An artist’s impression of the proposed Dunedin Hospital.
A national infrastructure strategy that prioritises projects based on national interest rather than political cycles can’t come too soon for senior business leaders.
Some 88% of respondents to the NZ Herald’s 2024 Mood of the Boardroom survey rated forming a strategy “very important”.
Jarden managing director Silvana Schenone sums up: “Infrastructure projects are by nature long term and large. They need stability.”
Barfoot & Thompson’s managing director Peter Thompson adds: “Nothing will get done unless we have continuance and this has to happen by all parties.”
KiwiRail CEO Peter Reidy, who has skin in the game, warns: “We are drifting as a nation. Attracting skills and the capability for large projects is becoming very difficult.
“We are losing credibility when large projects are cancelled at the change of a government and policy changes reflect a 360-degree shift. Business cannot invest on this short-term horizon. Due to the lack of national infrastructure intent, maintenance is not keeping up in sectors subject to the political cycle change and where we do not have clear pricing transparency on the whole of life cost impact.”
Mainfreight group managing director Don Braid wants a rethink of political cycles.
“The three-year political cycle has a major influence in our infrastructure planning and delivery. A longer political cycle of four or, even better, five years would allow government to plan and deliver rather than worrying about political consensus.”
Some 95% of New Zealand’s business elite believe a transparent and consistent pipeline of infrastructure projects would provide industry with the confidence and clarity needed for long-term investment in the New Zealand market.
“Bipartisan agreement on infrastructure pipeline is best practice in many peer countries,” noted a health business head.
But a transport CEO warns business will build the infrastructure the country needs, “if Government gets out of the way and stops fringe groups opposing everything. Government does not need to build everything”.
There’s not overwhelming confidence that the two main political parties will be able to establish sufficient bipartisanship to successfully plan and deliver infrastructure projects.
Mainfreight’s Don Braid is not hopeful. “It is not in the nature of the political animal to be bipartisan.”
A number of other leaders echoed this view with a waste management leader saying politics will get in the way while a prominent financial sector chairman says: “Politics and common sense are mutually exclusive.”
Roger Partridge, chair and co-founder of the New Zealand Initiative, counts himself among the optimists. “I am more confident than many. We have cross-party support on a wide range of issues — free trade, climate policy and, largely, on foreign policy. In the recent past, we’ve had cross-party support on the need for prudent fiscal management.
“It should be possible to get consensus on the country’s long-term infrastructure needs, too; or at least on 80% of them.”
The jury is out on whether the Government has struck the right balance on addressing New Zealand’s infrastructure deficit while also managing public finances. Asked if they think the Government has the balance right, 37.5% say “Yes” while 33.9% say “No” and the rest are unsure.
University of Auckland vice-chancellor Dawn Freshwater, Peter Thompson of Barfoot & Thompson and Harcourts managing director Bryan Thomson all say it is “too early to tell”. Deloitte chief executive Mike Horne says: “It’s very much a work in progress. Government is making some of the right noises but we are a way away from being able to see the reality.”
Blair Glubb, the CEO of brand and experience agency group Uno Loco, notes that: “The boom-bust cycle on infrastructure is incredibly inefficient, but we seem doomed to repeat it.”
Public-private partnerships get a big thumbs up from New Zealand’s business leaders.
When asked if they think government should be more open to partnerships (PPPs) as a way of funding critical infrastructure, 95% answered “Yes” with just 3% saying “No”. A transport sector leader says: “New Zealand needs to grow up, use PPP and accept tolling to pay for what we need.”
Fittingly, Michael Lorimer, the founding director of Grant Samuel, takes a broad investors’ view when he says PPPs are too expensive: “The government will always have the lowest cost of capital.”
Lorimer answered an earlier question about whether forming an infrastructure pipeline would give investors confidence, saying: “So long as we don’t use PPP to fund them.”
A communications sector leader warns that so many projects end in huge legal wrangles.
Construction companies potentially stand to benefit from PPPs. The leader of one construction firm says using PPPs “depends greatly upon the cost of finance and the risk allocation of the agreement”.
Fulton Hogan managing director Cos Bruyn says: “The value of PPPs need to be questioned when you have to resort to availability-type models. They have their place when a strong element on innovation can be brought to bear.”
Just under half of survey respondents favour the New Zealand Super Fund taking a controlling stake in vital new infrastructure. But a significant 19% are opposed and one-third are unsure.
Blair Turnbull, CEO of Tower Insurance, says: “I agree the Super Fund should invest in vital infrastructure but I’m not sure about taking a controlling stake.”
Freightways boss Mark Cairns’ view aligns with Turnbull: “Not necessarily a controlling stake, but they should be a significant investor”.
OfficeMax managing director Kevin Obern agrees, “provided that it generates an income stream for the investment”.
Boardroom views are balanced when it comes to confidence in New Zealand’s ability to secure the necessary investment to meet its long-term infrastructure needs, particularly in areas impacted by climate change.
Morrison chief executive Paul Newfield says: “We have our backs against the wall on this and will need to make fundamental changes if we are going to have the infrastructure we need in the long term.
“We don’t have large domestic savings pools to draw on, our government budget is tight and the combination of a growing, ageing population and climate change will create tremendous strains on our infrastructure.
“We need to put KiwiSaver to work alongside the right international capital. We need a pipeline that will attract global builders with the capability and balance sheets to deliver. That pipeline needs to be focused on the infrastructure we need for a 21st-century economy, not just laying concrete.”
Auckland Airport chief executive Carrie Hurihanganui says: “Securing the investment will depend on the settings that surround it.”
Business leaders give the nation a fail mark on infrastructure renewal.
Leaders were asked: “How confident are you that New Zealand is investing enough in the renewal of critical infrastructure, such as state highways, local roads and water systems, to maintain these assets for the long term? Rated on a scale from 1, not confident to 5, very confident, they scored 2.09. There wasn’t a single taker for “very confident”.
Fulton Hogan managing director Cos Bruyn warns: “In summary, we continue to kick the can down the road. Current maintenance budgets are inadequate to maintain current assets and we continue to consume our valuable road and water assets. The average age of many assets continues to increase and brings the increased risk of increased cost of repairs and outages.”
Local council performance
Local councils came in for a serve from New Zealand’s business leaders. Asked to rate their local council’s performance enabling growth and development on a scale from 1 (not well) to 5 (very well), respondents gave an average of 1.98, a clear vote of no confidence. Not a single respondent scored their council’s performance as very well.
Thomas Pippos, who chairs the Deloitte board, says: “Local Government is more challenged than central and similarly more eclectic in terms of outcomes.”
Kevin Mapson, commercial managing director for Pernod Ricard NZ says: “Councils blaming alcohol for complex societal problems avoid dealing with the real issues.
“Auckland CBD suffers from roadworks, a lack of parking and homelessness, yet hospitality is slapped with restrictions in response to these issues.”
Respondents singled out issues in the two main cities.
A finance sector leader describes Wellington City Council as “a shambolic embarrassment” while a construction sector leader expands: “Wellington City Council is a total shambles. Wasting huge amounts of money on over-the-top cycleways and roundabouts that add to congestion, and ethical investment fund while raising rates 17%.
“The council system does not work: no one votes and people elected are incompetent. Central government needs to take more control.” The leader of an industry body says: “Wellington is in a bit of a sad state”.
Auckland came in for less flak with a media executive reporting: “Too many road cones in the CBD - for too long,” while the head of a waste business says: “Auckland Council needs a better long-term plan”.
RMA Reform Minister Chris Bishop says two new laws are on their way to replace the RMA.
There’s widespread consensus that the existing legislation has acted as a brake on economic growth and productivity without achieving its aim of improving the environment.
When asked how well the RMA works to enable development on a scale of 1-5 where 1 equals “not well” and 5 “very well” survey respondents scored it an average of two.
The leaders who went on the record offered measured criticisms.
Beca Group executive chair David Carter says: “The RMA has been hampered by the lack of clear national policy statements, insufficient clarity on outcomes sought and the spread of requirements across multiple pieces of legislation.” Fulton Hogan’s managing director Cos Bruyn notes that it means a lot of “time and cost along with an uncertainty of outcomes. Bureaucrats find it easier to say no than yes”.
Many off-record comments were more damning. An energy sector leader describes the existing RMA as “New Zealand’s secret weapon in the decline of wellbeing as a country”.
A transport sector boss says: “It is a disaster and needs radical reformation to allow us to build what we need as a nation: housing, infrastructure and productive businesses.”
Many business leaders rate the Opposition Finance Spokesperson highly.