continues with its wellbeing approach. The budget is guided by three
overarching policy goals for the next three years:
- continuing to keep
New Zealand safe from COVID-19
- accelerating the recovery and
rebuild from the impacts of COVID-19
- laying the foundations for the
future, including addressing key issues such as our climate change
response, housing affordability and child poverty.
priorities of Budget 2021 are:
- continuing the COVID-19
- delivering priority and
time-sensitive manifesto commitments
- supporting core public services
through managing critical cost pressures
- continuing to deliver on
Infrastructure Sector Overall
is a mixture of good news for the infrastructure sector, and some
signals the government’s commitment to Three Waters, with 40% more cash ($296m
newly committed) available.
signals a big commitment to rail, with an additional $722m capital for Future
of Rail, most of it for rolling stock and two new capital bases in the South
Island (Hillside in Dunedin and Waltham in Christchurch).
There is an
investment in encouraging New Zealanders to shift to low-emission vehicles
($300m), a new regulatory standard for clean cars ($16m), and capital to Scott
Base ($306m) and the civil aviation/aviation security estate ($113m) up to
scratch. School property maintenance receives a $634m injection of
and Infrastructure Minister, Hon Grant Robertson, told analysts and media in
Wellington that he wanted to provide confidence in the infrastructure sector,
with a clear signal as to how much work will be coming.
capital investment – including in rail, roads, water, and health - over the
near term (five years) is close to $60b. Waka Kotahi will spend $10b over five
years on public transport, and roads.
nearly half of the $60b will be invested in the 2021 and 2022 years, with capital
investment trailing off by 2025. Net capital spending in 2025 will be about
$8b, half that in 2022.
infrastructure, the near term looks sunny. The longer-term needs attention.
Reading the Small Print
the small print reveals the government is under considerable pressure with the
New Zealand Upgrade Programme (NZUP). The budget says the $6.8b envelope
which was originally provided is proving too small, with costs rising.
New Zealand Transport Agency and KiwiRail are going back to basics,
reassessing all the NZUP projects.
print says the government is ready to put in more to Three Waters, if
necessary, additional to the 40% increase announced today, providing a signal
of the government’s determination on Three Waters. Funding announced today
includes provision for transferring assets from local government to new water
increases and skill shortages – on top of costs related to COVID-19 – are
biting, especially in the government’s most ambitious builds. Budget 2021
reveals that Kāinga Ora is under cost pressure in its large-scale housing
projects, including Tamaki. In Auckland, the budget says that City Rail Link
will cost more than $4.4b, partly because of the effect of COVID-19 and skill shortages.
Wellington Moving is likely to cost much more than originally estimated, with
the risk rising that the initiative may not be delivered in full.
estate receives an additional $5.1m of operational funding, a low sum given the
size of the defence estate. Reading between the lines, the government is
apparently having difficulty prioritising any new capital projects in the
Post the Resource Management Act (RMA)
signals the scale of the task in parting company with the RMA, with $131m
provided over three years to pay for the design and implementation of the three
new statutes that will replace the RMA.
of that will be spent next year, which suggests the hard graft on post-RMA is
Detailed Commentary of Budget 2021
two key disappointments that are worth noting.
the government has, as expected, shied away from taking on more debt at a time
of exceptionally low borrowing rates to fund an expansionary fiscal policy and
this will be a cause for frustration. The government could have been more
ambitious and spent more on capital in the out-years, which would have raised
disappointment is around the lack of innovation. The government has missed an
opportunity to be innovative, especially in making cities and regions
internationally competitive and increasing their contribution to the gross
domestic product. Auckland remains the engine of New Zealand’s growth as
well as our only internationally competitive city, but there is little for
Auckland – or indeed, any region – in the budget.
is the biggest single infrastructure winner. It has received a capital funding
boost of over $939m over the 10 years (2021-21 to 2029-30).
forecast period there will be $10b of investment in roads and public transport
projects through Waka Kotahi New Zealand Transport Agency.
2021-22 period, a funding allocation of $7.906b has been made up, comprising of
- National Land Transport
Programme (NLTP), funded through the National Land Transport Fund
50% at $3.976m
- A loan facility for cash flow
management – 9% at $750m
- Rail, in addition to funding
through the NLTP – 22% at $1.77b
- Road, in addition to funding
through the NLTP, additional Crown and loan funding is provided for
specific roading projects – 12% at $900m
- Crown Entity and other funding
– 7% at $519m.
allocates a further $1.3b towards a reliable and resilient rail system,
comprised of $810m capital spending and $535m operating spending.
$810m is also allocated to purchase 60 new locomotives and 1,900 new
wagons and upgrade existing stock, adding to the more than $4b put into rail
over the last term of government.
allocation includes $85m to build a local wagon assembly facility at Hillside
Workshops in South Dunedin; the facility will initially assemble
City Centre to Māngere Rapid Transit Project
government acknowledges that the cost of the preferred rapid transit solution
for the city to Māngere corridor is uncertain at this stage.
indication of costs will be provided through the business case process undertaken
by the establishment unit. Significant Crown funding will be needed to deliver
the preferred solution. Other funding tools, including value capture will be
transport component of NZUP consists of projects delivered by both Waka Kotahi
New Zealand Transport Agency and KiwiRail within a fixed funding envelope
has advised its component of NZUP is facing a significant increase in forecast
costs, primarily due to property price escalations and acquisitions, inflation,
and revised standards and assumptions behind cost estimates.
baselining exercise has been undertaken to better define the scope, costs,
for the projects and identify options for moving NZUP forward.
Housing Acceleration Fund
government had announced earlier this year $3.8b to establish the Housing
Acceleration Fund. $1.069b has been allocated for the 2021-22 period.
contestable fund will be aimed at boosting supply of ‘development-ready’ or
infrastructure-serviced land across New Zealand and will go some way in
increasing development capacity which is required through the National Policy
Statement on Urban Development.
allocates a further $296m (original funding $761m) to fund the costs of the
creation of new entities to effectively, equitably and efficiently manage water
infrastructure and provide New Zealanders with safe supply wherever they live.
government says it is committed to water remaining in public ownership, with
local authorities, communities, iwi and others playing a central role. Further
announcements on the details and further support for the programme will be made
in coming months.
District Health Boards
$700m has been allocated for district health boards’ capital investment over
the next four years.
This is a
high-level analysis prepared in a very short period of time. The focus of the
analysis is on infrastructure matters.
questions remain for the infrastructure sector, notably how NZUP will roll-out
post-assessment, and how the government’s $300m fund for low emission vehicle
uptake will take effect.
Waters remains a work in progress, with the government underlining its
commitment today, but with big hurdles to overcome yet.
the fine print of the budget are cost pressures on Auckland’s City Rail Link,
Kāinga Ora’s major housing projects, and other places. Skills shortages are
biting on big build projects.
of Budget 2021 and infrastructure is less in what happened today, and more in
what happens in the next 12-18 months.
For further information and
comment on Budget 2021, contact Owen Gill, Chief Executive, on 021 961 922 or Azeem Khan, Senior Policy Advisor, on 021 150 8677, email@example.com.