Infrastructure

Wishlist for a multi-billion dollar infrastructure spend

Transport, health and local government are all contenders for a multibillion dollar infrastructure spending boost, Dileepa Fonseka reports

Roading and rail should be at the core of a major Government infrastructure announcement.

That’s the argument economists and people in the infrastructure industry are making ahead of a spending package announcement by Finance Minister Grant Robertson. 

Robertson has previously said the package would involve the Government taking on more debt to fund short to medium term infrastructure projects across New Zealand.

“With fiscal policy you’re trying to forecast what cabinet ministers are going to decide in a closed room and that could be anything, right?

ANZ Economist Miles Workman bets the package, to be announced on Wednesday, will fall within the range of $5 billion to $15b.

“With fiscal policy you’re trying to forecast what cabinet ministers are going to decide in a closed room and that could be anything, right?”

“But we do know there are a few constraints subject to that decision-making process.”

Workman said the Government’s movement to a debt target range of between 15-25 per cent of GDP was one factor, a weaker GDP outlook was another. He said it was also likely the Government would want to hit a debt target slightly below 25 percent.

Infometrics Economist Brad Olsen puts an upper-limit of $10b on his estimate of what the spend might be and said the projects on the infrastructure roster would likely be split between short-term ones - that could be completed within a two year period - and medium term projects that would take a minimum of four years to finish. 

“We expect more spending to be announced on healthcare and hospitals, mostly in the regeneration and additional capacity space for existing health infrastructure.”

Grant Robertson says the infrastructure package will involve funding for projects in the short to medium term. Photo: Lynn Grieveson

Infrastructure NZ CEO Paul Blair said if the plan was about “shovel-ready” transport projects then roading projects would have to be on Robertson’s list. 

“Road has been consented, rail has not been consented. If it’s about doing stuff which is shovel-ready now the road has been consented the rail has not - they’re both needed.”

“I’m just saying if you had to deliver something, put shovels in the ground within a year, you can do that with road. Arguably you wouldn’t be able to do that with rail.”

His pick for roading projects that might be included in such a drive would be:

- Penlink (Auckland) - $384m - a campaign run by the Auckland Chamber of Commerce notes it has one of the highest benefit-to-cost ratios of any road transport project in Auckland;

- Mill Rd corridor (Auckland) - $500m - which would provide an alternate to State Highway 1 for travelling south;

- Cambridge to Piarere (Waikato) - $561m - continuing the Waikato Expressway south from Cambridge;

- Petone to Grenada highway (Wellington) - $1b - a project Blair said was crucial for resilience in the Wellington region: “When a quake happens our Highway 1 is going to be buried under the sea like Kaikoura was, you have to have another way of getting into Wellington or it’s an island”.

Blair said New Zealand would also need to invest in rail projects, because “if we want to seriously decarbonise we’re going to need rail investment”. But he noted that many had not been consented, His pick of rail projects to be invested in included a third rail line through Auckland which he classed as “essential”. 

Local government

Apart from roads Blair makes the argument that local government should receive some funding too. 

“38 percent of New Zealand’s infrastructure is owned by local authorities...but they only get 10 percent of the total tax take in the country.”

Infrastructure NZ is proposing the Government borrow money and award grants to local government entities for infrastructure projects. 

Access to the grants would be contingent on councils creating spatial plans for their area. 

“If we think at a regional level then we can scale up and we can actually get some better outcomes that moves away from having to deal with 78 councils which just simply is impossible for a Government that is doing a lot.”

Any entity that spent the money would also need to sign up for an investor confidence rating which would give it an A, B, C, or D score on how well it had used the money. 

The use of grants rather than loans meant councils could borrow twice as much as they were awarded with the initial grant, Blair said. 

“We’ve got a huge deficit, so any investment in good infrastructure is good.”

“But if Minister Robertson was going to put $5b out there...I would like to see that there is a proportion that comes for partnerships with regions.”

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