Contractor

Capital intentions + infrastructure investment decisions

This article first appeared in Contractor Perspectives 2017.

Hon Bill English, Prime Minister – written as Minister of Finance.

GOOD INFRASTRUCTURE is critical to New Zealand’s future. Ensuring that we have the right frameworks in place to support wise infrastructure investment decisions that meet the needs of a changing New Zealand is an important focus for this government.

In 2015 I released the 30 Year New Zealand Infrastructure Plan which states that, overall, New Zealand has a broadly good infrastructure base, bolstered by investment in recent years. However, the transport, telecommunications, energy, three waters, productive water and social sectors need to be better prepared for the challenges of the next 30 years. They are also aging and our growing population is creating pinch-points.

Major investments are required. The latest estimates suggest that around $125 billion will be spent on infrastructure in New Zealand between 2012 and 2025. That is the equivalent of 42 Auckland City Rail Links, our largest single infrastructure project for the past 30 years. One hundred and twenty-five billion dollars is a lot of money so it is essential that we invest it responsibly.

To do so, we need a better understanding of the levels of service we want to deliver, more mature asset management practices and use of data, and more effective decision-making that considers non-asset solutions.

To assist with that, the National Infrastructure Unit, which sits within the Treasury, publishes an annual Capital Intentions Plan.

The plan lists upcoming infrastructure projects across central government, local government and the private sector and provides the market with greater visibility of upcoming investment commitments and opportunities.

It recognises that a key focus of 2015’s 30 Year Infrastructure Plan, which is also released by the National Infrastructure Unit, is to provide businesses with greater certainty and confidence about current and future infrastructure provision. This is important because an efficient and reliable infrastructure network underlies our economy and is the basis for our social, economic, environmental and cultural wellbeing.

The Capital Intentions Plan for 2016 gives a year-by-year breakdown of actuals and intentions. It shows that the total actual and estimated spend between 2012 and 2025 has increased by nearly $15 billion since 2015.

Central government spending for the same period has increased by $5 billion to $54.1 billion, local government by $7.6 billion to $54.7 billion and the private sector by $2.1 billion to $16.7 billion.

Overall, the latest data shows a total of 4504 infrastructure-related projects across central and local government and the private sector, an increase of 1351 projects since the first Capital Intentions Plan was released two and a half years ago.

For these projects to come to fruition, infrastructure providers will need to be able to utilise new types of financing and delivery models that promote innovation and responsible use of taxpayers’ money.

With that in mind, the government is taking steps to more closely align the Australian and New Zealand infrastructure markets so they are more appealing to offshore infrastructure investors.

The recently-released Australia New Zealand Infrastructure Pipeline is an online portal that provides a clearer picture of high-value infrastructure investments opportunities throughout Australasia.

Twenty four New Zealand-based projects and 97 Australian-based projects are listed – from government agencies and local authorities.

All projects listed are valued at more than $100 million and most have either recently started or are yet to get underway.

As well as improving transparency and forward projections, the government is also exploring new types of financing and delivery models that promote innovation and responsible use of taxpayers’ money. The PPPs that we are starting to see across the country are a good first step.

By increasing procurement capability we will reduce risk, enable scale and lower transaction costs. I look forward to seeing the market solutions that this competitive environment will deliver to address our future challenges.

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