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A new government agency, a 30-year pipeline, and private sector investment are key to filling New Zealand’s infrastructure deficit, Chris Bishop says

Public Policy / news
A new government agency, a 30-year pipeline, and private sector investment are key to filling New Zealand’s infrastructure deficit, Chris Bishop says
[updated]
Chris Bishop, Minister for Infrastructure and Housing
Chris Bishop, Minister for Infrastructure and Housing

Infrastructure Minister Chris Bishop wants to have a National Infrastructure Agency and a 30-year pipeline of projects up and running by 2025.

In a speech to the Infrastructure Funding & Financing Conference, the senior minister said New Zealand’s $100 billion infrastructure deficit was a major drag on economic performance. 

“This deficit has not come about by accident. It is the product of decades of poor practice across successive governments,” he said. 

The New Zealand Infrastructure Commission, an autonomous Crown entity, has been told to develop a 30-year National Infrastructure Plan by the end of 2025.

It will include a “pipeline” of infrastructure projects planned in the next 10 years, a broader set of “priorities” which could be selected in the next five to 15 years, and a high level “needs assessment” for the next 30 years. 

“This will outline the scale of New Zealand’s future investment needs – and what we can afford – as our population grows and changes, our assets age and our incomes rise,” he said. 

The 30-year plan will be broken down by city and region, while partnerships between central and local governments will help to provide long-term funding for projects. The NZ Infrastructure Commission already has a pipeline in place.

Bishop said the Coalition Government wanted to use various funding models, including road tolls, congestion charges, levies, windfall taxes on land value, and private partnerships. 

A National Infrastructure Agency will be established to oversee this plan and is also expected to be operational by 2025, but Bishop was still unsure how it would fit into the sector. 

“The public sector infrastructure landscape is a crowded one and there are overlapping roles and functions, with quite a bit of duplication,” he said. 

The Treasury has been asked to look at how best to build a “high performing infrastructure system” with help from the Infrastructure Commission and an Expert Advisory Panel. 

This panel will be chaired by former National Party minister Steven Joyce and include former professional director Fiona Mules, finance specialist Ross Pennington, infrastructure and energy lawyer Sarah Sinclair, and City Rail Link boss Sean Sweeney. 

Fix procurement

While the exact role of the agency is still up in the air, Bishop said its overriding goal was to improve government procurement and delivery.

“I want the Crown to become a commercially competent infrastructure procurer that delivers value for money”. 

The Coalition Government  hopes to strike deals with private companies to not just build infrastructure but manage it in the long-term in exchange for a steady stream of revenue. 

These are often called performance-based contracts and they allow public money to pay for the asset slowly over its lifetime without incurring debt up front — kind of like Afterpay. It also incentivises the private company to maintain and operate the piece of infrastructure with commercial discipline. 

Bishop said he had formed an Infrastructure and Investment Ministers Group—with Nicola Willis, Simeon Brown, Paul Goldsmith, Shane Jones, and Simon Court—to oversee a cross-government work programme on infrastructure. 

This group will “really get into the weeds” of infrastructure investments and pay close attention to various agencies' capital expenditure decisions. 

“Frankly if Ministers were doing a bit more of this in the last six years we wouldn’t have ended up with disasters like light rail, the Auckland harbour cycle bridge and IREX,” he said.

Speaking in Interest.co.nz's Of Interest Podcast in February, Geoff Cooper, General Manager of Strategy at the NZ Infrastructure Commission, suggested NZ should be working towards a 100-year planning horizon when it comes to infrastructure, and viewing planning as "an exercise in dynamism and inquisition" rather than a "bureaucratic exercise."

The $100 billion infrastructure deficit figure comes from a report by consultants Sense Partners commissioned by the NZ Infrastructure Commission.

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74 Comments

So here is the future folks.

Flood the country with immigrants and user pay private funded infrastructure and services (health?).  I.e we are going to be strongly pushed in the direction of a USA  economic model.  That is working so well is'nt it.  As compared to the more socialist Scandinavian model. 

Young Kiwis would be well advised to leave NZ for this and a whole pile of other reasons. 

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but we need better infrastructure. 

Have you notice how much leaks in Wellington City? or how slow the city moves everywhere? 

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Wellington has a dysfunctional culture that is based on BS and spin.  Nothing works well in Wellington.  The great pity for the rest of New Zealand is that Wellington is the center that runs the rest of the country.  The poor dears cannot even run the most basic of their own services. God help the rest of us, and we can see this playing out just about every single day. 

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They voted for it, leave them alone. If they ever want it sorted they know what to do.

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Youi are all wrong, so far.

Wellington, like NZ and whole First World. is running into the Limits to Growth. 

Thus entropy - un-addressable decay - is starting to bite. That will show up in Rates, backlash will show is as ever-less done. 

Don't be small enough to blame this or that cohort - they all suffer from this blindness - as does Bishop. 

And 2025, end of, is too late. The planet is in irreversible recession, sliding into war, by then. 

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Wellington, like NZ and whole First World. is running into the Limits to Growth. 

Not really, it's just removed domestic human labour from much of the equation. You can't "grow" internally if much of your function is being done somewhere else.

This has been written about centuries ago by the likes of Cantillon.

And 2025, end of, is too late. The planet is in irreversible recession, sliding into war, by then. 

This'll likely age as well as saying "Putin holds all the cards" in 2022.

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The limits of BS jobs more likely. 

There are so many sectors that are up to get absolutely cleaved by disruption. 

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That aside, choosing as Bishop is to embrace what's been tried and failed in the UK - at least, failed for people, not donors - seems quite independently a decision that is the worse of several alternatives.

The UK has ended up paying far more for far less. Now Bishop seems to want us to do the same, as Nicola Willis wants us to do with ferries and ports.

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I saw on the front page of The Post yesterday that of all the Wellington Regional Council cities, Lower Hutt has allocated to spend the most on water infrastructure ($13.5M) while Wellington is budgetting to spend the least ($5.8M).  A telling indictment (well okay, another telling indictment).

 

It is behind a paywall unfortunately:

Water regulator told to be realistic about Wellington’s water crisis | The Post

 

 

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Flood the country with immigrants and user pay private funded infrastructure and services (health?). I.e we are going to be strongly pushed in the direction of a USA economic model. That is working so well is'nt it. As compared to the more socialist Scandinavian model. 

Scandanavia has an infrastructure deficit of half a trillion dollars. And a migrant crisis.

The model is fairly similar everywhere, with slightly different trousers.

Where are the kids moving to? Is Elon taking them to Mars with him?

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One thing is for sure, those white people aren’t going to be around for much longer, Europe is changing rapidly, the Ukraine, Russian war is taking out thousands of them. It’s what our leaders want.

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A beautiful rainbow.

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I’d prefer they stay and vote these right wing parties to oblivion.

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Funnily enough, Scandanavia is currently doing the opposite.

So socialism makes people unhappy, and a more liberal capitalism, also makes the population unhappy.

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Aren’t the Scandanavian countries the most happy in the world?

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And they also chomp down the most anti-depressants.

So happy, but possibly not inherently happy.

I tend to gauge happiness by visible smiles and how a population interacts with one another, and not filling in questionnaires. The Scandinavians wouldn't make the cut under that criteria.

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Funny, they'll notably retain "socialism" for themselves and their older voters...not those who follow, though.

No philosophical consistency. Always have their own hand out for taxpayer money.

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No philosophical consistency

This is almost every person, ever.

No one modelled very well for declining birth rates and increased lifespan. Or cities going from housing 25% of the worlds' population to 50.

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Although we credit the greater post war generations for leaving a better legacy to their kids than their kids have to those who followed - who instead cut provision for the young to cut their own taxes, and made their own pensions universal.

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The boomers built much of what we enjoy today. And as children, had less than what most of us take as a given.

But they also were given a level of social security that was never sustainable.

We can shake their fist at them till our arms go numb, but that doesn't change the fact that we face a number of challenges in reality that we aren't addressing.

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Free education and entry to work without debt, coupled with affordable housing, thanks to one's forebears...that's not a bad deal. Lower levels of availability of consumable junk is not that much a sacrifice in comparison.

Cutting the above so they could cut their own taxes, while changing the pension to be universal for themselves - very costly and unsustainable indeed - seems to have been unabashedly worse than the elders behaved. If their levels of social security were unsustainable as you note, it's rather conspicuous that they chose to cut social security for others while making social security even more generous for themselves.

Kicking the can down the road on maintenance in order to keep rates lower hasn't helped either, especially when admonishing younger generations that "it's never been cheap to live in a global city".

We can pretend that all generations have been the same...but they haven't.

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Neat! Let's privatize our essential infrastructure. 

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This panel will be chaired by former National Party minister Steven Joyce and include former professional director Fiona Mules, Chapman Tripp capital markets lawyer Ross Pennington, infrastructure and energy lawyer Sarah Sinclair, and City Rail Link boss Sean Sweeney. 

I smell grift. I don't know these people (except Joyce) and have no doubt they're professionally competent. But they're not necessarily game changers by any means. Sean Sweeny appears to have an idea and 'real' experience. Here's his views (https://contractormag.co.nz/contractor/sean-sweeney-crl/_

While the exact role of the agency is still up in the air, Bishop said its overriding goal was to improve government procurement and delivery.

Confirms grift and game of mates circle jerk. 

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I had similar sentiments over the term of the last Labour Govt, + their racism.

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Joyce? 

The one with his nose in the university - therefore taxpayer-derived - trough?

Excellent; are Kermit and Miss Piggy back too? 

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The one with his nose in the university - therefore taxpayer-derived - trough?

Yes. That was outrageous. North of $1 mio in fees I think.   

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Is the new government 'racist' when they talk about trying to lower the percentage of Maori in jails?

https://www.newshub.co.nz/home/politics/2024/03/corrections-minister-ma…

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I’m not sure if this answers your question, but the government would rather pay $150k to keep a single prisoner for a year than pay $1k each to 150 Māori students to keep them in studies.   

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No policy should be based on race… that’s what fascism and apartheid regimes push…of course, if you’re politically leaning that way..

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Race label aside, there's clearly identifiable groups of citizens in NZ who benefit more, and also those who are underserved and have poorer outcomes from accessing (or not) publicly funded services.

Disabled peoples are one such group that is underserved, and become less served this government term.

If you did for example group Māori citizens together for example, on average have less access to GPs, lower access to the determinants of health, lower quality of health and die years younger.

I don't care how we name the groups, but it is worth considering how the systems being changed with our tax dollars benefit (or not) our citizens

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Interesting in that light that they were so keen to have for-profit prisons too.

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None of these so-called experts have any clue about what it takes to build infrastructure in a geologically young (and very unstable) country like NZ. This is akin to bringing back the Ministry of Works without any engineering expertise onboard whatsoever. Complete bloody madness. Get ready for many more Transmission Gullies.   

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The Coalition Government  hopes to strike deals with private companies to not just build infrastructure but manage it in the long-term in exchange for a steady stream of revenue.  

Bags being packed as we speak 

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The Coalition Government  hopes to strike deals with private companies to not just build infrastructure but manage it in the long-term in exchange for a steady stream of revenue.  

Do we have the pvte companies for any meaningful transformation - scale, capability, expertise? I don't think they exist. F'more our population is likely to be too small to make the numbers work. Japan National Railways was founded in 1949 and not privatized until 1987. 

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Never mind, when Labour comes back in they can buy out these private infrastructure companies, and when National subsequently returns to power they can sell them off again.

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Let me guess who the directors, executives and shareholders of the successful bidders will be.... I'm pretty sure we've been here before.

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Max Key should be housing minister...

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Maybe we can create a few more rich-whites

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Touche Rick.......

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plenty of ex national MP chairmen will be lining up for a payday, this is another co governance under another name but mostly owned by foreigners

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"These are often called performance-based contracts and they allow public money to pay for the asset slowly over its lifetime without incurring debt up front"

No one else can borrow as cheaply as the govt, so why don't we pay for it up front? If we are choosing what to invest in wisely, it should provide much more benefits over the life of the asset then the initial borrowing. 

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No one else can borrow as cheaply as the govt, so why don't we pay for it up front? If we are choosing what to invest in wisely, it should provide much more benefits over the life of the asset then the initial borrowing. 

Sure, But financing is the simple stuff. What about actual delivery?  

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Financing isn't that simple when you've convinced the voting public that surpluses and balanced budgets are required. ;-)

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Quiz question, how many budget surpluses did NZ Govt run between 1952 and 1988 when we built houses and other things?

Yep, zero.

How many in our first 100 years as a country?

Five (and one of those involved some sleight of hand).

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Being able to draw upon the state budget meant that things could be done on a large scale which included doing things that looked scary. The Crown balance sheet could carry the risk. That’s a mix we haven’t been able to reproduce with public-private partnerships. In addition, the ability to make good policy, involves having the requisite skills to know how the coal-face operates, something that this panel does nothing to address. The professional skills of scientists, foresters and engineers were stripped out, under the cover of the neoliberal story that said they were just self-interested vested interests, out to capture the policy process for their own particular personal profit. I recommend Bob Norman's book 'You can't win em all'. Bob was the last but one Commissioner of Works and a fine gentleman. A fantastic read for anyone interested in the years highlighted by Jfoe. 

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Nationals PPP contract for Transmission Gully requires the NZ taxpayer to pay over 3x the headline upfront price to cover financing & "maintenance" for 25 years.

So that Key, English and Joyce could "keep the Govt  accounts balanced"

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Any savvy private operator will assess the risk and ensure it's worth while before signing any performance contract. I don't know why Govt would propose performance contracts when NZ Inc have lower debt servicing cost (unless foreign nationals and their corporations enter the fray).

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Another politician,

BIG words, 0 actions 

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“This deficit has not come about by accident. It is the product of decades of poor practice across successive governments,” he said. "

Well there's an admission.

"Infrastructure Minister Chris Bishop wants to have a National Infrastructure Agency and a 30-year pipeline of projects up and running by 2025"

More officials with little management and no engineering experience? Is this another name for the past Ministry of Works?

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The old Ministry of Works...well it worked!  After a fashion anyway. Long term programmes, people in jobs.  Big projects funded by the public purse and owned by the public till they got sold.  Career pathways for engineers and infrastructure trades.

This is a joke!

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It worked full stop. Training schemes that produced work-ready graduates, who could walk into a job anywhere in the world. 23 hydro schemes built between 1945-85 to address the severe electricity shortage after WW2. Of those, 18 were designed by the MoW Power Division office and 21 were build by its construction forces - largely Maori and immigrants. All of which continue to serve us very well and that generate massive profits for Contact Energy, Genesis and co, given that the debts incurred to build them were paid off years ago - by us!

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This won't work. Or should I say, it'll be much the same as now.

Why won't it work? Why will there not much difference to current situation?

Put simply, we have laws and regulations that entrench the rights of various fiefdoms (e.g. local governments) and local monopolies (think water). Add to that, government sell offs of various assets means that private property rights apply where none applied 30 years ago as government owned the assets (e.g. electricity).

The National Infrastructure Agency will go nowhere (or at least only as fast as at present) while all these laws and regulations exist. No doubt Joyce will expect compliance on a national level, much as he got in Christchurch, but the swiftly passed legislation that gave him massive powers in ChCh, will never pass on a national level. 

(I'll not mention the startling success of MBIE which was likewise a National Party initiative to make things work soooo much better. But did it? Most would say no.)

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Hmm Chris Bishop "In a speech to the Infrastructure Funding & Financing Conference, the senior minister said New Zealand’s $100 billion infrastructure deficit was a major drag on economic performance. 

What happened to the $210 billion infrastructure deficit? Surely he isn't over 100% out?

Infrastructure Report: Opinion - Filling NZ’s $210b infrastructure deficit black hole

https://www.nzherald.co.nz/business/infrastructure-report-finding-a-new…

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Sign of things to come?

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There are some decent people at the infra commission, but their understanding of Govt financing is a bit off. They need to look at how NZ did infrastructure financing in the 40s and 50s rather than how the UK did it (disastrously) in the early 2000s. My top three reasons NOT to do PPP style deals (from bitter experience) are:

  • Ultimately, Govt is simply paying higher finance costs than they need to, and often indirectly to global hedge funds to boot. I would use something akin to war bonds, which also help to manage the risk of inflation by deferring consumption.
  • Performance-based contracts can be done using typical procurement approaches - they don't need to be linked to private finance deals. However, performance-based contracts with penalties and exposure to financial risks (e.g. changing rates) creates serious financial risks for the provider. These risks are inevitably priced into the contract. It is rare that this works out as good value for a govt buyer, who tends to be over a barrel politically.
  • The negotiation of complex contractual arrangements involving private finance takes well over a year. The constant back and forth (assessing and transferring risks), and shifting sands of financial terms and estimates, makes the process ridiculously resource-intensive on both sides. These people and skills could be dedicated to doing the work! Finally, when delivery starts, it is pretty easy for providers to start loading up on money from change requests as the evolving nature of projects drift from the original spec.

It is far, far better for Govts to enter long-term partnerships with providers with structured reward sharing to encourage innovation. I would also advocate for some public ownership of critical parts of the supply chain.  

The other key point here (before I shut up) is that the challenge with getting infra done is NOT the money to pay for it, it is all about logistics and the availability of key resources - labour, skills, materials, energy etc. If we spent $10bn per year extra on infra (as we need to) then some simple maths will tell you that we will need:

  • 13,000 project managers, specialists, designers etc
  • 25,000 construction workers
  • 50 million tonnes of bulk aggregates
  • 2 billion dollars worth of equipment
  • etc

All in the right place at the right time doing the right things! 

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Agreed - good post.

But we need to keep an eye on geopolitics - Russia just turned the flow of oil down (and I'm betting it is in knowing retaliation). We will simply be doing less. And less. And less. With ever-more decay.

 

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Excellent post Jfoe!

The UK's PFI schemes were indeed a complete rip off for the country.

See link below to a special report by Paul Foot (Private Eye Magazine)

https://www.private-eye.co.uk/pictures/special_reports/pf-eye.pdf

We should be very weary of falling into the same traps

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The design task should be brought back in house.  That way you go to contractors with an agreed and detailed design that is to be built and should be no reason for constant variations and hands out for more money by contractors.

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Don't disagree. The irony here is that politicians wax lyrical about the private sector, but any big corporate faced with the challenges that NZ Govt has would in-source anything they thought they were going to get leveraged on (e.g. a critical service in short supply). They would most likely just buy the company.

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" windfall taxes"... so a capital gain tax?

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The $100 billion infrastructure deficit figure comes from a report by consultants Sense Partners commissioned by the NZ Infrastructure Commission.

Is this publicly available?

I'd like to know how much of that estimate relates to LG-owned and managed 3 Waters infrastructure?  Or was this excluded from the Sense Partners estimate?

 

 

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Public private partnerships cost 3-4 times as much as State build and have been seen to be such in uk

Tax required to pay but National won’t tell people that. So juicy long term contracts for their mates instead

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Try Sydney, a lot closer to home. $50 of tolls round trip to the airport for most.

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Toll Roads work well for the rich

- they tend to own the companies that build the roads, and that charge the tolls so make tons initially and ongoing (from the taxpayer)

- they can easily pay the tolls coz they are rich...  so they get emptier roads and faster journeys  (works like London congestion charging.. the cars in central london are bentleys, ferraris and rolls royces now)

for the less fortunate who will get charged RUC for all vehicles AND tax on petrol AND tolls...  they will soon be unable to afford to drive and be forced into to crowded inefficient public transport ... helps with our CO2 targets too.

An awesome policy. PPP for building other stuff like hospitcal - is pretty similar in all regards

Good job from the party of landlords and Elite :)

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#LootingForLandlords (and other donors)

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At this point, anyone with a Netflix subscription may want to check out the Utopia series.

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Yes, a brilliant series...bit like the series John Clarke (Fred Dagg) did on the Sydney Olympics..

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Just tow it away from the environment , no problem. 

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They have to be seen to be doing something & by the sounds of it, they're building on the work started by the previous lot - to their credit. I'm a Ministry of Works fan but I know not everyone is. Sure, they had their ups & downs, but it was only when they were dismantled did I really appreciate what they really did - essentially, by looking around at what wasn't being done, which [I think] is the huge gap the new minister is talking about.

Are they onto it? We'll see. 30 years of PC/woke nonsense doesn't help, but we have to do something for the whole country, not just the iwi leaders the last lot looked after.

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We have to become sustainable, in the REAL sense of the word. 

As in: long-term maintainable. 

That level is a long way short of our present one, consumption-wise. 

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Would a model similar to Pharmac work for infrastructure?   A small number of qualified specialists invite tenders from private businesses to get things done.  Maybe this is already what happens? I wouldn't have a clue.

 

 

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No. 

That's another right answer to a wrong question. 

We are up against hard physical limits - the limits of the planet to supply energy and resources, at exponentially-increasing rates. This was clearly foretold, and has been ignored at humanity's peril. 

We are now in the control of an unusual bit of species-merging; dinosaurs with clowns. 

Don't bother, they're here.....

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The "deficit" framing doesn't feel right, because it presumes that:

  1. it is okay for voters to expect to carry on current service models, even at financially and ecologically unsustainable levels and
  2. it is okay for politicians to continue to commit a greater and greater proportion of the tax take to new and old infrastructure, or borrow from future generations to fund it, all on our behalf
  3. the future economy will always be greater than the current, so we can borrow ad infinitum on the promise that we will be able to pay the cost of borrowing and
  4. we're infantile and can't have sensible conversations about how we can adjust our expectations to live within our means

How many of these presumptions are real?

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This is actually pretty good, I have been moaning that an Infrastructure Building Agency is needed here to prioritise infra work.  Thank god someone is listening. 

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