Government needs to hire equivalent of Ashburton by 2026 to deliver transport promises

Transport Minister Simeon Brown promises to supercharge the construction of highways, however officials warn New Zealand lacks sufficient labour. Photo / Sylvie Whinray

Officials warned the coalition Government – and its Labour predecessor – that New Zealand’s civil engineering and construction workforce will need to add the equivalent of the population of Ashburton by 2026/27 in order to deliver its infrastructure promises.

That would represent a more than 50% increase (25,000) in the size of the workforce, which stood at about 40,000 when the advice was drawn up.

“High-level analysis suggests we need to increase the number of workers in the transport sector across the country to ~65,000 by 2026/27, an increase from ~40,000 workers in 2022/23. This is significantly higher than what the current trend would suggest is feasible,” officials said.

Ashburton is meant to receive a second bridge as part of the transport plan – provided the Government can find people to build it.

The advice was included in a briefing to Transport Minister Simeon Brown about the challenges arising from Labour’s transport plans, which were branded “unaffordable and undeliverable” by officials, who noted that the last Government had not funded $200 billion worth of promises (a large portion of that belongs to the plan to build a second harbour crossing in Auckland).

The new Government has done little to assuage those concerns, announcing a transport plan that is even larger than Labour’s.

Brown told the Herald the figure was “early advice” he had received shortly after becoming a minister.

“That’s why the Government is taking a number of actions to get a 30-year plan in place... so that we can get more certainty and confidence to the sector so they have confidence to employ and hire people to deliver the long-term pipeline for New Zealand,” the Transport Minister said.

The warning, from officials at the Ministry for Transport, was released as part of a dump of documents on the Government’s transport policy. The documents also revealed NZ Transport Agency Waka Kotahi (NZTA) demanded a guarantee the Government would come to its rescue if it could no longer sustain its borrowing levels through the revenue it raises in fuel taxes and road user charges (RUCs).

Concerns over $3.1b loan

NZTA demanded this of both the Labour Government and the coalition Government, both of which had transport plans that were partly funded by NZTA borrowing $3.1b from the Crown.

Brown confirmed to the Herald that he and the Minister of Finance Nicola Willis gave NZTA those assurances in a “letter of comfort” to the agency.

Modelling of the number of workers needed to deliver transport plan. Graphic / Ministry of Transport

Advice on the plan revealed NZTA’s board was so worried about its financial position that it sought a number of assurances from the Government before agreeing to the plan, including a hard assurance the Government would come to its rescue with new ways of raising money – and that the Government would come to its aid if those new revenue tools did not pan out.

NZTA is in a fiscal pickle thanks to cars becoming more fuel-efficient and fewer people driving. The combination of these two factors has seen the amount of money raised in fuel taxes fall, with forecasts predicting it to continue falling.

Both the last Government and the current one agreed to help the agency find a solution, which is to move to a system where all cars pay RUCs instead of fuel taxes.

The ministry told Brown NZTA had four issues it wanted resolved before agreeing to take on more debt. First, that the Government addressed recommendations of a review of NZTA’s revenue-raising tools; second, that it put up a plan to resolve NZTA’s funding constraints by 2027; third, that it “accelerate” the tools needed for new funding and pricing tools to be ready by 2027; and fourth, that the Crown would “underwrite” NZTA’s loans if additional funding cannot be found.

Subsequent to receiving this advice, Brown agreed to target 2027 as the earliest potential date for switching drivers to RUCs.

Brown confirmed he had a “revenue reform work stream under way” which would include “tolling, road user charges, time-of-use charging and other things”.

Brown said reforms to revenue were important to maintain the “user pays” model.

“That’s why tolling will be an increasingly used form [of revenue],” he said.

Green Party transport spokeswoman Julie Anne Genter told the Herald there were “clear signs that NZTA is not financially sustainable. That is only going to be made worse by Government’s commitment to projects it campaigned on”.

“It’s a difficult situation for NZTA because they are being directed by the Government to carry on projects that probably don’t make sense and their ability to raise revenue is constrained by Government policy,” Genter said.

She warned the plan as it stood would “load future generations with debt”.

Cost increases on election promises

Another document showed NZTA warned the Government its cost estimates for roads promised on the election campaign were out of date and would now cost more.

New Zealand needs more construction workers. Photo / Jason Dorday

Ministry of Transport officials warned that in many cases, the incoming Government’s road costings were six years out of date so NZTA needed to re-cost them. NZTA warned that because many of these roads had been off the agenda for years, there were “significant disclaimers” around their updated figures.

Officials warned that because the cost of these projects was rising faster than their benefits, there was a chance some of the projects “can no longer be justified”.

Officially, NZTA has independence to decide what transport projects need to be built, however the agency must be guided by the Government’s high-level priorities. This means that in some circumstances, if the costs of a project rise more than the benefits, the agency might decide to drop it in favour of something else.

This Government, like the last one, has attempted to close the gap between NZTA and the Beehive by explicitly specifying projects as priorities, leaving NZTA little choice but to build them. Officials advised Brown on several ways he could write his plan to ensure NZTA did what the Government wanted it to.

Other agencies were unimpressed by this, with Treasury, the Infrastructure Commission and NZTA itself saying that “some of the language [in the plan] could be seen as directive”.

The costings have been redacted from the papers, although some figures were leaked to the Herald earlier this year, showing that overall, the cost of the transport package may be $24b more than budgeted for on the campaign.

Officials warned that both Labour and National’s transport plans were predicated on a large increase in spending on infrastructure but neither allowed for the maintenance cost of these new projects once completed.

“Given the ongoing costs of these investments, this ongoing cost will be substantial,” officials warned.

Moving to 10-year plans

New Zealand’s transport system is operated at arm’s length from the Government. Ministers give a high-level sketch of what they would like transport funding to be spent on and how much money will be raised in fuel taxes, RUCs and rego fees.

That 10-year sketch, known as a Government Policy Statement on Land Transport, is then handed to NZTA, which turns it into a three-year National Land Transport Programme (NLTP), which plots in detail what the agency’s board thinks is the best way to give effect to the plan.

The NLTP lasts for just three years, but Brown told officials he had the “intention to shift the NLTP from a three-year to a 10-year investment horizon to provide more certainty around long-term transport funding commitments”.

Officials said “this would be a positive move”, however it was “not without its challenges”, most importantly securing cross-party support and ensuring NZTA had guaranteed funding for the whole 10 years.

Thomas Coughlan is Deputy Political Editor and covers politics from Parliament. He has worked for the Herald since 2021 and has worked in the press gallery since 2018.