In January, Prime Minister Christopher Luxon acknowledged he is “open to the idea of asset recycling and the best use of capital”, suggesting National might campaign on the issue at the next election. This openness creates space for a much-needed national conversation about how we fund critical infrastructure without burdening future generations with unsustainable debt.
That conversation should be informed by success across the Tasman. New South Wales has pioneered an asset recycling approach that shows how governments can transform assets the state does not need to own into modern infrastructure.
NSW has generated A$53 billion ($56.9b) since 2012 through a straightforward principle: sell assets the Government does not need to own and invest the proceeds in infrastructure the public does need. The programme included leasing the ports and selling electricity transmission and distribution networks for a combined A$34.1b.
The results are impressive: the Sydney Metro Northwest rail line reduced commuters’ travel times by an average of 60 minutes per day. WestConnex motorways reduced journey times by up to 40 minutes. Hospitals in Blacktown, Northern Beaches and Westmead now offer world-class healthcare. Regional communities received upgraded water infrastructure, and schools across the state gained modern facilities.
What makes NSW’s approach particularly successful is strong governance. Proceeds from the sale of state-owned assets were ring-fenced in the Restart NSW Fund, ensuring transparency and preventing funds from disappearing into general government spending. This ring-fencing proved crucial for maintaining public support in a state where voters were initially as sceptical of asset sales as New Zealanders. Projects were selected based on rigorous cost-benefit analysis, with an independent assessment of proposals. Some 30% of funds have been reserved for regional areas, ensuring widespread benefits.
My colleague Bryce Wilkinson’s comprehensive analysis in his recent report “The People’s Portfolio” exposes the full extent of Crown ownership and its poor returns to taxpayers. The Crown’s commercial assets bear no resemblance to a balanced investment strategy. Instead, they represent a hodgepodge of businesses accumulated through decades of changing government policies.
The Crown’s commercial enterprises also reveal a pattern of underperformance. The Crown’s accounts record $44.3b of taxpayer equity tied up in state-owned enterprises. Yet these businesses struggle to deliver returns that justify continued government ownership.
Television New Zealand illustrates this problem starkly. Its billion-dollar book value has plummeted to just $208 million, with losses of $80m last year alone. Had the Crown sold TVNZ a decade ago, taxpayers might have received more than a billion dollars to invest elsewhere. Public service broadcasting could still be funded through direct commissioning – no government needs to own a TV network to ensure local content.
Other commercial holdings make even less sense. Once a state-owned enterprise, Contact Energy now operates successfully under full private ownership. Yet the Crown still has billions tied up in 51% shareholdings of three Mixed Ownership Model electricity companies – Genesis Energy, Mercury and Meridian. Landcorp manages 112 farms worth $1.9b despite private farmers successfully running most of New Zealand’s agricultural production. Quotable Value competes directly with private valuers, yet taxpayers have $26m tied up in this business. New Zealand Post faces terminal decline in letter volumes while private couriers dominate parcel delivery.
These examples highlight an opportunity hiding in plain sight. Rather than burdening taxpayers with more debt or higher taxes, New Zealand could tap into its dormant wealth by selling assets where government ownership serves no public purpose.
Infrastructure New Zealand recognises this potential. Its recent “Unlocking Value” report details how asset recycling could fund critical projects while delivering broader benefits. This approach places assets with owners who can manage them more effectively while directing proceeds to infrastructure where public ownership makes sense. Success requires carefully matching each asset with suitable ownership structures, but also ensuring recycled funds go to infrastructure projects that pass rigorous cost-benefit analysis. Without this discipline, value unlocked from asset sales could easily be destroyed by poor infrastructure investment decisions. Maintaining appropriate regulatory frameworks to protect public interests is also critical.
The New Zealand Initiative will provide detailed proposals for a New Zealand asset recycling programme in a forthcoming report. Drawing on New South Wales’ success, the report will show how releasing capital from underperforming assets could help fund the country’s infrastructure renewal.
New Zealand faces a stark choice. We can pretend our crumbling infrastructure will somehow fix itself while billions remain locked in underperforming Crown assets. Or we can make the rational decision to recycle capital from assets the Crown does not need to own into infrastructure New Zealanders desperately need. The evidence from across the Tasman shows this approach works. The only question is whether we dare to embrace it.
