Alan Bollard’s ‘report card’ on the Infrastructure Commission’s work

By Alan Bollard

NZ Herald·

27 Aug, 2024 05:00 PM5 mins to read

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Alan Bollard is the establishment chairman of the Infrastructure Commission, Te Waihanga. He will step down later this year after five years in the role. Photo / Mike Scott

OPINION

It is five years since the Infrastructure Commission, Te Waihanga, was established to help improve our lagging infrastructure performance, and later this year I will retire as our establishment chairman. What is the verdict on our work so far?

Some of our infrastructure challenges are very specific to New Zealand - ours is a long, thin, shaky country, sparsely-populated, leaking skills, and distant from industrial supplies. On other performance indicators - high costs, time delays, planning blockages, we have compared ourselves against other countries, and identified what we need to do to improve.

For the first time, we know the value of our existing infrastructure - estimated at $287 billion. We know that our stock of infrastructure, against prevailing wisdom, has been increasing in per capita terms for some 30 years. We spend around 5-6% of GDP on infrastructure each year, a percentage that has been stable for around three decades.

We have revealed the scale of the consenting challenge, showing that infrastructure providers spend $1.29 billion annually just on getting resource consents. Fast track consenting will help, but unpicking poor regulation is a complex business still to be pursued.

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We have documented the problems of building on time and to budget. New Zealand spends more than most in the OECD, but is near the bottom 10% of countries for the time and amount of work we get done. Smoothing out our pipeline, teaching and retaining skills, certifying new building materials, remote consenting … all this will make a difference.

Most of us do not understand how our infrastructure is funded, nor who pays. The answer is a mix of rates, taxes, special levies, user charges and other arrangements. Our work has demonstrated that how we pay for infrastructure has equity implications - but not always the ones we think. For instance, volumetric charging for water is often critiqued for its impacts on low-income groups, but those on high incomes generally consume more water, meaning pricing based on use can actually be more equitable for lower income groups. Volumetric charging can also reduce leakage and avoid the need for costly storage upgrades. That’s good for everyone’s wallets.

We continue to highlight pricing mechanisms and other “non-built” options that avoid unnecessary infrastructure investment.

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When Stockholm introduced time-of-use charging, severe congestion was reduced by 30-50%. In stark contrast, Auckland projects spending billions on its transport infrastructure only to see congestion increase.

Following our work, congestion charging has entered the mainstream. A legislative timetable for its establishment is in now place.

Our greatest infrastructure challenge is maintenance. We’re not all that good at it. Local government is investing about 74 cents for every dollar of depreciation. Central government might be worse. Over the past six years for instance, we have invested just 40 cents for every dollar of depreciation in our transportation network.

This matters because you can’t put maintenance off forever and because it only gets more expensive.

We might thank our tupuna for most of the infrastructure we currently use, but if we don’t maintain and develop this, our tamariki will end up paying for it.

The politics of infrastructure are difficult: local and national priorities compete and everyone has a view. Large-scale roading and other projects will always take some years.

There’s an incentive to fund new projects rather than take care of existing infrastructure. Anything underground costs more and attracts less attention than what is overground.

There is a natural tendency to pre-announce glossy projects before business cases are done, but we can now document how costly this is.

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In Australia, the 33% of projects announced without business cases accounted for some 79% of all cost overruns.

The commission has provided the most complete picture of future intentions in infrastructure we have ever had. Our Infrastructure Pipeline now shows a huge appetite for work: it contains details of 6200 projects valued at $148b; it also indicates the magnitude of the financial challenge ahead and identifies the workforce needs - we are now developing infrastructure leaders needed to make this programme happen.

How are we progressing?

We produced New Zealand’s first Infrastructure Strategy two years ago, with a long list of recommendations, 68 in fact. It is complex - tackling our infrastructure means a lot of improvements by a lot of different public and private players.

We are monitoring how this is all going and despite our challenges, there are bright spots.

There has been a significant increase in housing supply through the National Policy Statement and Going for Housing growth agenda, with a greater emphasis on letting people live next to infrastructure that already exists. Volumetric charging in Christchurch and New Plymouth is already saving water, reducing leak rates and helping defer upgrades.

Project delivery has been vexed, but the State Highway 25A was delivered on time and to budget. Auckland’s Central Interceptor also shows that we can get this right.

Our next step is to clarify what infrastructure will be needed and what we should be spending over the next 30 years.

We are now working on a National Infrastructure Plan to clarify the gap between the long-term infrastructure need and planned investment, and also how to bridge that gap. This plan will help guide decision-making by both central and local government, and give industry more confidence to invest in what they need to build more efficiently.

One part of this is an Infrastructure Priorities Programme: an independent review of unfunded infrastructure proposals and problems to ensure these meet New Zealand’s strategic objectives, represent good value for money, and can actually be delivered. This can give decision-makers a menu of potential investment proposals. Over time, it also has the potential to help depoliticise infrastructure decision-making and improve infrastructure planning.

The National Infrastructure Plan will be finished next year. While I won’t be chair then, I’ll be watching closely as someone who knows just how important our infrastructure is to our way of life, our economy and our success as a country.

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