Migration data released by Statistics New Zealand on Wednesday showed there were a net 118,800 new arrivals in NZ during the September year, a fresh record that could yet go higher.
These new residents are helping make up for low birthrates and ease pressures in the labour market, while also propping up economic activity and boosting house prices.
But they are arriving in a country that has underinvested in infrastructure to the tune of roughly $104 billion, according to a 2021 report written by Sense Partners.
Closing this gap will be a crucial challenge for the incoming Government, and its successors, to ensure the construction of infrastructure can catch up with population growth.
New Zealand’s population increased 2.1%, or roughly 105,000 people, in the year ended June and has been forecast to grow from 5 million today to 6.7 million over the next 25 years.
Much of this growth will occur in cities. Mike Jones, the chief economist at BNZ, estimated that 55% of all new arrivals in the June year stayed in Auckland.
These arrivals are offsetting an outflow of existing residents seeking greener pastures in the regions. This trend pre-dated the pandemic but was particularly strong in 2021 and 2022.
Residents are leaving other cities for the regions as well. Wellington and Christchurch had the next most departures, while less built up areas, such as Selywn and Waikato, had net arrivals.
Jones said remote working and aversion to the high cost of housing in larger cities was likely driving the shift.
“It’s why house price cycles tend to start in the cities and ripple outwards,” he said.
Population growth has been contributing to higher house prices and rents, particularly in regions that are slower to build new homes.
“The supply side also matters. It turns out that those regions experiencing the strongest population growth—Auckland, Otago, and Waikato for example—have also been the busiest builders over the past few years”.
Building too slow
A report written by the Productivity Commission last year said increased demand for housing had a larger impact on prices than it did in the past.
“House prices now rise more rapidly because housing supply is slower to respond to demand. When demand for housing increases, New Zealand now builds one-quarter to one-third fewer homes now than the middle years of the last century,” it said.
It's a story that could be told about all kinds of infrastructure, not just housing. New Zealand’s building and maintenance has not kept pace with population growth.
While migration has accelerated growth, the commission said infrastructure stresses were present long before immigration rates picked up in the years prior to the pandemic.
The Productivity Commission's report called for the Government to put out a migration and population plan that included information about the necessary “absorptive capacity”.
This includes everything from physical infrastructure, zoning rules, housing, health and education services, and “broader community infrastructure”.
Absorptive capacity is not a fixed constraint and could be increased with appropriate planning and investment, it said.
In a report published last year, Alan Bollard, the chairman of the Infrastructure Commission, said New Zealanders had a duty to maintain and replace infrastructure for future generations.
“Unfortunately there are too many examples of our failure to do this, whether it’s burst water pipes or congested roads,” he wrote.
“We now find ourselves facing hard decisions about how we keep up with the increasing demands of a growing population, so we leave an equally valuable legacy to future New Zealanders”.
Even assuming the current high rate of migration slows, the Infrastructure Commission still expects the total population to increase to between 6.2 million and 6.7 million by 2048.
Half of this growth is likely to occur in Auckland, where the population could increase by up to 900,000 people over the next 25 years.
“Responding to these trends will require new roads, improved public transport systems and water systems for growing cities, freight and port infrastructure for growing economic activity, and trade and telecommunications infrastructure to connect us to each other and to the rest of the world,” the Commission said in its report.
New government incoming
National has promised to fill the infrastructure deficit with a new agency, external financing, a fast-track consent process, and a 30-year pipeline of projects.
The party wants to strike deals with local governments that outline long-term infrastructure plans and establish the financing needed to deliver them.
While it wants to work with local governments, it has already vetoed some priorities in Auckland and Wellington — most notably light rail projects in both cities.
National will focus on building roads and busways, which it believes will be more popular and cost-effective. It also plans to scrap the Auckland regional fuel tax.
Without the fuel tax, Auckland Council will need to find transport funding elsewhere. One option is congestion charging, which the Infrastructure Commission supports.
It said the city’s growing population will require better use of existing infrastructure. This means congestion charging to smooth traffic peaks, greater use of public transport, and building higher density housing.
National does support some amount of densification in the city, but it abandoned a bipartisan policy that would have allowed three story homes to be built in all residential areas.
The policy was unpopular with homeowners who wanted to block construction in their suburbs but housing activists saw it as the most effective way to free-up land for new homes.
National’s revised policy allows councils to decide what kinds of houses can be built where, as long as they zone enough space for 30 years of population growth.
108 Comments
ABSURD.
New Zealanders can’t afford 108 billion in additional costs.
No matter what fancy off the books way it funded, New Zealanders have to pay for it.
Its simply impossible. that’s $21,600 real NZD per person ignoring cost overruns which will +20% minimum.
We already have Councils at the limit of their borrowings and near what people can afford in rates.
Then we have the idiotic situation of massive immigration adding to the infrastructure deficit.
you just can’t make this stuff up.
I believe we're about to go through a brutally long cycle of shrinkflation in the public services and infrastructure space. Councils, utilities and public agencies will continue to pass on the higher costs of maintaining services to rate/taxpayers. Meanwhile, skill shortages will worsen as lower skilled workers put more demand on critical services without alleviating supply side issues.
Perhaps this is what will change how people live. Endless sprawl is - as Mayor Brown has called out - financially unsustainable for the council to maintain, so they absolutely need to stop caving to NIMBYism and preventing people from putting more housing on their land closer in.
The NZ Dollar is a fiat currency and so has no fixed quantity and all government spending involves issuing new currency after which taxation deletes it again once its purpose has been served. Finding money then is not the issue but having the actual resources such as the workers and materials to build things is.
Yip. Providing we can keep inflation down, then you are right. We can just use the power of issuing our own currency to fund much of this.
It is a mistake to think that the only way for governments to get money is through tax. But it is a five balance regarding inflation and the quantity of currency.
What has the inflation rate been for infrastructure construction since 2021 when Sense Partners wrote their report? At least 15% I'd wager, which brings the cost of the deficit to more like $120b. Those are scary numbers, and they'll get higher fast if inflation stays high.
The light rail tunnel was put forward to try to justify the harbour road tunnels.
If you looked at each mode separately:
- You do not need a third road crossing
- You need a public transport crossing (this could be a bridge)
- You need a walking and cycling connection (this has to be a bridge).
They bundled the public transport crossing with a road crossing to try to justify a new road tunnel (not needed) this then led to light rail having to be a tunnel in order to tie in with the PT tunnel (which is only a tunnel to justify a new road tunnel).
Did Chris mention Kiwis aren't that bright.
Lets name it Masochist bridge.
Admittedly if it didn't have ships going under it then a pleasant flat bridge would be acceptable.
Can we estimate the potential use of a harbour cycling bridge from the percentage of Wellingtonians who cycle in all weathers like you?
I've cycled the Harbour Bridge. So have my kids when they were under 7. It's not steep. Seems steep when you're driving because of how quickly you go up but it's not a particularly difficult gradient. The gradient is a moot point anyway as ebikes flatten any hills and headwinds. You can wrap up in nice dry gear and never break a sweat.
Give it time and the guarantee that oil prices will rise eventually due to scarcity or international conflict, and by cost alone others will seek other modes of transport. Making cycling easier as well as public transport, takes cars off roads and eases the demand and degradation rate of roads, hence allowing more efficient use of the infrastructure we already have without having to build huge roading projects that kick the can for another 10years. Add the increased oil costs flowing through to the cost of roading and roading maintenance, and we will all pay somehow be it in rego costs, rates, taxes, etc.
A walking connection can probably work as a ferry, a walking bridge's main benefit from a transport point of view would be tourism and recreation.
Cycling is completely different and a bridge is perfectly feasible and desirable. It opens up the north shore. Ebikes are transformational and extend both comfort and range immensely. So if you're going to build a cycling bridge you may as well allow people to walk over it too, it's a marginal cost increase.
When we talk about the future of personal transportation being electric it is small electric e.g bikes, scooters and microcars. Tesla's etc... are dead ends in terms of system change. They are too heavy, inefficient, hard to build and only solve the issue of tailpipe emissions not congestion, parking, road wear and tear or air pollution.
They're busy sitting around drafting announcements about their announcements to announce an event that may or may not ever happen in the future. And doing their makeup for their press conference where they will read their announcement about their announcement to announce something. And also busy fluffing around overseas on international things that don't concern us like Facebook censorship. Being a charismatic leader is hard work don't you know? Far too busy crafting their self image to actually get down in the muck and deliver something that us plebs could actually benefit from.
I don't know if I agree with the logic.
We should probably stop importing people full stop, but if we must we should only bring in very lowly skilled people. Theory being that Kiwi's get the higher paying/higher skilled roles.
Bringing in skilled labour and leaving us the dregs will end in tragedy.
Non, unfortunately NZ needs people to clean the toilets. You know, the jobs that are beneath pretty much every NZ’er without a job. And it’s not just that level. For instance, who will be our nurses? Retirement home staff? Doctors? After 6 years of Labour our health system has nearly collapsed, staff have hit the road in their droves.
The infrastructure inflation rate is a good question.
I'm a bit cynical of the costing of major infrastructure builds. Where offshore companies have been brought in to deliver (think transmission gully, Christchurch stadium complex) massive "cost" over runs look more like a gravy train for those lead companies. With court action being considered adding even more cost.
I recall for transmission gully the lead brought in Australian H&S standards that were significantly more demanding than NZ standards, adding cost for the local service providers (and the project).
From what I observe in my local rural area, traffic management must be a massive additional cost on undertaking roading repair work. Is it time to have a hard focused review of this element? There is so much inconsistency between areas. On the Napier Taihape road there are multiple single lane cyclone damaged sections, all with 30km speed restrictions and give way signals. Yet in CHB there are traffic lights on similar single lane sections - that locals routinely disregard. What daily charge and maintenance cost is needlessly incurred? All a bit expensive namby-pamby to my thinking.
What areas of costs can be reduced to improve the cost efficiencies of roading infrastructure?
Sure, if the regional ports are up for it. The capital costs required for new coastal ships are huge though, and all we've got are a few barges, a bulk cement carrier and a couple of small ships.
Recently an initiative to have coastal shipping from Taranaki to Nelson was canned as the ship builders couldn't address issues relating to tidal differences at the two ports.
Nope, the government lockdown causing workers to put down the tools caused it to overreach the target dates which would have incurred penalty fines to the contracted providers, thus the businesses had all the cards and held fast until the govt bailed it all out, scrapped the fines as they would have been a result of govt decisions, and threw money at them to get it done ASAP.
Fully onboard with congestion charges in larger cities. W have seen decades of road building being a band-aid response that only lasts a small amount of time until it reaches capacity and the same gripes come up once again. A New approach is needed to change commuter behaviour towards public transport as places like AKL and Wellington reach a point where one person one car is simply non-viable. Nelson recently in August introduced new E-buses and more routes and patronage is up 71% in the 1st 3 months compared to the last 3 months before the change up. Positive sign.
Auckland already pays the only regional fuel tax. Wellington surely should stump up also - not in the least so that the people sitting there can enjoy the extra cost they impose on others.
Funnily enough, the rise in hybrids/EVs works against it - ~40% of the vehicles at my kids school currently pay next to nothing for the roads they use/congestion they cause.
Auckland already pays the only regional fuel tax. Wellington surely should stump up also
I'd agree on that point on the basis that AKL and WLG have good state highway motorways paid by all taxpayers who don''t get the benefit of the services.
Funnily enough, the rise in hybrids/EVs works against it
Yep, get those rego costs cranked ASAP as the govt already lost out on a large volume of revenue from the 25c/L fuel tax relief that they now have to pull form elsewhere. Labour got drunk on debt and got fired for turning up hungover to work. Now we have an interim committee squabbling to figure out where to go and when they make an agreement finally, they'll be reading through Robbos books and seeing just how sloshed and incompetent he was on the job.
Perhaps if coupled with liberalising the overly restrictive, anti-build zoning that's in place in Auckland's inner areas. Makes no sense to on its own penalise the folk who are pushed further out by NIMBYism, just to avoid raising rates on the NIMBYs causing the high costs.
Ain't that the truth - lol. This is exactly what Trump did to lead the US on the same path we are about to go down - and then he got hit by the double-whammy of COVID wage relief spending. We're doing it in the opposite - already done the COVID wage relief spending and NOW we'll have the tax cuts.
The report highlights that we cannot build our way out of the problem but we have been poor at choosing the alternatives and continue to resist
Think congestion charging, removal of height limits, water meters, fluoride in water supplies etc as answers that we have avoided.
We also have govt's that have over the last 30 years spent more of the tax money on transfers and less on development - this will be difficult to change given how people view govt now as a cash cow
Well we just had our chance to vote for a universal land tax but only 63,330 did so. Case closed.
Those that can will probably sign up for the PAYE and Company tax funded property ponzi. Those that are already there will double down and do more of the same. The youth with good well educated prospects will continue to export themselves to Aussie. Aussie will continue to sends 501s back all the while thanking the medical and tech and trade school system in NZ for the free tax payers they have gained. We will continue to import people to fill in the hole, and vola.... New Zealand will become New Asia.
thank you COVID for changing the WFH mindset of CEO's and allowing me to move out of Auckland after spending most of my adult life there. - now it's a nice place to visit but wouldn't want to live there.
Travelled to Aucks for Labour weekend. The crawling queues of traffic coming out on the Friday and going in on the Monday were the worst I've ever seen. Cops standing on the motorway at Ramarama as I cruised out wasn't a good sign - lol. Just for a few hours on the boat,(queueing on the boat ramp) near a beach (queueing for an ice-cream) or to catch up with family (booking and dining at packed out restaurants) = MADNESS
more people = more madness
My 20-something son just came back from a tiki-tour, Australia, US, UK and a lot of Europe and eastern Europe.
His opinion - Auckland is completely dysfunctional. And while it was a lot better when there were less people, many, many cities are larger but still function well. It's been poor policy making over decades.
They certainly dont pay higher taxes in the US. Their income tax rates are
- 37% for incomes over $609,351 (that's $1M in NZ $)
- 35% for incomes over $243,726
- 32% for incomes over $191,951
- 24% for incomes over $100,526
- 22% for incomes over $47,150 (that's $78k in NZ $)
- 12% for incomes over 11,601
- 10% for incomes under $11,600
And the brackets are inflation adjusted each year. AND you can deduct any State income tax, sales taxes, mortgage interest, and property taxes.
And from June next year, the Australian tax rates drop as well. They will have a 30% tax rate on incomes from $45,000 up to $200,000. Plus 12% tax free paid to superannuation. How many skilled workers are we going to lose to Australia when that kicks in?
They also have the global reserve currency as a distinct economic advantage, reap the benefits of having a large pool of skilled labour from all over the globe attracted to going there and paying into the tax pot, as well as vast mineral wealth and the tax take from harnessing this.
$120b. Chump change. Whereas Auckland Council's total debt has hit $13.2b!! There is no way Aucklanders can bail out the council from this debt mountain when the income of $1.5b from rates. Minus $500m per year for interest-alone payment.
Eke Panuku has firesales of properties every week and sells them off dirt cheap to the chairman of Eke Panukus mates! Eg. Council carpark in downtown; $40m for a 125-year lease for a twin tower project worth $600m+. Another loss-making venture for Auckland ratepayers. Let's just hope the postal addresses for the Twin Towers aren't '9' & '11'.
But who voted to keep them so low for years as a god given right? The young are now paying for the old in more than pensions. Cumulative environmental damage, depleted resources, under-investment in infrastructure. Short sighted thinking for personal gain with the consequences lumped onto the rest. Stolen from the future, and that future is now, and apparently our only solution is immigration and stealing form further into the future in the hopes someone else deals with it.
$104 billion, huh?
It can't be all done in one year. Probably, if construction capacity allowed, maybe over 20 years?
So $5.2 billion per year ... But Council's are maxed out ...
So how about taxing the people who are actually consuming the existing services and will benefit from upgraded one?
What about a CGT? Or a LVT?
Alternatively, all the people who like to live a First World existence can move to Australia, and then you can impose Third World conditions on all the immigrants left here who are used to living like that. Crammed 4 to a bedroom, no cars, just jump on the roof or hang out the windows of overcrowded trains and buses, eat sparingly, collect rain water in buckets for drinking, send your kids out to work when they're 12. Its gonna be great.
Where are all the wealthy philanthropists at, that believe in giving back to the society that's funded them so well?
What about the financial institutions, insurers, mega corps, instead of advertising how glorious they are with fancy head offices, sports teams and stadiums fund some hospitals and social services?
Why doesn't The Market, that demands more immigration etc, fund some of the infrastructure that actually enables it to operate and be lauded as financially successful? Without all the other components of society they can't really function. Obviously the same goes for all the other "winners" that like to crow about their investment savvy.
One doesn't have to be religious or spiritual, take out the fluff and the ancient texts really just offered a guideline for basic human decency. We seem to have created the opposite.
Good sentiment there, it would appear more of the wealthy don't believe in shedding some excess to help others anymore. My father did well over his lifespan, yet he chaired or was on the board of many many committees for charities, schools, did other volunteer work, donated to them freely, lived a better-than-average, but not exuberant, lifestyle, and overall spent a lot of time outside of work and away from the family giving back to the community. It saddens me to see that the current state of affairs in NZ doesn't reflect this sense of duty to help others prosper.
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