by Dr Richard Templer, Chief Executive, Engineering New Zealand

Disruption to our fuel supply could force some tough choices, but we must not lose sight of a strategic and consistent approach to the country’s infrastructure pipeline.

At the time of writing, the New Zealand Government had just announced that fuel restrictions will not be imposed until Phase 4 of the National Fuel Plan. Ministers have signalled it’s highly unlikely that this will eventuate, along with the worst economic fallout from conflict in the Middle East, but they want to be proactive and prepared.

The issue is shaping up to be cost rather than supply.The Reserve Bank’s Monetary Policy Committee said in April: ‘The Middle East conflict has disrupted global supply chains, leading to significantly higher prices for oil and refined petroleum products. As a result, near-term inflation is increasing and economic growth is weakening in many countries.’

The long-awaited green shoots of economic recovery in Aotearoa New Zealand have been trampled on. The compounding economic effects of the COVID-19 hangover and fuel disruption are significant.

This comes at a time when our infrastructure deficit is in the spotlight. The recently released National Infrastructure Plan shows that New Zealand has a $275-billion infrastructure pipeline. More than two-thirds of initiatives by value ($193 billion) are not yet fully funded. This cost can appear daunting in the context of an increasingly strained fiscal environment; however, most projects in the pipeline are small – 96 per cent are expected to cost less than $50 million and 98 per cent are less than $100 million.

These projects account for just under a quarter of the total value of the pipeline, while a handful of unfunded megaprojects account for a large share. This insight helps frame how some of the tough choices ahead can be navigated.

Beyond reacting to the events of today, governments and institutions must assess the impacts of their decisions on the future. This means not cutting or halting construction work that is underway or ready to go.

Evidence indicates that project costs don’t decrease over time, regardless of shocks to markets. The costs of stopping and starting projects are well-documented. In tight fiscal conditions, it’s critical that smaller, deliverable packages of work – such as maintenance of existing infrastructure – are not overlooked. This work is less complex and has shorter planning horizons, meaning it’s an easy win to provide a steady flow of work for the engineering and construction sectors.

Importantly, these projects are more likely to have confirmed funding sources and can be delivered quickly. Infrastructure Minister Chris Bishop alluded to this in his speech to the New Zealand Infrastructure Commission Symposium when he said: ‘It’s the high-profile and high-cost disagreements that make the headlines. But it’s the low-profile and often low-cost projects that make New Zealand.’

At the same event, New Zealand Infrastructure Commission Chief Executive Geoff Cooper stressed the importance of not just delivering new projects, but looking after what we already have – for every $1 we spend, $0.60 should be spent on maintenance and renewals.

Funding decisions on nationally significant infrastructure ultimately sit with central government, and Engineering New Zealand supports a bipartisan approach. So, it was good to see the government recently announce new measures to support clearer, more consistent advice and enhanced scrutiny of investments in major public infrastructure projects.

The suite of changes includes transferring responsibility for infrastructure project assurance from the Treasury to the New Zealand Infrastructure Commission. Ministers say this will remove duplication and make full use of the commission’s specialised expertise, ensuring that the government receives early, independent, and frank advice to support sound investment decisions.

Other changes include the introduction of a standardised ‘Fitness Assessment’ for major infrastructure investment proposals, new assurance of asset management and long-term investment plans, and greater oversight and review of investment plans. This will support a better long-term, coordinated approach to infrastructure management.

The government’s message is not about a bipartisan pipeline, but a bipartisan approach to the process for selecting and funding projects that end up in the pipeline. Minister Bishop has said that stronger assurance can also be a tool for the public to hold ministers to account. If a government funds a project that did not receive a favourable assessment, that’s a good basis for questions and scrutiny. We will hold the government to that.

The success of these changes will depend on governments acting on expert advice and ensuring approved projects are progressed through to completion. We ultimately want to see a more stable pipeline of work that’s less vulnerable to political cycles because it’s backed by solid evidence.

Infrastructure is one of the biggest issues for the upcoming general election. There was once a time when infrastructure like the pipes carrying a city’s drinking water and wastewater were ‘out of sight, out of mind’ for voters. That is no longer the case.

Engineering New Zealand is bringing together the country’s political movers and shakers for a live infrastructure election debate on 6 August. ACT leader David Seymour, Greens co-leader Chloe Swarbrick, Labour leader Chris Hipkins, National’s infrastructure spokesman Chris Bishop, and New Zealand First deputy leader Shane Jones will be put through their paces on our infrastructure crunch.

Central government is the biggest player in this space, but local government is responsible for a quarter of New Zealand’s infrastructure investment, delivering services critical to our daily lives, such as roads and flood protection.

Like central government, local government is increasingly fiscally constrained by disruption to our fuel supply. Councils are also grappling with a deluge of reforms – from Local Water Done Well and resource management changes, to rates caps and emergency management reform.

The government has now given councils just three months to submit proposals for the merger of two or more territorial authorities, creating unitary authorities with the functions of both regional and local councils. Councils that don’t voluntarily merge through this process could face an uncertain future.

The constant policy change facing local government has already resulted in widespread postponement of infrastructure projects; even maintenance and renewals that need to occur to maintain service provision regardless of government direction.

Local government infrastructure projects are critical to a healthy infrastructure pipeline, particularly in smaller regions. The tough choices ahead are real, but so is the cost of delay, disruption and political churn.

This election, our leaders must commit to a stable, evidence-based pipeline that keeps Aotearoa New Zealand moving forward.