By Stephanie Ward, Partner – Deal Advisory, KPMG New Zealand

As we move through the final quarter of the year, many people in the infrastructure industry are starting to see an uptick in activity, which will hopefully set the foundation for a stronger 2025. 

2024 has seen renewed calls for a nonpartisan infrastructure pipeline so that the sector and the country don’t lose momentum when there is a change in government. In August, we saw statements from the government and the opposition in support of this, and there have been steps towards change.

The role of the Infrastructure Commission has been clarified and it is now responsible for developing the Infrastructure Priorities Programme, which will set out the commission’s view of the priorities for the country, and allow the public and political parties to be well-informed.

The Treasury is now the lead agency providing advice to the Minister for Infrastructure, to allow Te Waihanga (the New Zealand Infrastructure Commission) to have a more independent role.

A new National Infrastructure Agency will be established on 1 December 2024 to play a coordination role in attracting private finance into Aotearoa New Zealand’s infrastructure programs.

With time, we will see if the changes in institutional settings provide the stability that the sector is looking for. For now, the focus must move back to getting our infrastructure programs moving so we can set New Zealand up for success.

Our infrastructure underpins our economy and society – the decisions we make today are critical in supporting our emergence from the current economic downturn. Generations of New Zealanders have built infrastructure that allows us to connect with each other, receive services and move products to market. Our networks of transport, energy, water, and data will be critical for the economic growth and prosperity of New Zealand, coupled with our social infrastructure – such as schools, hospitals, and housing.

At KPMG, our team of more than 30 local infrastructure specialists (part of KPMG’s large global network of specialists) has identified, through discussions with asset owners and those delivering infrastructure, the five big opportunities for New Zealand’s infrastructure sector. These are outlined here.

1. Making better use of our existing assets

We need to make the most of past investments and ensure we are extracting the full value from them – the value that was originally planned. Many of our assets have surplus capacity if we are thoughtful about how we use them. For example, a road can carry more people if they are travelling on buses rather than in cars, or at different times of the day. Equally, new developments could be targeted around areas of our cities that have capacity in our road and water networks.

2. Proactive maintenance of our assets (and factoring this cost into initial investment decisions)

Sound asset management provides higher-quality services to New Zealanders and reduces the large rebuild costs for run‑down assets. Unfortunately, we are currently seeing the lack of maintenance play out in our water and road networks. We can utilise digital innovations that other countries are adopting to improve the data we hold about our assets, identify faults early and schedule our maintenance. We also need to get better at being realistic about the whole-of-life cost of an asset before we build, and allow for the full cost in budgets.

3. Improving the efficiency of our design and construction processes through collaborative delivery models

There have been headlines all over the world about infrastructure projects exceeding budgets, and New Zealand is no different. While much of this can be attributed to the unexpected pace of construction inflation in recent times, there are lessons in taking a disciplined approach to scoping changes and considering new ways of partnering to manage delivery. Other countries have been experimenting with more collaborative contracting approaches and it is timely for New Zealand to refine its delivery models, drawing on approaches from the United Kingdom, Australia, and Canada. Through improved delivery, New Zealand could strip the cost out of major infrastructure projects and allow more projects to be delivered.

4. Drawing in other forms of funding and financing to reduce the call on taxpayers and ratepayers

Real value is generated from infrastructure, so there is a case for others to contribute to the cost through user charges, levies, value capture and property development (for example, around a train station). This has the advantage of aligning cost with those who benefit from the infrastructure investment, though this needs to be considered alongside other objectives to ensure the asset is well-used and that development occurs around it. Generally, value capture and user pays do not cover the full cost of an infrastructure investment, particularly in New Zealand, and there will still be a need for some taxpayer and/or ratepayer funding.

As well as new funding tools, the government has been clear that it will utilise private finance to smooth the cost of infrastructure over generations and bring global expertise into delivery. This could be through traditional public private partnerships or other models that the market may propose.

5. Taking a long-term, cross-sector approach that considers how we want our cities and regions to grow, increasing our resilience and adapting for climate change

A long-term approach is important for designing how our cities and regions grow, and reflecting the long life of the assets. Our investments today need to factor in the changes in climate that are expected over their life, including more frequent and severe extreme weather events like the 2023 floods.

Proactive, collaborative planning can save money by ensuring investments complement each other and by coordinating delivery. Building new transport infrastructure out to a new greenfield development, for example, will only be beneficial if the local council can also afford the new water infrastructure and the local roads required.

New Zealand could be world famous for its infrastructure by making smart investment choices and managing assets well. We have a history of being innovative. Our scale means we can be nimble and take advantage of new technology, and we have an infrastructure sector that is ready to get moving.

About the author
Stephanie Ward specialises in providing commercial and financial advice to central and local government, with a focus on infrastructure and urban development. Ward brings both global and a local lens to develop solutions for New Zealand’s complex infrastructure needs, having worked in Canada, the United Kingdom, and across New Zealand.