bundled long-term maintenance programmes as well as the big new projects. We need to leverage the capabilities and resources required to fulfil our infrastructure vision. In many cases, those will come from overseas (and that’s okay).
We must also build on the growing recognition of iwi as sophisticated investment partners who offer a strategic advantage and a quadruple bottom-line approach that has the long-term health and wellbeing of our country and communities at the heart of their investment decisions.
With communities: Infrastructure projects do not exist in a vacuum. They are there to serve communities. Public engagement is not just a legal requirement — it’s a strategic necessity. Community engagement and education will help accelerate our infrastructure build. We need to get the public on board with infrastructure spend and the need to invest in asset maintenance, moving from a fixation on upfront cost to a focus on long-term gain. Articulating and quantifying the social return of infrastructure will help with this.
In procurement: New Zealand needs to be open to more collaborative procurement models. A more interactive and flexible procurement process has been a key enabler in maximising value and delivering outcomes in both Australia and Canada.
From vision to reality
New Zealand has made impressive strides in reforming its infrastructure system. The policy settings are sound, the institutions are evolving, and the appetite for delivery is strong. But the journey from vision to reality requires more than good intentions. We need to act now, with certainty and collaboration, to enable New Zealanders to live, work, and thrive. If we get the delivery right, the benefits will be felt for generations.
