By Peter Nunns, General Manager – Strategy, Te Waihanga (the New Zealand Infrastructure Commission)

How and where will we need to invest in our future infrastructure?

Infrastructure lasts a long time. Pipes that carry water to homes are designed to last generations. Road tunnels in our cities have stood in the same place for almost 100 years. Because infrastructure lasts such a long time, infrastructure decisions need to be made with an eye on the future.

Te Waihanga (The New Zealand Infrastructure Commission) is working on a National Infrastructure Plan that is focused on New Zealand’s future infrastructure needs and how we can pay for them. The final plan will be delivered to government in December 2025.

To inform this work, we’re undertaking a long-term needs analysis (as discussed in the report ‘Paying it forward: Understanding our long-term infrastructure needs’). This analysis seeks to identify and forecast how and where we will need to invest to meet our long-term infrastructure needs.

Needs and our willingness to pay

Before we can talk about meeting our future infrastructure needs, we need to have a good understanding of what we are willing to pay in order to meet those needs. Infrastructure is not free. Deciding to invest in infrastructure to meet a need must consider the benefits of doing so against the costs of the investment. Without a discussion about what we are willing to pay, there will likely be a large difference between perceived needs and our willingness to address them.

What’s clear is that we, as a country, value and invest in our infrastructure networks. We are clearly willing to devote a lot of our money to our networks. Over the last 20 years, we’ve spent between five per cent and 6.5 per cent of our gross domestic product (GDP) on all types of infrastructure. New Zealand is close to the top 10 per cent of countries in terms of how much we spend on our infrastructure.

What we want to know is what types of factors make us want to invest in infrastructure, and how those factors might change over time and into the future.

Drivers of future infrastructure investment

When considering future needs, we’ve identified eight drivers of future infrastructure investment, including population growth and demographic changes, decarbonising our economy, and building resilience to natural hazards.

Some of these are easier to think about than others. Our need to renew our assets is a function of what we have and how quickly it wears out over time. On the other hand, when we grow richer as a country, the demands on infrastructure can change in many ways; for example, it can lead to higher service expectations or safety standards. And when major technology innovations, like the internal combustion engine or the internet, come along, they can upend our investment plans.

Our goal in the National Infrastructure Plan is to forecast how these drivers will affect infrastructure needs in the long term.

How do we respond to uncertainty?

The only thing that is certain about the future is that it is uncertain. In thinking long term about infrastructure needs, we need to ensure we account for this uncertainty.

Some pressures on our networks are easier to foresee than others. For instance, so long as we have good information on the size and condition of existing assets, we can forecast what we will need to spend to maintain and replace them.

Other drivers of future infrastructure investment, like population growth and demographic changes, are harder to predict. We estimate that population growth and population aging accounted for more than 60 per cent of the growth in our public infrastructure networks from 1960 to 2019. Looking forward, we know that New Zealand’s demographic future will be different from its past, but it’s hard to be certain about how, where, and when we will see the impacts.

Declining fertility rates mean overall population growth is expected to slow, and that it will be increasingly driven by migration, which is hard to predict. This means that the amount of infrastructure we need to provide to serve population growth will be more uncertain.

At the same time, we also know our population is aging and diversifying. This affects not only how much we need to invest in infrastructure in the future, but also what types of infrastructure we need to invest in. For instance, older people use hospital and medical facilities more, whereas schools and universities are used mainly by younger people.

As part of our long-term needs analysis, we’re thinking about ways we can plan for an uncertain future. Some of the approaches we’re using include looking at different scenarios, testing different assumptions, communicating the likelihood or predictability of something occurring, and reassessing our infrastructure needs periodically and updating information as required.

One aim of the National Infrastructure Plan is to develop a shared understanding of our long-term infrastructure needs for the country. New Zealand needs greater certainty about what is important to us and where we should be choosing to invest. An increased level of certainty helps us to better understand what skills and people we’ll need to build our infrastructure, and what projects we should be prioritising to ensure we continue to thrive.

The National Infrastructure Plan will go beyond identifying long-term infrastructure needs – it will look at other parts of our infrastructure system to determine whether they are fit-for-purpose to meet our infrastructure needs. This includes examining factors from asset management and planning practices, to ensuring that our system settings enable us to meet our infrastructure needs in the future. 

For more information about the development of the National Infrastructure Plan and Te Waihanga (The New Zealand Infrastructure Commission), visit https:tewaihanga.govt.nz/.