Infrastructure sector faces ongoing challenges post-2023 election

Tracey Ryan.

Almost one year on from the 2023 general election, New Zealand’s infrastructure sector is still grappling with the challenges stemming from the change of Government.

“I don’t know if disruption is the right word here, but we’re still getting our heads around the change of policies, the change of direction and the flip-flopping over projects,” says Aurecon NZ chief executive Tracey Ryan.

“Many projects the industry was working on were stopped and now we are still waiting for the Government to work through their new policy settings, their focus and direction.”

Ryan leads Aurecon, a design, engineering and advisory company, but also chairs industry body Infrastructure NZ.

When there’s a big shift in Government direction, the entire industry pauses, she says.

“How do you continue to keep a healthy business going, retain your people and attract new talent at times like this? It has hurt the industry and we have all retrenched a little.

“There has been a slowdown with many of the major projects that were in the system, the rapid transit networks and some of the water projects. Even the East Coast Alliance has slowed down”.

She says it’s hard to move employees to other projects, in part because there is no formal long-term pipeline of projects to fall back on, which means parts of the slowdown were more like a hard stop.

“And that’s been challenging for me as a business leader. We know there’s a big infrastructure deficit, and we know that a lot of work needs to be done, but how do we work alongside Government or other clients to unlock that pipeline?

Ryan fears much talent working in our infrastructure sector will head overseas where there are larger projects. “We invest in innovation, in technology and in digital, but we need to keep people working or we will lose them. The best way to keep the top people is to keep them working on exciting projects. We need to keep the momentum going.”

The other issue hurting the sector is the energy shock.

“We have a big business that is in transportation, we have a big business in energy and industrial. Much of the work we are doing in energy and industrial is linked to decarbonisation and the transition to renewable energy: mainly wind and solar. We have projects in water and the built environment.

“Normally in a business cycle you have peaks and troughs to navigate through but this year we have seen everything slow down.”

Bipartisanship

Ryan wants to see New Zealand develop a bipartisan long-term vision and plan for infrastructure. “We can’t keep kicking the can down the road when it comes to national direction and responding to climate change. It’s too expensive, it’s unaffordable.”

She says there needs to be a pipeline of investment opportunities to ensure to attract foreign investment.

The government’s commitment to establish a National Infrastructure Agency has the potential to help develop that pipeline. “We’re now seeing the impact of decisions that were made 12 months or so ago. It’s going to be another 12 months until the National Infrastructure Agency is up and running, then it will take the agency another 12 months or so to sort themselves out. That’s a long time in the infrastructure world.”

There is no shortage of investment money but getting that money to New Zealand is not straightforward.

Ryan notes New Zealand’s legal framework and lack of corruption as pluses. But there still needs to be a guaranteed pipeline of suitable big projects for infrastructure funds to come and invest in.

Master-planning

Immigration has a huge impact on housing demand. Ryan doesn’t think New Zealand has the right immigration settings.

“I don’t think we have properly defined what New Zealand’s immigration setting is”.

Ryan says New Zealand has good intent around solving problems to do with housing affordability but as a nation we struggle with the execution.

“We need to step back and think systematically about where blockages are in the system. There’s a tendency to put the blame on everything being expensive, without looking closer at why that is the case.”

Ryan wants Government to think more about strategic master planning. She asks if we are developing greenfield sites for housing because they are cheaper to build on and not because they are places where people want to live.

And when we do build on these sites are we thinking enough about the physical infrastructure and transport systems needed to make them work?

The answer could lie in addressing inner-city developments and creating the types of attractive places younger people want to live in.

Aurecon is a sponsor of the Herald’s Mood of the Boardroom project.