The Government will continue to invest in infrastructure to make the economy more resilient to extreme weather, even as budgets are being reined in elsewhere.
In a pre-budget speech to Auckland businesses, Finance Minister Grant Robertson said this type of investment will be critical for both future growth and rebuilding from the storms.
This week, the North Island was again rocked by flooding which resulted in the death of one high school student. This follows four deaths in the Auckland Anniversary floods and 11 during Cyclone Gabrielle.
Treasury has estimated the combined economic damage of the two earlier events to be somewhere between $9 billion and $14.5 billion.
Robertson said Budget 2023 would include funding for more investment in the infrastructure rebuild from cyclone and floods, as well as “national resilience projects” to protect communities from future risks.
“I won’t say much more about this funding today, other [than] to say that this will be a down-payment on making sure our nationally strategic infrastructure is strong and resilient”.
As an example, the Finance Minister said the transport agency was working on upgrades to the transport network that would make NZ’s roads less vulnerable to weather.
“This is what they call the invisible component of our transport network, like culverts, slip protection, and water pumps,” he said.
This work will be funded separately from the annual road maintenance budgets and will be an ongoing process with only an initial set of projects announced in the budget next week.
Bridge deficit
Robertson said the country had an “extraordinary infrastructure deficit” which Treasury has estimated will require approximately $210 billion of investment across the next 30 years.
“Decades of failing to maintain and enhance our infrastructure has been exacerbated by failing to plan and build for population growth.
On top of that we are acutely aware that the infrastructure that we do invest in needs to be resilient to the ever more obvious impacts of climate change.”
In a speech to Wellington businesses on Thursday, Robertson signalled the government hadn’t used its balance sheet to its full potential.
This could suggest he would be more willing to tolerate higher debt levels than previous governments which have focused on paying down debt.
“New Zealand also comes out of the pandemic with some of the lowest public debt in the world. Our net debt sits at around 19% of GDP, well below the 30% ceiling that we indicated when we set the fiscal rules last year,” he said.
This is dramatically higher than prior to the pandemic—when years of surplus under both National and Labour had net debt levels down into single digits—but is still lower than many comparable countries.
Robertson said it was the Finance Minister’s job was to invest for the future and provide core services, while maintaining enough room on the balance sheet to respond to crises.
“[It means] ensuring the Government can always step up in times of need – that there is a buffer or capacity available to deal with the unexpected without having to drastically cut into the services that New Zealanders rely on in their everyday lives,” he said.
Government finances were currently in a position that allowed investment in infrastructure, while supporting the most vulnerable members of society.
Westport gets $23m
Meanwhile, Prime Minister Chris Hipkins travelled to Westport on Friday to announce $22.9 million of funding for flood defences.
The South Island town was hit by severe flooding this week, as well as in February, and in July last year — when 2000 people were evacuated from their homes and the NZ Army was called in to help.
Westport will use the money to build structural flood protection and relocate new development away from riskier areas.
“This funding has both an immediate and longer-term focus. It will help with design and delivery of flood protection, such as stop banks, and support people to protect their homes with property and community level resilience measures,” Hipkins said.
He said this demonstrated the government’s approach to its wider work building community resilience and rebuilding after the recent storms.
76 Comments
Very skeptical of this narrative but big infrastructure spend to keep unemployment low while stimulating the economy to avoid a deflationary debt spiral is the right move.
ESG is the opium of the investors. It is unclear whether it is an effective means to change company policies or whether it is just a luxury feel good item for investors themselves.
The risk is the drying up of demand because everyone attempts to pay off their enormous debt burdens at once. All the money absorbed paying off higher interest rate mortgages is not being spent on coffees, clothes and cannabis.
http://www.davidmcwilliams.ie/arrears-and-the-paradox-of-aggregation/
The result is a slowing of the economy, because there is less demand for goods/services, a fall of incomes for businesses and in turn economic pain. The concern is that incomes begin falling, so debt to income ratios increase even as people pay off their debt even faster to avoid the pain of higher interest rates. It is a deflationary debt spiral.
Robertson has had years to build things, it has been in their interests to shake the label of announcers of announcements and actually execute on this stuff, and they haven't. If they can't do it to save their own skin, why would they suddenly be able to do it now?
Jacinda and Robbo have done nothing to build the two way relationships between governement and business. Indeed Jacinda seems to got out of here way to not listen to business. It came to a head during covid. They simply do not have the relationships required to get this physically done. When it comes to restructures Labour will do all the work but never fire the people reqiuired to complete the restructure and reallocate the $$$ to the front line, we can see that with polytechs health education.
They and the greens hate roading / oil / gas THATS CALLED INFRASTRUCTURE you CLOWNS.
They have had there chance its time to give Natioanl another crack
The infrastructure deficit has a long tail, or history. See the two charts at this link - the first regarding infrastructure spend as a share of GDP and the second a track of our population growth over the same decades. You can't more than double your population (i.e., from 2m to 5m from 1950-present) and all the while spend so, so, so significantly LESS on infrastructure as a share of GDP.
No government in the future (no matter how many terms they get) will ever have the capacity to 'catch up' on this deficit.
That's why I listen so closely to pdk on the need to move our policy/thinking toward infrastructure triage. I keep looking at the SH25A slip and think it ridiculous to re-build. And neither can we afford an alternate route through the centre of the Penninsula - and the coastal roads - who knows how long those will last.
So, what future for the Coromandel - my guess is air and sea. Ferry tourism for the masses and helicopters for the wealthy bach owners.
Agree Kate, but I think Labour has become captured by there need to satisfy the Greens as a co partner. The Nats believed that by selling off kiwirail etc they did not have to maintain it, well a few sick ferrys and train lines failing in our two biggest cities shows us how well that has worked. IMHO the power grid will require a lot of maintenance as well soon, at the same time many maintenance workers are retiring or going offshore to fix the US and Canada etc, big dollars are being offered.
We need to reinstate personal liability for senior role CEO etc, that will force decent audits, maintenance schedules etc and professional engineers back onto boards.
I cannot see a future for my kids in this environment in NZ, as a familly we have actively been discussing a move towards Australia once elderly parents have passed.
It’s getting depressing. When I deal with mid mngt govt I often wonder how the heck some of these people are in these roles. Govt depts are now dominated by those who can talk without saying anything, say words that come out of some sort of flowery training school and always ends with promises to take it on board, work collaboratively or get on the same page and move forward type c##p.
Yep hence why they all have such high attrition rates at present. People get a new job in govt for 10-20k more each time, stay for 6-12months then leave when they realise their management are incompetent and keep saying the same things without doing anything to influence change for their staff. Rinse and repeat for another 10-20k, different department or team, same same but different
Chin up bro... I know what you mean.even the private sector are the same.... Try ringing a bank branch to talk to someone.
There is always a system and processes between you and the person taking your money
The bullshit talk, spin, non commitment, evasion, and arse covering is amazing.
If a gen y z ex government employee was to erect a tent it would take 6 months of
Hui
Consultation
Karakia's
Planning
RMAs
Blah blah blah ..
Before they even opened the box
I was recently involved in an event where a lot of teenage girls had to put up a tent in teams.... the natural leaders stood out, lets try this lets try that etc.... nothing better then getting your hands dirty at the coal face to understand the issues.
The teams that adapted to the reality beat the ideology based teams every time......
I seem to remember it went to Canadians who bought it initially. From memory again the then Labour government bought back the rails for $1. A wag at the time thought they had paid too much!
Not sure about any "3 billion ripped from the heart"....By any business case based on population, km of rail, etc! we probably only have a rational need for not much more than the main truck. But this is typical of little NZ....aren't we one of the leading western nations?
Yep, the various new owners of rail progressively sold off all the engineering workshop premises, the capital equipment and made all the staff redundant. These workshops, under government ownership, were where all our engineers and fitters & turners were trained. They then fed out to local government and the private sector. Once gone, we have never got that training capacity back up to anywhere like it had been. In fact, the ability to keep any heavy industrial plant/equipment going is in crisis as the last of those ex-NZR trained engineers and F&Ts retire.
We've got a problem Houston.
Hence, why some kind of '3 Waters' local government infrastructure reform was desperately needed - likely much of the management and operations would have had to be contracted out to overseas entities. Looks instead like we'll end up carrying on with failure after failure and no central government funding for it. To my mind, the Mayors who so vehemently opposed the idea thought they were genuinely looking after their local communities interests, but they haven't got the talent or institutional knowledge (let alone the funding) to get the maintenance and upgrade jobs done.
Ahhhhhh, the good old days, Kate, when NZ (& many other western countries) "did stuff". Yes the railway workshops, navy dockyard, Ministry of Works, State hydro, etc., were our bedrock of engineering training and skills.
But let's not be too nostalgic, old buffers like me, can tell a thousand tales of abysmal management, feather-bedding, rampant unions, etc., that seemed to be a significant downside of those, err, enterprises in the decades following WW2.
To a large degree, it was these inefficiencies and associated wasted government funding which drove reformers such as Douglas & Prebble to..,"rip the sticking plaster of the hairy chest (of large state entities) in one loud shriek". And yes, they probably threw the baby out with the bathwater.
And yes, we somehow need to regain engineering talent and once more "do stuff" locally, but hopefully not via the old taxpayer funded dinosaurs of the past.
"New Zealand also comes out of the pandemic with some of the lowest public debt in the world. Our net debt sits at around 19% of GDP, well below the 30% ceiling that we indicated when we set the fiscal rules last year"
Don't worry says Robbo, we can still borrow more, she's all good!
While comparatively we do have lower debt levels yes, In times of; an ever-increasing trade deficit, demographical spike in healthcare costs on the way up and up and ditto for superannuation, as well as high inflation, plenty will agree that we cannot afford to borrow and spend our way out of this.
Have we not already borrowed from the future enough, given the next generation may not be capable of paying it back? Sadly we need a big economic downturn to reset and build back a better NZ from the ground up.
The Truth About Government Debt
The payments funded by government debt actually increase household wealth. Here’s how it all works.
https://democracyjournal.org/arguments/the-truth-about-government-debt/
They are both bad, but Labour are considerably Badder. They hate roads, they hate cars, they hate parking , they hate cars travelling at decent speed limits, there has been a war on cars, a war on oil and gas.... there has been a war on coal, so now we import it....
I am not sure what Labour can consider to have improved in 6 years, crime is worse, education is worse and critically our youg maori are way worse in truency levels. Health is worse after a pandemic???? mental healt is bloody mental, there is no capability even after promissing 1.9 BIL. What have Labour done that improved NZ?
As Chris Trotter said, they have over promised on everything and delivered f all.... way better to choose a few things under promise and over deliver. Jacinda had to go, she was the figure head, they change jackets like kids after a ram raid and suddenly the minister for everything is a new broom...... No way ..... all they did was finally listen to their own focus groups that told them they where going to lose the election. suddenly no co-governance no media merge, no lower speed limits, given he has canceled everything they said they wanted to do, we have WASTED 4 years.... What new stuff will he promise or just more cancelled stuff..... that they where never going to deliver anyway
> [Labour] hate roads, they hate cars,
Then why have they reversed Nationals cuts to the road maintenance budget? Surely if you hated cars you wouldn't be trying to catch up on road maintenance, let alone built marginal new highways like penlink, and encourage people into EVs.
Sorry, are you forgetting they canned a huge chunk of roading projects for cred, only to resume a bunch of them later down the line at significantly increased delivery time-frames and cost when they suddenly realised they couldn't deliver on their own actual infra projects like light rail?
Interesting that he mentions population growth (immigration) as adding pressure to the infrastructure deficit, yet we never any debate about why we need population growth in the first place given such externalities from it (other than to keep real wages low and productivity growth weak).
Yeah, have a look at the two charts I linked to above;
https://www.interest.co.nz/public-policy/119757/katharine-moody-probes-…
There is no catching up to that deficit.
Hi Kate, I looked at your link and as always enjoyed your thoughtful comment.
But your statement,..."there is no catching up"... says it all. By coincidence on tv tonight a clip about the problems of flooding in Wesport, with some good aerial pics of the town. So typical of our coastal and river port towns, sited on the river flats of the delta, built largely in the 19th century before road transport and any possibilities of major earth moving to develop resilient urban space.
There may be a remote possibility that somehow, between local and central government proactive measures might be taken to improve NZ's shaky isles, soft hills and sometimes excess water flows to better provide for a safer future. However, judging from my local area, I wont be holding my breath. Nearby a huge development of high density "affordable" housing on a peat swamp with a normal water table only a few spade depths down. Another seaside subdivision on the coastal flats with a large sloping catchment behind...with no sign of any public stormwater system between slope and new housing.
I think any ideas of appropriate infrastructure for even new developments will be a big stretch for our government bureaucracies more focussed on treaty workshops and public focus groups, etc., etc. But for all the existing set up I think the best outcome we can practically anticipate is that government, local & central can just exercise some honesty. ie the basic geo-tech realities should be on every land title and on public signage (with regard to public space...eg Whanganui.."this locality is flood prone...we have inadequate storm water systems...most buildings in the commercial centre do not meet modern earthquake standards...this subdivision was located on old orchards which used long life poisons..etc." Be warned!
On the other hand we humans are a funny species. On the Hauraki Plains, beside the river flood banks, folk still build new homes on a concrete pad 300mm above the ground level!
Thanks, Mills and yes, you've pegged that all right.
About to write another article for interest.co.nz about the implications of section 72 caveats (hazard caveats under the Building Act) being placed on land titles as (my anecdotal understanding is) developers find it (i.e., encouraging their clients to accept them) as the only means/way for much of the new development (and upgrades to existing dwellings) to get RMA consents. This situation isn't serving anyone fairly - and particularly not the land owners. But it does get council's off-the-hook with respect to future liability.
What a mess.
Umm, we did have copious debate in 2017. We elected the highly committed and totally honest Labour Party who promised to drastically cut immigration. I believe their finance spokesperson at the time was someone called Grant Robertson who made a strong economic case for reducing it.
I think we were promised "reforms", not just simply cuts in migration numbers. Labour committed a shakeup of migration policy to focus more on acquiring highly skilled individuals and high-achieving students that would lift productivity and/or living standards for the rest of the economy.
Much of the damage was actually done by Key in 2016 when he introduced a median wage threshold on resident visa applications, which saw number of residence applications plummet right after.
If you want to watch a Rob with a brain then this is worth the full 60 minutes of your life to watch.
https://www.youtube.com/watch?v=AY89a_zXi9s
Ultimately Winston is to blame for going with these dingbats back in 2017.
Fortunately they appear to be imploding but unfortunately National will have a huge task ahead of them to clean up the mess.
But they’ve managed to clean it up before when they won in 2008 so here’s hoping.
Shafty…. Understand MMP… but he’s right…the queen maker was Winnie…. He went with the party he knew he and his cronies would get the bigger hand to play… fair deal, tis logical
ALL I KNOW IS THE LEFT BLOCK IS TOTALLY SCARY… I think another round would destroy this nation on so many levels
Just ignorant, like all of the Right
And almost all of the Left
We were a smarter, more science-savvy society in the 70s than we are now. Now we're just two incorrect ideologies talking loudly past each other
While some of us are pointing out that that is a silly argument on a sinking ship...
So true. My grandparents would proudly tell people all 3 of their kids pursued science or engineering after high school.
Nowadays, raising LGBTQ+ kids takes the cake. You no longer have to contribute anything real to society to be considered a hero these days - expressing self-righteous opinion is good enough.
Robertson said the country had an “extraordinary infrastructure deficit” which Treasury has estimated will require approximately $210 billion of investment across the next 30 years.
Seriously, where are we going to find an extra $7bn a year. That’s more than the NLTP for transport which is roughly $5.5bn a year.
We can’t even maintain what we have.
The NZ Dollar is a fiat currency and so there is no fixed quantity that has to be sought out like its some rare mineral. What limits spending is the available resources and not money. All government spending happens in the same way, the treasury instructs the central bank to make a payment and currency then comes into existence as central bank reserves and taxation and borrowing must occur after this process.
"Money" is only useful when it is an accepted method of transfer....and nearly everything we need is sourced offshore, consequently we are restrained in how much we can source.
The Gov can issue all the currency (or debt) they like but the markets will treat it on its merits.
The challenge for Govt on infrastructure is not 'finding the money' - they can pay us as many NZ dollars as they want to do the work. The challenge is
- Being able to secure the real resources needed - the people, concrete, steel, machinery, solar panels, turbines etc
- Running the economy hotter without causing runaway inflation / profiteering
- Avoiding blowing out the trade deficit and creating currency risks, and
- Building the capacity / capability to deliver major infrastructure projects
Anyone with an ounce of common sense will work out in minutes that we cannot meet these challenges without using more of our natural and human resources for the common good. How will we avoid blowing up the trade deficit importing billions of dollars of steel and machinery if Aucklanders are ordering new Teslas every few seconds? How will we get great people working on the change if it pays more to flip houses, or work for the radpily expanding finance and insurance sector? How will we build quality ecohomes if all of our pa and son building companies can make more money doing renos for rich folk, or building helicopter pads on Waiheke?
I am not advocating for a communist state here, but we need a change in mindset, and quickly.
Big questions! I think the mobilisation required is so large that it will require special measures to make space in the economy for the level of spending needed. Those special measures could include compulsory savings (higher rate of kiwisaver contribution?), higher top rate taxes, shared investment in new energy infrastructure etc with households and businesses (e.g. solar) - basically anything to hold back consumer spending on discretionary stuff whilst Govt investment steps up significantly and more of our resources are put into the infrastructure work. The more special measures in place, the quicker the investment can go in.
In terms of phasing, I'm not sure I have the expertise to comment - but clearly there is a need to build the capacity (people, skills, equipment) to do the work before trying to start it, so building that up has to be phase one. After that it will be about working on the long-term stuff (hydro?) whilst delivering things to show progress for an impatent electorate (e.g. massive solar rollout). It is worth a quick look at the nightmare waka kotahi are having now as they try and do more.
I find this calculation interesting - a way of reasoning about government budgets and plans which is seldom talked about by the media (right? Or am I just not paying attention).
Indeed if the government would incentivise me to save at this point as opposed to getting contractors in to upgrade my property, I guess that would help huh. Otherwise inflation and delays are the name of the game.
It seems like government plans should be all about efficiency/productivity. Smooth out the gaps and bumps and unlock the potential of the country. Rather than 'solving' crisis and crisis.
Easy to meet the challenges!. Just remove all the barrriers and allow oveseas competition into the market and remove the protectionism!
But the biggest barrier to every firkin infrastructure need is the Green wankers!
Concrete, steel, everything! Creates carbon or some form of pollution to create... and the grèens want to/ have made it overpriced by taxing everything we need!
But lets look at the net effects of competition...
Take TVs... $1k buys a better tv than $1K 40 Years sgo. Why competition and low market protection
Roads build in Spain are 1/2 the price of NZ and better quality. Why?... euro competition
Do you remember when spain wanted to dump excess potato chips here. The greedy potato growers stopped it to protect a few jobs. So instead of stepping up to the overseas price challenge the kiwis lobbied gov and media and got it stopped.
Unions imposed costs on business
Take road works saftey. I was driving the coast of Croatia last year. ( AMAZING COAST) WHEN WE CAME ACROSS GUYS CLEARING ROAD SIDE TREES THERE WAS NO DELAYS, NO CONES, NO SIGN TRUCKS.. just a warning sign and two guys loaded with common sense and with paddle stop go signs.? Total cost say 2k compared to 40k for NZs over zealous 3 truck, 50000 cones, ten guys, system.
The PC woke woofters of NZ govt and the greens have screwed NZ
Why doesn't Robertson acknowledge we are, right now, in a polycrisis (e.g. climate change, biodiversity crisis, planetary resource overshoot, pandemic, increasing inequality, war)?
Isn't that enough to abandon this failed neoliberal ideological drivel about balancing the books, returning to surplus, and saving for crisis?
Apparently not, all we are getting is more of the same - roads not rail, flood protection schemes not managed retreat.
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