2025 Emerging Trends in Infrastructure and Transport

As demand for high-performing infrastructure is increasing, infrastructure is competing with other sectors for scarce funding. The Government is right to ‘sell’ New Zealand as an investment destination through the Global Investment Summit, but we need more than private capital. We also need to be able to pay back that capital, which requires new sources of funding. Initiatives such as the increased use of tolls and congestion charging and the recent announcement to improve local authority options to fund growth infrastructure (by replacing Development Contributions with levies) will help. However, other countries have and are increasingly looking for more flexibility around the use of the public sector balance sheet. 

We see merit in New Zealand developing a more sophisticated understanding of whether the current assets held by central and local government are the best use of funds relative to the new infrastructure we need. That said, one of the lessons of asset recycling overseas is that the benefits are maximised when combined with strong consumer protections such as a sophisticated regulatory regime that can drive long term performance and asset quality.

New Zealand’s experience of this trend has some unique features. Not only are we highly exposed to any inefficiency in global supply chains, but we also carry inefficiency in our local market. Examples include freight movement inefficiencies, including across the Cook Strait, and constraints on availability of certain materials (e.g. regulatory barriers or vertically integrated sector ownership models). As we move into a less benign trade and security environment, anything within our control that we can do to drive supply chain efficiency and standardisation will benefit businesses and consumers across the economy.

This is most relevant for New Zealand Climate Reporting Entities (CRE’s) regarding their transition planning arrangements specifically and their thinking around adaptation more broadly. CRE’s are required to disclose how they will position themselves as the global and domestic economy transitions to a low-emissions, climate-resilient future, including: how their business model and strategy might change to address its climate-related risk and opportunities; and how their transition planning aspects are aligned with capital deployment and funding decision making. The following quote from the emerging trends report neatly summarises the challenge this year for New Zealand CREs, “It will be a year where leaders try to align ambition with action, intent with investment, and objective with outcomes”.

Many of New Zealand’s public assets are in sub-optimal condition. Barely a week goes by without a news story on failures in our social infrastructure assets. In a time of fiscal constraint, asset owners need to squeeze as much life as possible out of existing assets before asking for new investment, but that can increase service failure risks. Therefore, dynamic asset management strategies and asset utilisation monitoring becomes increasingly important and Trend 5 explains the opportunities that emerge when low-cost sensors and Internet of Things devices are applied to existing infrastructure assets. KPMG New Zealand’s InfraBytes initiative sees us regularly discussing with infrastructure sector leaders the application of digital technologies to enhance infrastructure planning, construction and asset management. There is significant upside of digitisation but also a need to rapidly develop continuous strategy, planning and governance informed by real time data.

In a tight fiscal environment we must get the most bang for our buck from large scale infrastructure investment decisions. Whilst we have some natural barriers to overcome (think our challenging geography and geology and a relatively small, widely disbursed population), there is scope to improve productivity through innovation in the delivery of infrastructure in New Zealand. Key to this is efficient delivery, and providing the certainty of pipeline to give the private sector the confidence to invest (a 2022 study by Infrastructure New Zealand indicated that up to 13.5-26.5% savings could be achieved through streamlining delivery based on international literature). We applaud this government’s efforts to prioritise the development of the National Infrastructure Plan by the New Zealand Infrastructure Commission / Te Waihanga with bipartisan support.

New Zealand is as exposed as any country to capability and capacity constraints. Anecdotal evidence suggests there is already a steady stream of our specialist talent leaving to Australia and other markets. Bottlenecks, like the limited pool of large-scale vertical construction firms, are a regular feature in our market. Encouraging new entrants into the market can reap benefits for both the public sector and the domestic delivery market in the transferring of knowledge, experience, financial capacity, and much needed resource.

New Zealand is ahead of many other countries in energy transition, having a historic baseload of hydro and geothermal generation. However, we still have much to do and the electrification of the economy will only grow demand for new sources of electricity. We need to keep investing in both our network and renewable supply, which will cost many billions of dollars. Our big challenges will be finding pragmatic solutions to balance our generation sources when wind, solar and hydo generation is constrained (i.e. security of supply) and to ensure affordability as we move closer to 100% renewable.