dave May 30, 2017 No Comments

The government has announced it will allocate $11 billion in new capital infrastructure over the next four Budgets, in addition to funds already included in agency baselines – a move welcomed by the transport industry.

Finance Minister Steven Joyce says New Zealand is growing faster than it has for a long time and adding more jobs all over the country: “That’s a great thing, but to keep growing, it’s important we keep investing in the infrastructure that enables that growth.”

Mr Joyce says that the focus will be on the infrastructure that supports growth, with capital investment in Budget 2017 being increased to $4 billion, including $812 million for reinstating State Highway 1 north and south of Kaikoura.

“We are investing hugely in new schools, hospitals, housing, roads, and railways. This investment will extend that run-rate significantly, and include new investment in the justice and defence sectors as well.”

The capital commitment in Budget 2017 will represent the biggest addition to the government’s capital stock in decades. “To put that into context, the net new capital allocated in the last four Budgets was $4.8 billion, of which $4.1 billion was funded through the proceeds of the mixed ownership model programme,” Mr Joyce says.

“In Budget 2016 we were forecasting just $3.6 billion in new capital spend between Budget 17 and Budget 20, compared to $11 billion now, and that’s an additional spend on top of investments already planned by the government,” he explains.

“If you add the government’s budgeted new capital investment together with the investment made through baselines and through the National Land Transport Fund, the total is around $23 billion over the next four years, or an average of nearly $6 billion per year. And we want to extend that further, with greater use of public-private partnerships, and joint ventures between central and local government and private investors.”

MEETING POPULATION DEMANDS

Stephen Selwood, CEO of Infrastructure New Zealand, says the further $11 billion in new capital infrastructure is very welcome. “This is a massive increase and the largest capital investment commitment by any government since the 1970s, but it must be said that New Zealand’s growth challenge is the highest it has ever been, and meeting population demands requires the services for a city larger than Nelson to be added every year,” he notes.

“Added to the growth challenge is New Zealand’s historic under-investment in infrastructure. The reality is that it would not be difficult to spend $11 billion in 2017 alone.”

Mr Selwood points out the government’s commitment to the Kaikoura rebuild, along with its $1.5 billion contribution to Auckland’s City Rail Link and a further $1.5 billion on the East-West Link, a billion more on each of Mill Road, the northern busway extension and the northwestern busway, $400 million on Penlink, plus state highway improvements in the regions is enough to consume all $11 billion, “let alone much-needed investment in health, education and housing nationwide,” he adds. “To get full value out of national resources, the government is going to need to use its funding to unlock private investment.”

ACUTE PRESSURE

Road Transport Forum chief executive Ken Shirley says the government’s decision to fund $11 billion of new capital infrastructure over and above existing projects is a welcome response to New Zealand’s infrastructure pressures. “With our growing population and expanding economy, the burden on our transport infrastructure is becoming acute. The freight task alone is expected to increase by around 70% over the next 25 years,” he adds.

“While the government’s announcement is a substantial allocation of funding, it is no more than is necessary to catch up on our significant infrastructure deficit. The devil will be in the detail of course, but the transport industry looks forward to Budget Day and more information on where the first $4 billion will be spent.”

Mr Shirley describes the government’s $812 million commitment to rebuild State Highway 1 through Kaikoura as “an absolute necessity” for the long-term viability of freight between Picton and Christchurch. “It is pleasing that the commitment extends to work on making the route more resilient,” he adds.

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