Westpac CEO urges bipartisan support to tackle $200b infrastructure deficit

Catherine McGrath.

A bipartisan agreement on infrastructure cannot come too soon for Westpac CEO Catherine McGrath.

“The Treasury tells us that the infrastructure deficit is $200 billion,” says McGrath.

“We saw that our infrastructure badly needs investment during the Auckland Anniversary weekend flood and Cyclone Gabrielle.

“We know that we need external investment to help address the infrastructure deficit, because we can’t fund all of it ourselves. If we’re going to give people overseas the encouragement and confidence they need to invest in New Zealand we’re going to need bipartisan support.”

McGrath has spoken to leaders from both of the main political parties and says they recognise that while there will be different projects they each want to deliver, there is much where bipartisan agreement could be forged.

She says there is no time to lose with the deficit becoming increasingly apparent and impacting on everyday lives in ways it did not five years ago.

“Getting clarity about what we need to do and in what order is becoming critical for all of us.”

McGrath says the Government has been clear that it wants the business sector to come up with solutions to problems the nation faces and that it wants problem solvers to think about matters from a total ecosystem perspective.

Banks like Westpac have a clear role to play when it comes to helping fund infrastructure investment. “We can bring the benefit of seeing how alternative funding models have worked in other countries, particularly in terms of public-private partnerships that might work in New Zealand. We are able to work alongside other industries.

“There are useful conversations happening today that might be able to help and demonstrate possible paths forward.”

The lack of a bipartisan approach means that overseas investors might see New Zealand as a riskier destination.

“We need to think about this in terms of how we can make ourselves the most attractive place for overseas investors to come and help us close the infrastructure gap faster.”

Housing affordability

McGrath sees housing affordability as one of the main issues facing the nation. She says it is a real issue for many people but addressing it comes with a challenge. “The people who own houses would like them to continue to grow in value. That’s what we are used to here. If you don’t own a house, you want the value to come down because that will make it more affordable and let you get into the market.”

McGrath says we need to be more open-minded about the ways people can get into home ownership. “There are some real opportunities for that, whether it is shared equity or whether it is leasehold. The community housing providers have a big role to play here. As a country, we should step in and help more people get into homes faster because it has benefits for society as a whole. There are many good things that come if you are in a stable home environment.”

This is something that European nations do so much better. McGrath says she was surprised when working in Europe that, as a renter, she was able to paint the walls or do something with a carpet while in New Zealand, renters can barely put a nail in a wall.

It’s another issue where the banking sector has a key role to play. McGrath says banks need to better understand how to lend over a range of different housing models. “There are a number of things the industry can do to step in and help whether it is over leasehold land or mana whenua land. There’s particularly a role with community housing, and there’s also a role for Government, it can offer a longer-term view about cash flow and support.

“Organisations like the Queenstown Lakes Community Housing Trust do an amazing job at having several different models of helping people into homes. They recognise that for different segments of the market, a different approach can be right. Having that breadth of ideas and models is important”.

Cyber threats

McGrath lists cyber threats as one of the business confidence issues she is most concerned about and an issue that is likely to keep her awake at night. Given how essential banks and the payment system are to the wider economy, it’s an understandable concern. She says at a time of heightened geopolitical uncertainty, such concerns are elevated and that keeping our infrastructure protected has to be a top priority.

“For me, I worry about the things that I can’t control. I can make sure our defences are as good as they can be. However, there are many others outside New Zealand with far deeper pockets than we’ve got. They are the people we are defending against.

“If your infrastructure is targeted, that is quite problematic. It is incumbent on anybody who is in a role that’s in a critical part of infrastructure, and banks definitely are part of that, to put security at the top of the list of things to worry about.

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