THREE KEY FACTS:
It’s a tough time being rich.
Financial news website Bloomberg reported this week that the billionaires who flocked to Donald Trump’s inauguration on January 20 have lost a collective US$209 billion ($365b) since that date - that’s almost as much as New Zealand’s entire GDP.
So while Finance Minister Nicola Willis proclaiming “stability is our middle name” and cracking jokes about labour productivity growth might have most New Zealanders swiping left or reaching for the remote, the Government hopes the investors with more than $6 trillion gathered in Auckland for the Government’s infrastructure summit will take note.
Boring is the new Birkin - or at least it might be, if investors actually wanted what we’re selling.
What we’re selling, in the short-term, is Public-Private Partnerships - agreements between the Government and a private provider (often an alliance of several) to build and run (or perhaps just to run) a public service like a road, school, prison, or hospital.
Early indications are that they do.
The chief executive of New Zealand-founded Morrison, Paul Newfield, said his firm was keen to partner with international investors to bid for some of the PPPs, as the company and Infratil, the fund it manages, has done overseas.
“A lot of the institutional investors in the room are people who we have existing global relationships with. We’re really trying to say to them, ‘you already work with a global infrastructure investor from New Zealand, make sure that you also look at things with us in New Zealand’,” he said.
Newfield said he would “definitely have a good look” at the projects the Government is shopping this week.
He said one of the challenges the Government faced would be that some of the PPPs on offer would be “too small’ for them (proposed PPPs included a redevelopment of Linton army camp and courthouses).
He warned the summit would not be a success unless firms could see a commitment to a long-term pipeline of work rather than just one or two projects.
Foreign investors aren’t likely to embed themselves in the New Zealand market for just one or two investments, he said - they needed more.
That concern was echoed by Brett Shepherd, Craigs Investment Partners’ executive chairman of investment banking, who told a press conference that a pipeline was needed to maintain investor interest.
“It’s been on and off,” Shepherd said.
He said his clients, like Canada’s Brookfield Asset Management had about US$1 trillion ($1.7T) wanted to know whether there was an “on/off switch or a sustainable mode”.
There appears to be a lot of interest in what is on the table, particularly the Northland Expressway.
Guido Cacciaguerra, the Australia-based head of PPPs for Italian Webuild confirmed his firm was part of a consortium including Australia’s Plenary and Malaysian firm Gamuda.
“The Italians are coming back” he said, referencing Webuild’s predecessor Codelfa-Cogefar’s role building the Tongariro hydro scheme, a project which saw Italian workers bring their own cheese, olive oil and cooks to 1960s Tūrangi.
Plenary committed to bidding for up to five PPPs and said it would establish an office in New Zealand.
The conference was this Government’s happy place. After a torrid week responding to dreadful polling and answering for “exploding lunches”, Prime Minister Christopher Luxon appeared to be enjoying himself among the delegates (according to official photos - media weren’t permitted in the room).
The sales and dealmaking role is more his metier than taking questions in the House. He even got some positive attention from the Financial Times, the house journal of the kinds of people Luxon is trying to attract.
Infrastructure Minister Chris Bishop was also in his element - a slightly different element, to be fair, than Luxon’s: He has tickets to see Shihad three times in the next week (the fact the first concert was the night the summit opened, did not stop Bishop from attending).
Announcements abounded.
Regional Development Minister Shane Jones said registrations of interest had opened in a PPP to build a large dry dock in Northland, big enough for New Zealand’s Navy ships and the Interisland ferries. Health Minister Simeon Brown announced a new panel to partner with the sector on significant health build projects, confirming what had only been hinted at in the past: there will be a major push to attract private funding into the health system.
“I want to make explicit, the Government is open to PPPs to deliver the infrastructure New Zealanders need and deserve and we welcome market proposals for health infrastructure projects. We’re open to all funding and financing proposals… that includes long-term contracts for services, while other parties build the infrastructure that is used to deliver contracted public health services,” Brown said.
Jones also said he was taking advice on legislating over the top of a recent High Court decision that ruled an NZTA permit allowing it to inadvertently kill animals like bats and kiwi while clearing vegetation for the Mt Messenger Bypass in the upper North Island was unlawful.
In simple terms, the decision means that nothing can be killed unless it is diseased or there is overpopulation or something similar. It cannot be moved elsewhere unless the Department of Conservation (DoC) is funded to help sustain a species population in another location.
The decision is bad news for a Government that is promising investors New Zealand has a regulatory environment favourable to infrastructure.
Jones said legislation might be introduced on Budget night, speeding it through Parliament. Regulation Minister David Seymour said he was supportive of legislating a change in light of the court decision.
While the High Court decision appears quite heavy-handed at first blush, bluntly and rapidly legislating over the top of it will do nothing to heal the wounds that opened between the Government and environmentalists over the fast-track law.
The challenge for the Government, articulated by the Greens’ Julie Anne Genter is that for all the investment interest, someone still needs to pay for all these PPPs - and that probably means the taxpayer.
Speaking to the Herald, Genter said she was concerned that the ongoing cost of PPPs inked by this Government would bind a future Government’s hands, giving them less money to their own projects.
“The reality is those investors will want a return. It’s highly likely we will end up paying more for anything that they are investing in [compared with a publicly financed option],” she said.
The Government was keen to talk up the bipartisanship on display as evidence that New Zealand’s stop-start approach to infrastructure was at an end. The proof of that is largely in the next Government’s hands.
Willis talked up the bipartisan infrastructure pipeline.
“The simple reality is that overcoming New Zealand’s infrastructure deficit demands an approach that can look through elections and any change of Government,” she said.
She bridled when one journalist asked whether these remarks squared with her Government’s decision to effectively pause the replacement of the Interislander ferry replacement project and scrap Auckland Light Rail (Labour did the same, effectively pausing or scrapping billions of dollars of roads when it rescoped the transport programme shortly after taking office in 2018).
In fairness to both Labour and National, however, both sides at least seem to be open to the notion that the tradition of scrapping a bunch of projects upon taking office might need to end.
Bipartisanship showed up in the most unlikely places. Health Minister Simeon Brown had warm words for the health merger, National fought so forcefully in opposition.
“Previously, New Zealand had 20 DHBs which individually declared their own infrastructure needs. Delivery was piecemeal and uncoordinated, planning didn’t fully consider the future capacity of the community beyond their own catchment boundaries…
“... By having a unified health system, the Government now has just one delivery entity to deal with,” he said.
If even Brown, who even other politicians find very political, can briefly bury the hatchet, perhaps there’s hope for the bipartisan pipeline yet.
A Chinese cameraman brought a unique camera to film Luxon in Beijing.