By Alexandra Cain

Maintenance of Aotearoa New Zealand’s infrastructure is facing significant challenges, particularly in terms of efficiency and value for money. A new mindset is key.

Despite spending more on public infrastructure as a percentage of gross domestic product than Australia and the median Organisation for Economic Co‑operation and Development country, Aotearoa New Zealand ranks near the bottom 10 per cent of high‑income countries for the efficiency of that spend. This was one of the most concerning findings of a recent progress report released by Te Waihanga (the New Zealand Infrastructure Commission). The report concerns New Zealand’s 30‑year Infrastructure Strategy, released in May 2022, which emphasised the need for smarter planning and building, and better use of infrastructure across the country. This latest report covers progress from May 2022 to December 2023, with updates to March 2024.

The document highlights several key issues when it comes to keeping water, roads and trains running throughout New Zealand. The most concerning finding is around the high cost of maintaining and renewing existing infrastructure assets, with $6 out of every $10 spent on infrastructure going towards maintenance. Yet, there is not enough robust management around how these funds are spent.

As the report notes, ‘New Zealand does not currently have a planning system that supports the fast-paced, efficient, and sustained infrastructure investment needed to meet the challenges and opportunities ahead.’

While New Zealand’s infrastructure spending is less efficient than in many other countries, there are reasons for that, which are highlighted by the report. Key to this is the stressful economic climate, with increasing government debt levels and current spending exceeding current revenues, indicating a need for tighter fiscal management, and greater emphasis on efficiency.

With an aging base of infrastructure assets and a growing maintenance bill, public administrators need a range of financial tools at their disposal to ensure New Zealand’s bank of roads, ports, wires, and other necessities remain in good condition.

Matthew Willard, Infrastructure Advisory Leader at engineering firm Aurecon, emphasises that there must be a relentless focus on improving the productivity and efficiency of work performed.

‘This includes leveraging best practices from Australia and beyond, as well as from adjacent sectors,’ he says. ‘For example, the approach to fixing potholes and leaking water pipes could benefit from the approach to managing our telecommunications infrastructure assets, and vice versa. Additionally, enabling a wider range of funding and financing tools is crucial to accelerating the rate at which these potholes and leaks are repaired in an efficient manner.

‘Business cases for new infrastructure investment are rigorous, with public sector agencies competing to convince government decision-makers that their project is the best choice out of a limited funding pool during the annual budget process. For local government authorities, the case for new investment needs to be communicated well to the ratepayer during the long-term planning process. These new investments often require trade-offs, such as reduced services in other areas or higher rates for individuals. These processes place a high bar for new investment, which helps us make better decisions when considering which infrastructure projects we should build. We do not treat existing assets the same way.’

Willard says that monetising a proportion of these assets, and taking a user-pays perspective, could help generate funds to pay for maintenance and renewal activities that will then deliver improved services for communities, as opposed to traditional debt funding, which distributes the cost over a much wider population.

KPMG Partner Mair Brooks says that demand management is one of the jigsaw pieces to making sure infrastructure gets the attention it deserves once it’s in place.

‘Then, people can see the correlation between using something and paying for its maintenance. In New Zealand, we haven’t had that as much as other countries. Conversations are changing, which is really welcome. Things like road user charges mean people who use assets more pay for them, and the community is responding to that change,’ says Brooks.

Part of the discussion around attracting private sector investment is the argument that properly incorporating maintenance into funding considerations can be attractive for private investors. This is because it gives them trailing revenue after the asset has been built – sometimes for many decades.

‘If you start maintaining assets, you can have different ownership and maintenance structures. With some public private partnerships, we see “build, operate and maintain” models that suit every stakeholder’s needs,’ says Brooks.

A new mindset

Breaking the psyche that the community shouldn’t have to pay for these services and that they should be covered by taxes is key. But the reality is that consumers are already paying for the services they use. User pays is just a way to distribute costs uniformly across the community.

‘The user-pays conversation is maturing. But there needs to be considered engagement to ensure the public buy into it, and simultaneously ensure marginalised communities aren’t disproportionally affected,’ says Willard. 

For instance, shift workers should not have to pay the full amount for congestion tolling if they are required to travel at peak times. Rebates and caps for residents with a tollgate in their local area are other possible interventions.

Wayne Hatcher, Technical Director – Asset Management at engineering and professional services firm WSP, notes that over the past 20 years, New Zealand has developed a much more sophisticated understanding of the condition of its infrastructure assets – data that has fed into investment decisions. ‘But what we really need is consistency across political cycles,’ he says.

Hatcher notes that given New Zealand’s particular geology and geography, we are in a much better position to adapt to and withstand natural disasters. 

‘We understand a lot of the weaknesses in our infrastructure. We have the earthquake-prone buildings program, and cooperation of building owners and authorities. There is increasing awareness of the risks and hazards we face in New Zealand. We need to be proactive, which is hard given how unpredictable the funding and investment situation is.’

Brooks says while there is a lot of focus on new assets, New Zealand has much to gain by making sure that existing assets are kept up to date. This requires continuous programs of work. She agrees a switch is happening, and there is now more acceptance of a user-pays model.

‘We’re having much more interesting conversations because we understand our critical assets,’ she says. ‘In New Zealand, infrastructure has traditionally not been given a great deal of thought. For instance, with water, people don’t realise that if there’s a leak, it means someone has to pay for it down the track.’

Ultimately, Hatcher says what’s important is to avoid a situation where the country is robbing from past infrastructure investments by not maintaining existing assets. 

‘It means we’re not getting the full value of those investments. You need to understand that when the ribbon is cut, only about 40 per cent of the cost to realise the full value of the investment has been spent.’