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Draft National Infrastructure Plan
1.1. Infrastructure is about services | Ka kitea e tāua he ōritetanga
Infrastructure supports our wider social and environmental goals.
1.1.1. Infrastructure lays the foundation for a productive and sustainable economy
Infrastructure is a means to an end. We build water pipes not for the jobs created, but to move water to people who need it, keeping us healthy and energised. We build recycling facilities to protect the environment, and swales and wetlands to protect our property from flooding. We build networks to service new subdivisions that enable warm, safe housing. We value infrastructure because it helps us get more of the other things that we value.
Our economy depends on interdependent infrastructure services (Box 1). We commute on transport networks constructed and maintained by generations of New Zealanders. These same networks carry the goods that fill our supermarket shelves. These supermarkets are powered by electricity produced by power stations that may have been built decades ago. This electricity also charges phones that connect to a network of cell towers, which bring us closer to the world and to each other.
Infrastructure also supports wider social and environmental goals. The New Zealand Infrastructure Strategy outlines an approach where our infrastructure drives higher living standards, contributes to a strong economy, enables our culture and society to thrive, and protects our environment.
Infrastructure includes many layers of connected assets and networks
Figure 1: Mapping different types of infrastructure
Box 1
Infrastructure and economic growth
Well-designed and maintained infrastructure is important for long-term economic growth and development, and for raising living standards.
Infrastructure benefits long-term economic activity in three main ways:
- It provides services to consumers that support activities, such as visiting or calling family and friends; travelling to school or work; heating a home, powering a TV; streaming movies; cooking meals and doing laundry.
- It supports economic production. Water, power, transport and communication infrastructure provide the raw materials and services to businesses. A well-trained and healthy workforce depends on education and access to healthcare.
- It increases productivity and the effectiveness of our workforce and businesses, by allowing specialisation within and across firms and countries. It also raises productivity by expanding and deepening labour markets and increasing flows of information and competition. Infrastructure can also enable us to respond to technology change.
Achieving these benefits requires us to invest the right amount in the right type of infrastructure, at the right time. More investment is not always better. When we spend too little on infrastructure to start with, then increased investment may deliver strong economic returns.
But if we are already spending enough to meet our needs, then additional investment may not boost economic activity enough to outweigh the costs. Increased taxes, rates or user charges may make living unaffordable for some.
High-income countries like New Zealand already have extensive, well-established infrastructure networks. This means the economic returns from new infrastructure are smaller, and the quality of spend tends to be more important than quantity.[1]
Infrastructure investment can have short-term economic benefits through jobs created by new projects. However, major infrastructure projects are seldom an effective fiscal stimulus for governments in economic downturns because it takes time to plan, design and procure them.[2] Maintaining existing asset spending is likely to be more cost effective and timely for fiscal stimulus.[3]
1.1.2. We rely on many types of infrastructure
Many types of infrastructure exist (Figure 1). The term ‘infrastructure’ includes the networks that provide our water and wastewater, internet, electricity and roads. It also includes social infrastructure, like our hospitals, schools, courthouses, and much more. Infrastructure can also include things like public parks and green spaces (which help with urban stormwater management), household solar panels and batteries (which are an alternative to grid-connected electricity supply) and community facilities, such as marae (which help to connect communities and provide social services). It can also include economic development infrastructure, like convention centres or business incubators, that is intended to jump-start new economic activity.
Many organisations are involved in providing New Zealand’s infrastructure. Government agencies, local government, regulated utilities, state-owned enterprises, Schedule 4A companies,[4] council-controlled organisations,[5] and commercial businesses. Within any one sector, there can be public and private funding, planning, construction and provision of services.
Ownership structures are varied and constantly changing. For example, central and local government are currently co-investing in the City Rail Link through a Schedule 4A company, with assets that will likely transition to a state-owned enterprise and local government, with a council-controlled organisation contracting services to a private operating consortium and collecting passenger revenue.
We categorise infrastructure according to the types of services that it provides and according to who owns and/or funds it. For instance, we distinguish between land transport infrastructure and energy infrastructure, or between energy infrastructure and education infrastructure. We also distinguish between infrastructure owned and/or funded by central government, local government and commercial entities (including self-funding state-owned enterprises and council-owned companies).
1.1.3. New Zealand’s infrastructure faces many needs and pressures
New Zealand is contending with a range of needs and pressures on infrastructure. Infrastructure providers are facing rising costs to build and maintain infrastructure, along with rising expectations to provide better and more resilient services (Figure 2).
Maintenance and renewal is our greatest investment challenge. This challenge is amplified by natural hazards, like earthquakes and extreme weather, which damage infrastructure, and other risks, like cybersecurity, which make infrastructure harder to operate. Climate change will increase the cost of some natural hazards, like flooding and extreme weather. Consequently, a significant and growing share of our infrastructure spend will need to be on renewing and replacing infrastructure that is wearing out and reaching end of life (Box 2). This already accounts for some 52% of all infrastructure investment by local government. The costs to insure infrastructure against natural hazards and other risks will add more.
Box 2
What we heard – asset management
Inefficiency of public infrastructure asset management was a recurring theme in feedback to ‘Testing our thinking’. Many respondents stated that existing assets are not being used to their full potential. There was concern that infrastructure is often left to degrade due to short-term budget constraints, leading to costly reactive maintenance and reduced asset lifespans.
Respondents emphasised the need for a shift towards a proactive, whole-of-life asset management approach that prioritises maintenance and optimisation, before considering new builds. The use of digital tools, predictive analytics and advanced asset management technologies was also seen as essential to improving infrastructure efficiency and performance.
New capital investment will also be necessary. New Zealand will need to keep building and improving infrastructure in response to its growing and ageing population, ongoing economic growth and international trade, technology changes, and the need to provide affordable and reliable electricity to decarbonise the economy. But these trends will have varying impacts for different types of infrastructure. For instance, as our population ages we are likely to need relatively more hospitals and healthcare services, and relatively fewer new classrooms in schools (Box 3).
Box 3
What we heard – strategic infrastructure planning
A consistent theme to feedback received to ‘Testing our thinking’ was the need to ensure long-term, strategic and effective infrastructure planning.
Respondents strongly advocated for cross-party agreements and commitments to ensure infrastructure decisions are guided by long-term national priorities rather than short-term political agendas. Many emphasised the importance of adopting a 30- to 50-year planning horizon that aligns with population growth, climate resilience and economic development.
But the future is uncertain. Some things are hard to predict, like new technologies that fundamentally change how people use infrastructure, and unforeseen events, like earthquakes and pandemics, also affect what it costs to build infrastructure and how we use it. Population and productivity could be faster or slower than predicted, affecting both how much new infrastructure we need and how easy it will be to pay for investment. Often, these uncertainties add to infrastructure costs, although we can take actions to mitigate some of these costs.
Infrastructure is under pressure to respond
Figure 2: Long-term drivers of infrastructure investment
A flaw in the human character is that everybody wants to build and nobody wants to do maintenance.Kurt Vonnegut