Infrastructure: Time to make the big calls

Deputy Prime Minister Grant Robertson. Photo / Mark Mitchell

Deputy Prime Minister Grant Robertson says Cabinet has a "real sense of urgency" about the impending decision on which option to back to finally secure light rail for Auckland.

"We've just sat on this for too long as a country," Robertson told the Herald just weeks out from the critical Cabinet meeting in which Ministers will choose which option, out of three put forward by the Auckland Light Rail Group, will get their approval.

These options are explored further in the Herald's Infrastructure report in a discussion with Transport Minister Michael Wood and an interview with the group's project director, Tommy Parker.

Robertson — who holds both the finance and infrastructure portfolios — wants to make as much progress as he can, in short order: "It is a massive project.

"I would like to think by the next election we would have made some good progress and people would be able to see where we are going."

Cabinet is due to make the call at its meeting on December 13 with the industry expecting an announcement later that week.

It is just one of the three big infrastructure calls the Labour Government will make before the 2023 election. It has also embarked on what is known as the Three Waters reform, which will see the creation of four publicly-owned water entities to own the nation's drinking water, wastewater and stormwater networks.

These entities will have sufficient balance sheet strength to raise debt to build new infrastructure to service expanding populations and replace worn out and leaking pipes.

The Government is also bringing forward a decision on a second harbour crossing for Auckland.

There are a number of factors driving this: population growth, which is causing capacity issues on the harbour bridge is one factor; but also a deepening strategy to expand light rail from central Auckland to the North Shore via tunnels to carry more passenger traffic and assist in the decarbonisation of transport.

These will be multibillion-dollar investments.

Robertson says when it comes to Three Waters there will be "hundreds of billions" raised over a multi-decade horizon to bring that infrastructure up to scratch and provide for growth. The official projection is $185 billion over 30 years but that is now expected to rise. The debt will be raised on the balance sheets of the four new public-owned entities.

Light rail in Auckland has been projected to cost between $9b-$16.3b to fund, depending on the option that is chosen. But there are estimates it could run out to a $20b range once associated urban development along the rail pathway and inflated material costs are factored in.

The "Let's get Wellington Moving" initiative which will bring light rail to the Capital is expected to touch on $10b.

The cost of an Auckland harbour crossing by tunnel — which is Robertson's preferred option — has ballooned to $15b; a 50 per cent increase on the previous estimate of $10b. These are significant cost escalations.

In his May 2021 Budget, Robertson said the Government would spend $57.3b on infrastructure between 2021-2024, increasing what was already a large figure in the 2020 Budget. That is going up again. He told the Herald "we will have to add to that".

Robertson expects to release updated figures in the December 15 Budget policy statement.

He will also have more to say then about another agenda of work outlined in the 2021 Budget which focuses on hypothecating revenue from the Emissions Trading Scheme for emissions reduction projects.

The Green Infrastructure Fund Green Bonds programme for 2022 are central to this.

Robertson concedes that this is a "massive" programme.

"The thing for me, it is about having the infrastructure backbone for a higher wage, lower carbon economy," he said.

Having that backbone meant taking on the big-ticket projects through long-term investments.