infraread - Te Kawepūrongo Waihanga

Keep up to date with key happenings in the NZ infrastructure space with our Monthly Newsletter.

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  • 16 Jun 2021 5:08 PM | Anonymous

    By Claire Edmondson, Chief Advisor

    The government faces a critical test in infrastructure in the next five years that will burn as much financial capital and as much political goodwill as it can muster.

    In the last few weeks, with the Climate Commission’s final advice to the government sitting in the Prime Minister’s in-tray and Te Waihanga’s draft 30-year strategy about to arrive in Grant Robertson’s inbox, it has become apparent the government is facing:

    • A shortfall in capital to address the 30-year demands of New Zealand under climate change and Three Waters
    • Pressure in the cities and regional centres where Three Waters makes sense in policy, but not necessarily politically
    • Medium-term demands in public and private transport, with New Zealand Upgrade jumping nearly 30% in total capital in just 18 months.

    The issue of climate change has very quickly taken centre stage. The extensive work of the Climate Change Commission has generated much debate and discussion. Infrastructure decisions will have a significant impact on climate change adaptation, mitigation and resilience. While the government has used the COVID-19 pandemic to justify canning some critical projects from the New Zealand Upgrade Programme, we are encouraged to see the Infrastructure Commission giving climate change serious consideration.

    The Commission’s recent consultation document on a national infrastructure strategy has brought together several issues, such as climate change, that have previously been discussed either in isolation or in parallel to one another. The consultation document steers clear of taking a stand on some of the more gnarly matters. Nonetheless, to see issues like value capture and a population strategy being discussed in the same document is encouraging. It demonstrates an attempt at a holistic approach to addressing our infrastructure woes.

    More immediately, 2021-2022 has shaped up to be a busy year, fast. We expect to see an exposure draft of the Natural and Built Environment Bill to be released in the third quarter for public submission potentially, work on the Strategic Planning and Climate Change Adaptation Bills will be initiated in some form, the Three Waters Review is gaining significant momentum, and there will be an opportunity to get involved in and influence the review into the future of local government. 

  • 16 Jun 2021 5:05 PM | Anonymous

    By Owen Gill, Chief Executive 

    I often wonder what it must be like to work in Minister Grant Robertson's office. In the last few weeks, I suspect it has been like being a circus juggler. The Finance and Infrastructure Minister has more balls in the air than perhaps any minister since Bill Birch pushed through Think Big in the early 1980s. As Minister Robertson notches up his fourth Budget (2018 was his first – it seems a long time ago now), he has shepherded into life:
    • Three Waters, alongside Minister Nanaia Mahuta
    • Te Waihanga, with assistance from then-ministers Shane Jones and Phil Twyford
    • New Zealand Upgrade Programme
    • A proposed resurgence of rail and rolling stock-making in New Zealand, with assistance from Transport Minister Michael Wood
    • A housing acceleration fund, with assistance from Housing Minister Megan Woods
    • A renewed assessment of light rail for Auckland proposed to report before Christmas.

    On top of all that, he threw a few curveballs in Budget 2021 – $306 million to rebuild Scott Base, and a $300 million fund to encourage the uptake of low-emissions vehicles. Some saw Scott Base coming, but the low-emissions vehicles piece was a surprise. Three Waters received an additional $296 million, to take the total available to just $1.1 billion.

    New Zealand Infrastructure Commission: Te Waihanga will present Minister Robertson with its proposed 30-year strategy for New Zealand this September and is currently engaging on a consultation document. The government will table the final strategy to Parliament before the end of March 2022. Our pick is that the September version of the strategy will be 99% of the story – Te Waihanga and Minister Robertson will not want any surprises next March.

    Expect to see Te Waihanga make a strong play for the idea of lead infrastructure, which is identifying and prioritising the big builds that produce significant results. New Zealand fast fibre – which has been a success in anyone's books and an enormous credit to Crown Infrastructure Partners and its contractors – is the class-act in this regard.

    The big question for Minister Robertson – who is proving to be remarkably adept at juggling – is what next? With the assistance of a handful of others, he has catalysed a lot of action in a short time. He must now be thinking about his second act and what he can do in the remainder of this term. As Te Waihanga opens consultation on its strategy, here's our summary of Minister Robertson's medium-term choices:

    Private capital or not?

    PPPs have proved to be a vexed thing for this government. One of the Minister's tasks is to figure out how the government can accept more private capital. Budget 2021 shows the government's balance sheet will be stretched right through to 2028 or so, which means the minister has little room to raise capital via the government's own means.

    Finessing delivery

    In the 1990s, then UK Prime Minister Tony Blair had a group of senior officials who worked on what was known as Deliverology – the art of taking an approved piece of policy and getting action on the ground. Indeed, Sir Michael Barber, Blair's deliverology leader, went on to make an entire school of thought out of the subject. Delivery is one of Minister Robertson's most problematic areas. The government will raise its capital investment to near-record levels in the following year, but – as the national budget shows – the government is increasingly caught between rising project costs, skills shortages, and a lack of prioritisation.

  • 16 Jun 2021 4:59 PM | Anonymous

    Three Waters Reform Programme

    On 2 June, the Department of Internal Affairs (DIA) released a second tranche of evidence-based reports, commissioned to inform the case for change for the Three Waters Reform Programme.

    Infrastructure New Zealand welcomes these reforms as they anticipate having significant positive impacts on the economy, including increasing gross domestic product (GDP) by $14.4 billion to $23 billion in present value terms over the next 30 years compared to the likely outcomes without reform. Without service delivery reform and the associated efficiency gains, the real cost increases to communities (households and businesses) of meeting the required investment would be significant and likely unaffordable for many smaller communities and low-income customers.

    The reforms expect to create a significant number of jobs spread across all sectors. The WICS Phase 2 analysis shows the affordability challenges that local authorities would likely face without reform.

    For some small, rural local authorities, average household costs in 2050 could reach as high as $9,000 per annum in today's dollars and would be unaffordable for many households. In the larger provincial and metropolitan councils, bills could reach between $1,700 and $3,500 per annum in today's dollars. 

    Auckland would be among the centres gaining the least from efficiency, partly because Watercare has already picked-up much of the potential gain since the merger of local authorities in Auckland in 2010. WICS has advised the government that the biggest efficiency gains in water are made with a population base up to 800,000 people. 

    But the risks in Three Waters are big, and the capital cost is high. WICS states New Zealand needs to invest $120–$185b in water services over 30 years if it is to reach the same service standards as the United Kingdom which is between four and six billion of capital, year-on-year, over 30 years.

    Cabinet expects to make decisions, including the number and boundaries of new water services entities, in the coming months.

    Infrastructure New Zealand will partner with DIA to provide several workshops on the reform programme in the coming months. The complete reports are published here. For the key findings of each report click here.

  • 16 Jun 2021 4:55 PM | Anonymous

    New Zealand Upgrade Programme

    The government announced the New Zealand Upgrade Programme (NZUP) in January 2020, a $12 billion programme of 32 investments. 

    The majority of expenditure was in public and private transport. There were lesser amounts for a handful of hospitals, a modest injection of capital into schools, and the first of a series of clean-powered public sector projects, mostly aimed at closing coal-fired heating in hosptials. Eighteen months later, and the top 16 projects - mostly in road and rail - were costed at $12.8 billion, roughly double the original estimates for that tranche. That led the Government to a series of adjustments and cutbacks, to get the top 16 projects under $7 billion total capex.

    The government has said these projects will result in the reduction of vehicle emissions and decarbonising of our transport system.

    The National Party has made its displeasure clear and has accused the government of deliberately downplaying the programme’s costs in an election year and now using the higher, more realistic costs to cancel projects it ideologically opposes.

    The government has added a very big project in Auckland, a walking and cycling link between Auckland's City Centre and the North Shore named ‘Northern Pathway’, which is 90% bigger in cost than its predecessor and a very ambitious piece of engineering. Indeed, the revised and much-bigger Northern Pathway in Auckland – effectively a second bridge alongside the existing one – surprised many Aucklanders when the government announced it, partly because of the scale and also because of the proposed capital cost, at near-$700 million, excluding the $100 million for the land section. We support a walking and cycling connection over the Waitematā Harbour, but without seeing the business case,  it’s hard to see how a new bridge would be justified.

    Similarly, the $692 million SH1 Whangārei to Port Marsden Highway – an upgraded 22km four- lane corridor – has been canned in favour of safety improvements along the existing highway and the construction of a new rail line from Northport to the North Auckland rail line.

    Projects such as the $1.3 billion Mill Road transport corridor in South Auckland – a 21.5km new four-lane corridor with separated walking and cycling facilities that would have served as a new connection from Manukau to Drury South and provided better access for the 120,000-plus people – has been drastically cut back to focus on safety issues and possibly involving an upgrade of two lanes instead of the four between Flat Bush and Alfriston.

    The government’s announcements reveal that it continues to struggle with one of the most vexing policy issues New Zealand faces in infrastructure – the reliable prioritisation of projects. The decisions underline how difficult it is for the government to hold to its original priorities and maintain confidence in cities and towns, and with the sector.

    One of the purposes of robust prioritisation is to provide certainty – both locally, and to the infrastructure sector regarding the quality and depth of the pipeline of work. 

    People who were hoping to see the government’s climate policy tested in court will have to wait for another day. All Aboard Aotearoa had initiated proceedings in the High Court, arguing Mill Road is a breach of the government’s obligations under the Paris Accord and under the Zero Carbon Act 2019. It is hard to see that case proceeding now, given the extent to which Mill Rd has been reduced.

    Details of the updated NZUP can be accessed here .

  • 16 Jun 2021 4:49 PM | Anonymous

    Infrastructure Commission consultation on 'Infrastructure for a Better Future'

    • Consultations close on 2 July 2021
    • Infrastructure New Zealand has made a submission
    • Member workshops held across June where Infrastructure Commission presented

    New Zealand infrastructure deficit is around $20 billion and results from decades of underinvestment by successive governments. This deficit is affecting our wellbeing, costing New Zealanders in lost income and productivity.

    The matter is not helped by a constant focus on the short-to -medium-term. Our Budget 2021 commentary outlined that the Budget's attempts are primarily concentrated in the 2021 and 2022 years, with capital investment trailing off by 2025. 

    The Aotearoa New Zealand Infrastructure Strategy could act as a critical catalyst to changing this. The Infrastructure Commission: Te Waihanga was established in 2019 to coordinate, develop, and promote an infrastructure approach that encourages infrastructure (and services that result from the infrastructure) that improves New Zealanders' wellbeing.

    The Commission is required to prepare a 30-year infrastructure strategy. It sought feedback on a consultation document titled He Tūāpapa ki te ora: Infrastructure for a Better Future to help develop the draft Infrastructure Strategy. The commission will submit a draft strategy to the Minister for Infrastructure in September 2021 (which will eventually be tabled in Parliament). It will contain a set of recommendations for the Minister to consider and provide a response.

    Our submission supported most of the findings and options identified. 

    We also held member workshops to allow the commission to present and engage directly with members. These workshops were well attended and provided a unique opportunity for members to influence the commission's strategy directly.

  • 16 Jun 2021 4:45 PM | Anonymous

    Building Act reforms

    The Building (Building Products and Methods, Modular Components, and Other Matters) Amendment Bill, which represents the first of a suite of reforms to the Building Act 2004, was passed by Parliament on 3 June.

    The Bill seeks to lift the efficiency and quality of building work, provide fairer outcomes if things go wrong, and support the building sector to shift to new and more effective ways of working. The Bill will help support productivity improvements by lifting efficiency and quality of building work and to improve trust and confidence in the building regulatory system.

    The Bill has two parts: the first part amends the Building Act 2004, and the second part makes consequential amendments to other legislation. The changes to the first part are in five categories:

    (i) strengthening the existing product certification scheme known as CodeMark;

    (ii) creating a new scheme for modern methods of construction;

    (iii) better information for building products and methods;

    (iv) improved offences and penalties; and

    (v) expanding the use of the Building Levy.

    A key change that could significantly speed up the building consenting process is a new modular component manufacturer scheme allowing offsite building manufacturers who meet specific requirements to be certified, allowing them to sign off their designs and construction.

    The Ministry of Business, Innovation and Employment is consulting with the sector to develop new regulations to support the modular component manufacturing scheme, CodeMark changes and the new building product information requirements.

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