By Claire Edmondson, Infrastructure New Zealand Chief Executive
Budget 2022 lifted infrastructure spending to approximately $62 billion over the next four years, but there is much more to be done to address the infrastructure deficit and improve delivery capacity.
In Budget 2021, Minister Robertson committed approximately $57.3 billion for infrastructure from 2021 – 2025. This year he increased that by $4.6 billion, with capital investment up to $61.9 billion from 2022 – 2026.
This increase is certainly welcome, as are the initiatives announced to address the quality of our long-neglected social infrastructure. However, it still does not go far enough to address New Zealand’s significant infrastructure deficit, which Treasury’s 2022 Investment Statement estimated at $210 billion. The Infrastructure Commission – Te Waihanga, estimates $31 billion spending on infrastructure will be needed annually, for the next 30 years, to build our way out of current and future infrastructure challenges.
Many of the infrastructure-related initiatives in the latest Budget have already been committed through previous Budget announcements, so that $4.6 billion is the amount of ‘new’ capital investment.
The Budget placed a heavy emphasis on health reforms and investing to meet New Zealand’s climate change goals. We welcome this additional investment, but recognise that much of it is aimed at addressing historic underspending on ageing health, education and transport infrastructure.
Key infrastructure initiatives in Budget 2022
- Climate change – The Climate Emergency Response Fund (CERF) was officially established, with an initial $4.5 billion ‘down payment’ from expected revenue from the Emissions Trading Scheme from 2022/23 to 2025/26. The CERF includes an initial allocation of $2.9 billion over four years to support delivery of the first Emissions Reduction Plan. It has a strong focus on transport initiatives including a new scrap-and-replace scheme to help low and middle-income New Zealanders shift to low-emission vehicles. This funding recognises infrastructure’s role in addressing the impacts of climate change, and provides for transitional work to support various sectors to prepare for a low-carbon future. Despite this seemingly significant announcement, there was very little in actual climate infrastructure spending this year with most of the funding allocated to grants such as the innovation fund for agriculture.
- Funding to support decarbonising the freight and supply chain sector – Approximately $20m will be provided through the CERF over four years, including for business cases and research programmes, capability and capacity, and contestable funding for low-emission freight solutions. Investment in decarbonising the public transport and freight sectors is welcome, but we need to ensure we do not move too quickly and impose costs on an already stretched sector or leave New Zealand exposed to volatile global oil markets.
- Port Sector opportunities for decarbonisation, resilience, and regional development – $3.7m will be provided for three technical studies; a research exercise to inform the development of the NZ Freight and Supply Chain Strategy; a study considering the technical engineering feasibility of the Manukau harbour as a location for a future port, and a study on the proposal for a Northland dry-dock. It is encouraging to see further action on the location of a future port for Auckland. The study will need to take an independent and robust approach to assessing opportunities and challenges associated with Manukau as a location, particularly given the issues with the entrance on the West Coast.
- Construction Sector – $37m was allocated for the Construction Sector Accord Transformation Plan. This should see increased productivity, capability and resilience of the sector. We support this investment and look forward to partnering with the Government on its development and implementation.
- Rail – $349m of capital funding was announced for KiwiRail’s rolling stock investment programme to replace ageing stock with modern, energy-efficient units. The Rail Network Investment Programme received $312.3m in operating funding for the National Land Transport Fund for KiwiRail to restore a “resilient and reliable” national rail network. This replacement of old assets will, realistically, bring freight-and-people-moving up to where they should already be.
- Auckland Light Rail – Received funding for delivery progression of $199.5m, including for a detailed business case. We welcome allocation of funding to progress this critical piece of transport and urban infrastructure. Light Rail has the potential to lift access to the city centre, shape urban and housing outcomes and pave the way for congestion charging through provision of viable public transport alternatives.
- Resource Management – Budget 2022 provided $178.7m over four years to ensure there are sufficient funds to develop the National Planning Framework, along with the first Regional Spatial Strategies and Natural and Built Environments Act plans. This includes support for local government.
- Health and Education – The $1.3b of capital funding for health includes priority capital projects such as the rebuild of hospitals in Whāngarei ($572m was however committed in Budget 2021), Nelson and Hillmorton ($14m was from Budget 2021). Education received $386m capital expenditure and $50m operating expenditure for building and refurbishing new classrooms.
Addressing resource challenges
Funding is not the only issue. Concerted effort is also needed to address further domestic and global challenges. A major concern is whether there are sufficient resources in New Zealand, including labour and materials, to deliver on our infrastructure pipeline. Budget 2022 also announced $230 million in trades training to fund an additional 24,000 apprenticeships through the Apprenticeship Boost support scheme. However, further work is needed to remove barriers to New Zealand being competitive in the global labour market and attract skilled migrants to meet existing labour shortages.
Budget 2022 is a step in the right direction, but there is more to be done and the Government cannot do it all. We urge the Government to genuinely consider alternative infrastructure funding, financing and delivery arrangements. There is a significant opportunity to partner with the private sector and take advantage of its under-utilised capacity to bridge the gap between what the Government can afford to do and the significant infrastructure deficit facing our country. Only by working together can our country’s infrastructure needs can be addressed successfully for the benefit of all New Zealanders.