New Zealand's Infrastructure Strategy

New Zealand’s Infrastructure Commission has led the way in publishing a dedicated infrastructure strategy that confronts the climate challenge and the country’s unique position along the Alpine Fault. 

The Infrastructure Strategy 2022-20521 identifies challenges to new and existing assets, ranging from record construction cost escalation and severe workforce shortages, to preparing for the impact of the colliding Pacific and Australian Plates along the Alpine Fault. In New Zealand, and across the world, infrastructure has been tasked with doing most of the heavy lifting to meet Governments’ Net-Zero commitments, requiring a dramatic rethink of transport and energy systems.  

The strategy highlights 12 unique challenges to New Zealand: 

1. The average Auckland commuter spends five days in traffic per year 
2. By 2050 one in four New Zealanders will be over 65 
3. NZ$90bn is needed to fix the water networks 
4. $5bn of council infrastructure is exposed to rising sea levels 
5. 115,000 more homes are needed to fix the housing crisis 
6. There is a 75% chance of an Alpine Fault earthquake by 2070 
7. Electricity generating capacity needs to increase by 170% 
8. NZ$60 spend needed on maintenance for every NZ$40 spent on new infrastructure 
9. New Zealand’s population will grow to 6.2 million or more over the next 30 years 
10. Infrastructure construction costs have risen 60% faster than prices elsewhere in the economy 
11. Half of all population growth will be in the five major centres 
12. New Zealand will have a shortfall of 118,500 construction workers in 2024 

Furthermore, the strategy proposes 68 recommendations to the government driven by three guiding principles: 

Equitable – Ensure present and future New Zealanders need to benefit from infrastructure. Any development should meet the needs of current and future consumers. The strategy suggests investing in long term infrastructure and using debt to distribute costs over multiple generations.  

Aspirational – use the smartest minds and international best practice to identify the best infrastructure solutions. The strategy suggests things like a NetZero economy, zero landfill waste and universal access to digital services. 

Efficient – secure maximum value with minimum wasted effort and expense, rapidly adopt and diffuse technologies. All infrastructure decisions should provide value for money. The strategy calls for maximised potential of existing infrastructure, integration of economic, social, and environmental objectives, as well as investment for resilience.  

The NZ government has shown full support for 58 of the recommendations made by the New Zealand Infrastructure Commission and it has committed a further NZ$61.9 billion of infrastructure investment over the next five years.  

The challenges highlighted and outlined by the Commission are not entirely unique to New Zealand (Alpine Fault aside) as many states are making an inward review of their country’s infrastructure and highlighting the present risks to realising any commitments made to a carbon free future. There is overlap between recent infrastructure reviews performed in the UK and Canada. The key themes explored in these reviews focus clearly on the energy transition, a rethink of transportation systems, digital interconnectedness, functioning water and wastewater systems and above all a clear emphasis on ensuring we have a transition which is equitable, universal, and affordable. 

Addressing the challenge 

The question of affordability is high considering the current cost of living issues and the energy shock that is being seen across Europe and the world which highlights, in particular, the conundrum of who pays for all of the infrastructure outlined in these reviews.  

Successful delivery of critical infrastructure will require a focused collaboration between a wide range of participants, meaning that no entity acting alone can affect real change within the sector. Consequently, infrastructure commissions across the world are increasingly recognising the need for private capital involvement in delivering the high quality, resilient infrastructure that is needed to decarbonise our economies and societies.  

As we stand today, private investors are estimated to have close to USD$300 billion in dry powder waiting to be deployed and are actively seeking investment opportunities which bring about fair returns whilst driving the energy transition and decarbonisation of all transport sectors.  

So what is stopping this deployment? A clear barrier to foreign direct investment (FDI) and the deployment of billions, as outlined in our pulse survey,2 is the role that governments and regulators play in providing certainty and clarity to investors. The pulse survey outlines several key challenges and barriers that investors face when looking at regions to deploy capital: 

• Lack of a visible project pipeline 
• Unattractive regulatory regime 
• Lack of clarity on funding models  
• Political instability 

Furthermore, a key challenge in many jurisdictions is the lack of a dedicated infrastructure strategy that recognises the challenges at hand and provides a roadmap to finding solutions to achieving Net Zero and other key socioeconomic goals.  

Like the UK and Canada, New Zealand, with the creation of an infrastructure commission and the subsequent publishing of an infrastructure strategy, has put in place a long-term framework for infrastructure that helps bring greater certainty. This is complemented by the strategy’s emphasis on the need for private capital to play an integral role in meeting infrastructure needs. To achieve this, we are resolute in the need for collaboration to guide decision-making and to ensure private capital can help New Zealand achieve its infrastructure goals.