Budget reflections – published 18 May 2023
As expected, the Budget shows the commitment to recovery after the recent national disasters. In addition to the $71 billion infrastructure plan over the next five years, Budget 2023 sets aside $6 billion for strategic investments as part of a National Resilience Plan. Whilst this covers $6 billion in 10 years, oversight and allocation of these funds and projects will be needed to ensure we focus on the priorities facing the communities and the economy.
A key piece of the puzzle has been released today to support the allocation of the $71 billion, with He Whakakaupapa mō Te Hanganga o Aotearoa The Infrastructure Action Plan. This is the inventory of initiatives across the sector and identifies 331 actions to be completed.
Whilst we applaud the holistic, transparent approach that this action plan provides, there is a lot to implement, coordinate and align. The question is, how will the Department of Prime Minister and Cabinet, Treasury, and Te Waihanga be strengthened and enabled to ensure the oversight and reporting of progress. This will be essential to manage the impact on the industry, workforce and deliverability of infrastructure projects in New Zealand. For the sector, this provides a useful overview of all the moving parts we are dealing with and the scale of the challenge we are facing.
Balancing three competing priorities: Recovery, Maintenance, and Growth and Transformation – published 9 May 2023
Even for an industry that has historically experienced its fair share of volatility, the past few years have been dramatic for the construction and infrastructure sector. Covid-19, massive supply chain disruption, continued material shortages, raging inflation, war in the Ukraine and major talent gaps.
These phenomena come on top of long-standing challenges of a variable performance record, poor productivity, aging workforce, low contractor margins, low levels of technology innovation and investment and continued lack of certainty for owners.
The recent natural disasters of the Auckland Anniversary weekend flooding and Cyclone Gabrielle have put additional pressure on our infrastructure and has shown New Zealand the impact underinvestment can have on our resilience to both withstand and recover from such events.
When it comes to infrastructure, our leaders need to be comfortable with making uncomfortable decisions. As we face into the 2023 Budget, we will be looking to see how the Government reshapes its priorities to deal with and balance three competing priorities:
Recovery – providing additional support to the Hawkes Bay, East Coast and Auckland to respond to the National state of Emergency and rebuild critical infrastructure while still keeping an eye to the future and focusing on sustainable solutions.
Maintaining – to correct the longstanding under investment in existing infrastructure across water, health, transport, education etc. and plan for the ongoing funding that will be needed to maintain assets.
Growth and transformation – the resilience of our infrastructure underpins how we support the ongoing transformational shift to support New Zealand’s key strategic initiatives. These include delivering on climate action plan, support service improvement across social services, continue the investment in public transport, expand the national energy network and transition to 100% renewable energy. All looking ahead to our growing population and the growing strain on our infrastructure - in the first quarter of 2023 we also experienced migration roaring back with nearly 50,000 people arriving.
This all has to be delivered with a backdrop of a struggling economy and therefore we need to consider alternative funding and financing levers such as increasing the user pay charges as recently announced with the Whangaparoa toll road, congestion charging, more use of the Infrastructure Funding and Financing tools. We should be open to considering the role that alternative capital can play in releasing value from existing assets and investing in new assets.
About the author
Mair Brooks has over 25 years’ experience in consulting, with a wealth of global experience in leading, directing and providing insights and assurance around complex infrastructure portfolios and projects. She leads the growing Major Projects Practice to support her clients to deliver large transformational change programs in infrastructure and complex business environments.
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