There has been much said about constraints on building supplies affecting the housing sector, but relatively little analysis or discussion of issues facing supplies and resources for our infrastructure projects. These require vast quantities of raw materials and are highly sensitive to the quality, location and cost of things like aggregates, steel and cement.
New Zealand has vast physical resources at its fingertips, but over time a lack of strategic planning along with various new regulations, consent conditions and unhappy neighbours have chipped away and eroded rights of operators to develop and recover these essential ingredients for our economy — leaving us worse off as a result.
NZIER forecasts indicate that non-residential construction cost inflation will increase to 10 per cent per annum in coming months, a truly staggering figure which equates to a doubling in cost every 7 years.
While current supply chain disruptions are likely to be transitory, they may persist if the ongoing Covid pandemic continues to affect manufacturing and port operations in Asia. For infrastructure, the recent Infrastructure Resources Study commissioned by the New Zealand Infrastructure Commission (Te Waihanga) suggests that rather than just blaming supply chain issues, we should be looking closer to home for a solution.
The study indicates that over the past decade raw materials costs have tracked below inflation, but the cost of transporting these materials to the places they're needed has risen considerably. It indicates that strategic planning has a key role to play in protecting high-quality resources near key markets and ensuring that regulations are sufficiently permissive to allow supply to meet demand.
The lack of flexibility in supply and the long lead times required to realise new capacity means both aggregates and timber are especially sensitive to sudden increases in demand like the boom we have experienced over the past 18 months.
Emissions reduction targets set by Government are bold, and growing bolder with each passing climate summit; meanwhile, emissions haven't budged. In the construction materials sector, emissions reduction efforts are hampered by unintended consequences arising from land-use policy and our resource management system.
The Auckland region, for example, is New Zealand's largest infrastructure market and consumer of materials yet it currently produces about half of the aggregate it needs, with the balance being trucked in from surrounding regions at an annual cost of up to $163m.
The industry reports that the cost of bulky, low-value materials like aggregate doubles about every 20km we transport it and a good percentage of that cost is the fuel and operating costs of the trucks moving it around — which also contributes to carbon-related emissions.
When faced with the scale of decarbonisation the transport sector is being asked to deliver, access to locally available, high-quality resources will be essential to the solution.
If used effectively, the proposed Spatial Planning Act could provide future infrastructure projects with access to the right resources in the places we'll need them. For instance, siting quarries closer to our urban centres, with operating conditions that allow them to work efficiently.
The planning and consenting needed to create low cost, low carbon infrastructure may mean some difficult trade-offs between local amenity issues (noise, dust, traffic) and wider economic benefits must be made.
The New Zealand Government's commitment to be carbon neutral by 2050 will require a complete rethink of not only how we move our materials around the country in the most carbon-efficient way, but also of the materials that we use.
Recent advances in engineering and the need to reduce carbon emissions are leading to a wider range of uses for timber, including in multi-storey construction, while the cement industry has developed a range of low-carbon additives and recycled fuels to offset emissions. Even steel, a very high embodied carbon material, has seen huge scientific advances in recent years which offer a promise of a far lower carbon future.
The enduring nature of infrastructure means the choices we make today will be inherited by tomorrow's New Zealanders. We need to be thinking long-term and strategically — something we've struggled with in the past. And we'll need to balance the difficult trade-offs that must be resolved through our new resource management system
• Ross Copland is the CE of the New Zealand Infrastructure Commission, Te Waihanga.