By Ross Copland, Chief Executive, Te Waihanga (The New Zealand Infrastructure Commission)
When TE WAIHANGA published the New Zealand Infrastructure Strategy in May 2022, we were clear it would not be a strategy that sat on the shelf. Two years on, we have released a report that outlines progress against this – New Zealand’s first infrastructure strategy.
In drafting the New Zealand Infrastructure Strategy, Te Waihanga (the New Zealand Infrastructure Commission) worked with central government, local government, and the wider infrastructure sector to get sustained traction on the 11 key objectives and themes outlined in the strategy – ranging from enabling a net zero carbon emissions economy and supporting the growth of our regions and cities, to strengthening the resilience of critical infrastructure and boosting the productivity of the construction sector.
This year, our team has published a report looking at how we’re tracking against these objectives and the strategy’s 68 recommendations. In good news, there are real signs of positive change, with more than half of the recommendations either advancing (17) or partially advancing (21). This progress has been made against the backdrop of some of the challenges we’ve faced as a country, including severe weather events, significant construction cost inflation and supply chain disruption.
Areas where we have seen progress include a focus on enhancing the resilience of critical infrastructure; revisions to standard construction contract NZS 3910 to improve risk allocation and better support good contracting practices; Treasury’s measures to strengthen Quarterly Investment Reporting for government agencies; and the uptake of water metering in some urban areas, which can help manage demand and help defer investment. We’ve also seen some good examples of infrastructure delivery, such as the delivery of State Highway 25A being rebuilt ahead of schedule after incurring significant damage due to the North Island weather event in January 2023.
But, as everyone in the sector is already keenly aware, there are still many areas where there’s room for us to do better. New Zealand currently spends more than Australia, and the median Organisation for Economic Co-operation and Development (OECD) country, on public infrastructure as a percentage of gross domestic product. The rub is that we rank near the bottom 10 per cent of high-income countries for the efficiency of that spend. Simply put, we’re spending more and getting less compared to most other OECD countries when it comes to our infrastructure. In the past couple of years, many sectors have lost control of project budgets, scope and schedules, culminating in some of the largest time and cost overruns in our history. This requires the urgent attention of the sector to restore public confidence that we can deliver value-for-money outcomes from investments in public infrastructure. It starts at the top, with our client organisations needing to lead this change, supported by the rest of us having a hard look at how we do things and being prepared to change.
In addition, the tight fiscal conditions we’re facing as a country means there will be an elevated focus on the quality of new investment. Ultimately, we must get more out of the infrastructure assets we already have. That includes finding ways of managing peak demand.
This should be a focus across all infrastructure sectors, but is particularly important for transport networks in urban areas. Motorway development in Auckland demonstrates clearly that building for the peaks in the absence of pricing tools has not solved congestion. The strategy recommended that congestion or time-of-use charging be introduced in Auckland and other urban areas. It is proven to reduce demand for road space at peak times. Over the past 20 years, there have been at least five major studies of congestion pricing options for Auckland. All have concluded that congestion pricing would help to reduce the city’s traffic woes. Draft congestion charging legislation has been written, and Auckland Council and the government agree that it is needed. Removing the barriers to a permissive, efficient congestion pricing policy remains a priority action under the strategy.
We also need to take better care of our existing infrastructure. Te Waihanga research has found that for every $10 we spend on infrastructure, $6 needs to be spent on maintenance and renewals. While renewal spending equals or exceeds depreciation in some sectors (such as electricity distribution), it is below depreciation in a number of others such as state highways, local roads, water supply, and wastewater and stormwater infrastructure – leading to declining asset condition and a growing backlog of renewals.
When we make new investments, greater care and discipline is required across all phases – from option evaluation, to scoping, procurement and delivery. The OECD recommends that countries guard fiscal sustainability, affordability, and value for money through rigorous project appraisal and selection processes, and independent and impartial expert assessments. Consistent with this advice, Te Waihanga has been asked to develop an Infrastructure Priorities Programme. This will produce an independently assured set of quality infrastructure proposals, including non‑built solutions, from which future governments of all flavours can confidently select, building pipeline certainty.
Our research indicates that government asset owners still have work to do as clients. In recognition of this, Te Waihanga has established the Infrastructure Leaders Network to enhance the quality of major project leadership capabilities across the New Zealand public sector. The Leaders Network has been designed with the aim of building a robust community of practice among project delivery leaders. The network includes a dedicated online platform where leaders can connect, and share insights and best practices, enhancing collective knowledge. Members of the network are also able to attend online regular masterclass seminars and quarterly face-to-face meet-ups in various locations around New Zealand. The network aims to improve individual leadership skills, and enhance the sector’s capacity to deliver significant infrastructure projects effectively and efficiently.
While asset owners value options when it comes to the detail and scope of spend, we also hear clearly from the sector that we need greater pipeline certainty. We have been building the National Infrastructure Pipeline to provide a forward view of infrastructure project activity. Pipeline contributors have nearly doubled in the past 24 months – from 44 to 82 contributors. The value of projects in the pipeline has grown from $69 billion in March 2022 to $121.8 billion in March 2024 (an increase of 77 per cent). Of that, $13.4 billion of funded projects in the pipeline will be in procurement over the next 12 months.
The pipeline’s forward view of intentions and project activity across New Zealand gives our infrastructure providers and construction markets valuable insights to help coordinate, plan, and prioritise. To those organisations already contributing: thank you – you’re making a huge difference in terms of coordination and planning efforts. If your organisation (public or private sector) is not yet contributing, please contact our team – we would gladly receive and publish your investment intentions data (pipeline@tewaihanga.govt.nz). We know that building a credible pipeline will provide a more complete view of planned infrastructure activity to the market – and that benefits all of us.
Our infrastructure challenges have been decades in the making – our objective is to learn from history to inform a better future. In some cases, minor tweaks are required, while it is clearly time to make fundamental change in others.
In recognition of the long-lived nature of infrastructure, the government has asked Te Waihanga to develop a 30‑year National Infrastructure Plan that aims to build enduring national consensus on key projects, needs, priorities and policies.
Monitoring progress against the strategy helps us in the development of this National Infrastructure Plan, as well as providing advice and information to decision-makers, central and local government, and the wider infrastructure sector to support improved infrastructure delivery and services.
For more information, visit https://tewaihanga.govt.nz.