New Zealand has a $210 billion bill to plug New Zealand's infrastructure deficit and stop the deficit getting worse in future, Treasury has warned.
But Government frequently gets poor value for money from its investments, and has one of the worst records of all developed economies at delivering infrastructure.
Those are two key messages from Treasury's 2022 Investment Statement, which looks at the health of the Government's balance sheet. It is the first statement to take account of the pandemic.
The statement looked at the costs and benefits of the pandemic response to the Government's books. On the upside, the Government, one of New Zealand's biggest property owners, has made billions of dollars of gains from the skyrocketing cost of land; on the downside, the Government is set to book large losses from the Reserve Bank's money printing programme.
A focus of the report was plugging New Zealand's massive infrastructure deficit.
Treasury cited the Infrastructure Commission's recent estimate of New Zealand's infrastructure challenges. This includes an "infrastructure gap" - the value of what New Zealand should have built but has not - of $104 billion. This figure includes a "shortfall in public investment of $83b" and an "estimated $21b necessary to eliminate the current housing shortage".
The Government also has a "future infrastructure gap" of $106b over the next 30 years, which is the difference between what the Government is currently planning to spend and what it should spend to keep up with demand.
Two-thirds of this cost lies with the Government, with the rest falling on the shoulders of the private sector.
Finance Minister Grant Robertson said the Government "inherited a significant infrastructure deficit and have committed record levels of capital investment to begin to address it".
He said the Government was planning "for the next 30 years in infrastructure".
"The Infrastructure Commission Te Waihanga's work on the delivery of a 30-year infrastructure strategy and ongoing work on the infrastructure pipeline will help us achieve better certainty and improved planning and delivery," Robertson said.
He said the Infrastructure Commission was "working to provide support to government agencies who are developing policy advice that relates to infrastructure, including the Government's reform programme in health, resource management and 3 Waters".
National's finance spokesperson Nicola Willis said National was "determined that New Zealand can meet its long-term infrastructure needs so that we have the infrastructure needed to support economic growth and to support ambitious, growing businesses and to support healthy families".
Along with the huge bill, Treasury's statement came with a warning: New Zealand often gets a poor return for the money it spends on infrastructure.
"Investment disciplines matter: in order to provide value for money, investment needs to be managed well and sequenced to reflect the economy's capacity to deliver," Treasury wrote.
Officials warned that evidence "suggests New Zealand is among the least efficient high-income countries at delivering infrastructure".
It laid the blame at "decision-making, capability, planning, and consenting".
Treasury warned a "key challenge" for the Government would be "lifting New Zealand's capability at the same time as improving investment disciplines".
Willis said the analysis showed there "hasn't been enough of a focus on tying infrastructure investment decisions to delivery, but also upfront cost-benefit analysis of those decisions to ensure they pay for themselves over their life".
She cited Auckland's proposed light rail line as something she believed had poor value for money.
There were notes of optimism in the report.
Treasury noted that Covid-19 had a "significant" impact on the Crown balance sheet since the last investment statement of 2018, however the Government's books remained "resilient".
Treasury wrote that while the Government's debts had increased markedly during the pandemic, the value of its assets had also increased. This was a result of some borrowing being used to finance new assets, as well as the value of physical and financial assets of the Government increasing in value over the course of the pandemic economic boom.
The Government's assets were worth $438.6b as of 30 June 2021, with debts worth $281b. Treasury said these debt levels were within "prudent' levels.
This gave the Crown a net worth of $157.2b.
The Government's balance sheet has benefitted from the increase in land prices, with property, plant and equipment owned by the Government increasing in value by $68.7b, or 48 per cent, since the last investment statement in 2018.
Treasury also put a figure on the hit to the Government's books as a result of the Reserve Bank's money printing programme, LSAP.
Most of the value of the $53b worth of bonds purchased by the Reserve Bank will net out, because the debt bought by the bank is both an asset and a liability to the Crown - it is an asset to the Bank, and a liability to Treasury. The programme also reduced borrowing costs for the Government, another benefit.
However, the changing values of the bonds from when they were bought will cause a slight loss for the Crown, a loss that is not covered by lower cost of borrowing.
This cost was estimated to be $5.1b by Treasury.