Day One: The Covid-19 Environment
ANZ New Zealand Chief Executive Antonia Watson, representing our premier sponsor, helped set the scene, highlighting ANZ’s work in the development of innovative funding solutions to meet renewable energy generation needs and work in the housing space.
She reflected that in the coming years, banks will have a central role both in investing and reporting for a greener future and noted that a shift toward climate risk reporting will fundamentally change the appetite for risk in the financial sector.
Antonia highlighted ANZ’s role in leading work in this area and concluded by reflected on the conference theme, “a fork in the road” as we move forward towards a ‘new normal’ including pandemic recovery and climate change.
The Prime Minister, the Rt Hon Jacinda Ardern, reiterated the Government’s commitment to the infrastructure sector, investing $57.3b across a range of key projects over the next five years.
The Prime Minister acknowledged key issues in the sector, including work to address the current skills shortage, investment in regional infrastructure, climate change and the health of our natural environment, as well as work to improve Auckland’s housing supply. She emphasised infrastructure’s key role in post-Covid recovery, and acknowledged the sector’s ongoing hard work and resilience throughout the Covid-19 response to date.
Ian Goldin, Professor of Globalisation at Oxford University, explained that an increasingly connected world was increasingly vulnerable to a range of crises – not only pandemics, but financial crashes, climate change and other crises.
Covid-19 and differing management approaches had caused a shift in the ‘economic centre of gravity’, compounded by the growing importance of service provision and the increasing automation in delivering those services. He believed service automation and our natural environment provided significant future opportunities for New Zealand.
Deputy Prime Minister Hon Grant Robertson – who also holds the Finance and Infrastructure portfolios – spoke to three key challenges facing the infrastructure sector:
- Supply chain constraints
- Skills shortage pressures
- The resulting labour and supply costs
He reiterated the Government’s commitment to easing housing pressures and noted work was underway looking at building material costs. He highlighted New Zealand’s low unemployment rate and favourable debt position compared to other OECD nations.
On climate change, the Minister emphasised the cost of doing nothing and the Government’s desire to partner with industry actors who shared its commitment to climate resilience and carbon neutrality. He highlighted New Zealand’s strength in innovation and encouraged the sector to capitalise on the opportunity to develop and lead new technology, rather than rely on overseas innovation to address challenges.
Auckland University Associate Professor Siouxsie Wiles spoke about the Covid-19 response, outlining how the virus worked, and the effectiveness of a range of responses to it.
Dr Wiles highlighted the declining protection provided by vaccines beyond six months and the negative effects of long-Covid, including fertility and severe fatigue. Vaccines were just as important on worksites as hardhats and other health and safety measures.
Day One: Afternoon session – The Economic Environment
Hon Stuart Nash (Minister for Economic and Regional Development, Minister of Forestry, Minister for Small Business, Minister of Tourism) emphasised the role of industry-government partnerships in responding to issues such as climate change and highlighted the Government’s leading role in digital governance to drive sustainable growth. He listed five key actions the Government was taking to meet New Zealand’s key challenges and ambitions:
- Driving productivity
- Enabling digital uptake
- Key stakeholder engagement in the context of regional economic development policies
- Changes to immigration policy
- Work focussed on New Zealand’s global branding.
Andrew Wear, author of Recovery, reflected on the learnings from other crises, highlighting the importance of community-led recovery approaches and the private sector’s vital role in bridging the gap between post-event economic stimulus and sustained economic development and recovery. He also highlighted the importance of innovative and incremental experimentation as part of rebuilding, to help drive export growth.
ANZ Group Chief Economist Richard Yetsenga, ANZ Greater China Chief Economist Raymond Yeung ANZ New Zealand Chief Economist Sharon Zoller discussed infrastructure’s role in global economic recovery.
Richard reflected on the generally positive outlook for the global economy, encouraged by the vaccine roll-out and moves toward greater opening up across the globe. He noted inflation was likely here to stay.
Raymond highlighted China’s experience following the 2008 financial crisis, with investment in key projects to build productivity and support future growth. He said the key question policy-makers should be asking was how to invest wisely to ensure long-term growth.
The trio reflected on the risks of global monetary policy, and the need for a shift in consumption and investment towards less climate damaging goods and more climate agnostic goods.
Sharon provided a strong New Zealand context covering a range of economic issues.
Brad Olsen from Infometrics spoke to the key economic challenges facing New Zealand. He expanded on Sharon Zollner’s earlier reference to global supply chain issues, and highlighted the skill shortage plaguing New Zealand’s infrastructure sector.
Construction had experienced the second largest growth in job numbers by sector over the past year, meaning significant wage pressures were likely to continue. These issues were compounded by record high levels of job turnover and significantly reduced migration inflows, as well as the effects of an aging population.
On rising building costs, Brad noted that inflationary pressures for the sector were higher than they had been for some time, and particularly pronounced in regional areas.
While freight container prices had levelled off in recent months, they remained 10% higher than normal, with perhaps another 18-24 months before they returned to pre-pandemic levels.
There would be increased demands on ports as the sector tried to complete work it had not been able to during previous lockdowns.
Ian Purdy (INZ Board Member and facilitator) Boyd Warren (ChristchurchNZ), Pam Ford (Auckland Unlimited) and Nigel Tutt (Priority One – Tauranga) formed the Covid-19 Economic Recovery panel.
The panellists were asked what support they needed and what could be done to improve their current situations. Key themes included the difficult road ahead in Auckland. Pam noted that hospitality, retail and travel had been particularly hard-hit, and that South Auckland had also suffered, with much of the population being frontline and construction sector workers.
In Tauranga, Nigel considered they were in an ‘okay’ position, with a well-diversified regional economy. The challenge was enhancing regional infrastructure to match rapid growth.
Boyd noted the need for drinking water and rural broadband infrastructure improvements across the country, and the role of infrastructure in retaining good people and businesses.
The panel agreed it was vital to get young people with the necessary skills into productive jobs such as construction and technology, and the importance of accelerating productivity and bridging income gaps.
Josh Cairns (Simpson Grierson) lead a Funding and Finance panel including Natalie McClew, Partner, PwC, Christoph Vojc, Investment Director, Morrison & Co, Sean Wynne, Deputy CEO – Bulk Housing Infrastructure, Crown Infrastructure Partners, and Wei Lu, Head of Investment Banking and Asset Management, China Construction Bank.
Josh outlined some of the convergent financial pressures affecting infrastructure including:
- The age of our assets
- Supporting the growth of our regions
- Adapting to climate change
- Unfunded mandates
- The (pre-Covid) growth in tourism
- Rising prices
- Political pressure to cut costs.
The panel took on the key challenges and opportunities of infrastructure funding and financing, asking how we might best place investment. They noted significant growth in the funding and financing regulatory environment, including the introduction of the IFF tool and reflected on how we might best leverage value capture mechanisms, depoliticise funding decisions and explore development contributions. The panel also reflected on the need for complementary government initiatives alongside the IFF legislation.
In reflecting on the potential of PPPs, the panel noted the need for large New Zealand companies that can absorb the associated level of risk, and the need to attract overseas investors. It reflected that the Government’s recent lack of predictability in this area combined with the uncertainty of the Covid-19 environment had not helped.
A key takeaway was the need to coordinate across infrastructure types on the interrelationship of transport and new developments to leverage investment and achieve ambitious outcomes.