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Draft National Infrastructure Plan
New Zealand’s future is intricately connected with its infrastructure
Our future is intricately connected with our infrastructure.
New Zealand has a formidable number of infrastructure needs.
Our cities need housing so that our children have a place to call home. Transport networks provide accessibility to jobs; and are essential to get goods to businesses and our doorsteps. Transmission and distribution lines carry the electrons that power our lights and heat our homes. A network of schools keeps our children learning, while hospitals take care of our sick. Other infrastructure is often less front of mind: court houses, police stations and correctional facilities are essential to the rule of law that makes commerce possible; and our defence estate and flood protection infrastructure stands by preparing for the worst.
Our infrastructure needs are intensifying. We face rising costs to build and maintain infrastructure, along with rising expectations to provide better and more resilient services. Maintenance and renewal of what we’ve already got is our biggest investment driver, and it is amplified by natural hazards, like earthquakes and extreme weather, which damage infrastructure, and other risks, like cybersecurity, which make infrastructure harder to operate. At the same time, we need to keep building and improving infrastructure in response to a 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.
We spend a lot but we’re not getting value
We spend more than most on infrastructure. Over the last 20 years, New Zealand spent an average of 5.8% of gross domestic product (GDP) on all types of infrastructure. That’s around $4,500 a year for every person in the country, putting us in the top 10% of the OECD for infrastructure investment over the last decade.
We don’t get enough for our infrastructure dollar. The quality of our infrastructure lags, relative to what we spend on it. High-level comparisons suggest that New Zealand is in the bottom 10% of Organisation for Economic Co-operation and Development (OECD) countries when it comes to the ‘bang for buck’ we get from our infrastructure spending.
It is difficult to build, maintain, and operate infrastructure. Our small population and challenging landscape put us on the back foot to start with. We have a similar population to Greater Sydney but we‘re spread over an area 21 times larger. That can be a challenge to build infrastructure to the same standard as more densely populated countries, because we don’t have as many people to use and pay for it. But we also put hurdles in our way. Our regulatory system is complex: we have 1,175 land-use zones across 68 territorial authorities. Japan has 13. We spend $1.3 billion every year just on consenting infrastructure. The cost of managing traffic during construction has surged in recent times.
The infrastructure sector struggles to navigate the swings and roundabouts. Infrastructure planning is often short term and reactive, rather than long term and strategic. Projects are announced before it’s certain that they’re affordable and deliverable. Half of the large projects seeking funding through central government’s annual Budget lack business cases to demonstrate that they’re ready to fund. Maintenance funds, which should provide a steady, ongoing stream of work, may get diverted to new builds. Consequently, efforts to recruit, develop, and retain a skilled workforce are stretched.
We can lift our game
We can’t build our way out of all our infrastructure challenges. Household affordability is under strain while fiscal pressures are intensifying for government. New Zealand has been running structural deficits and with no changes, our net core Crown debt is forecast to reach approximately 115% of GDP in 2050 and continue to climb. Similarly, our fast-growing local authorities are nearing debt limits. These trends are driven, in part, from some big changes to New Zealand that will not relent. In 1960 we had seven workers for every retiree; by 2075 that ratio will be 2:1.
Investment must be affordable and deliver the right services in the right places at the right times. We need to understand what we need, today and in the future. That means looking carefully at the infrastructure we’ve already got, how well we’re maintaining it and how well we’re using it. It means setting a high bar for new investment, ensuring that our ambition for improvement doesn’t come at the cost of affordability or deliverability. And it means keeping a close eye on how we pay for investment.
It's time to get smarter about how we do infrastructure. We cannot take it for granted that New Zealand will continue to have one of the highest infrastructure spends among OECD countries. To sustain high-quality infrastructure services, we need to lift our game. That could be by reducing costs or easing the regulatory environment. It might also mean taking a more commercial approach to infrastructure whereby we vastly lift the bar on project quality, finding new projects that households and businesses will be willing to pay more for.
Consensus is needed. Infrastructure needs to adapt to changing demands. Growth won’t always happen in the places we’re expecting it. Earthquakes and extreme weather will damage infrastructure and force us to rebuild. The projects we’re choosing will change over time. But the overall approach we’re taking to infrastructure investment should be well-understood and broadly agreed. That means investment decisions that are durable and executed with greater stability.
Our focus is on the public sector
We look across central government, local government, and the commercial sectors. Many organisations are involved in providing New Zealand’s infrastructure. The infrastructure sector includes a complex ‘alphabet soup’ of government agencies, local government entities, regulated utilities, state-owned enterprises, council-controlled organisations, and commercial businesses. Infrastructure providers have a variety of governance, decision-making processes and funding models.
To get it right, we need the public sector to step up. Central government is New Zealand’s largest owner and funder of infrastructure and it sets the ‘rules of the game’ for other sectors. It accounts for 40% of our total stock of infrastructure and almost half of all infrastructure investment each year. It sets up oversight and accountability mechanisms for local government and commercial entities, for instance by tasking the Commerce Commission with regulation of monopoly infrastructure providers.
Central government’s approach to building and maintaining its infrastructure stands out. Unlike local government and commercial entities, central government oversees its own performance through the Investment Management System, which is a part of the overall Public Finance System. But while it sets rules for itself, it doesn’t always live by those rules. Central government decides on what to invest based on how much it can spare in its Budget, instead of needs and the quality of potential projects. Half of all proposals for investment in both the 2023 and 2024 Budgets did not have a business case. Over half of all capital-intensive agencies do not have robust, comprehensive asset registers in place or adequate plans for looking after existing infrastructure.
There’s a role for everyone. Central government needs to lift its game, but others need to be on the field as well. Local government and commercial entities are each responsible for around one-quarter of New Zealand’s infrastructure investment. A largely private sector workforce of over 100,000 people is involved in designing and building new infrastructure and maintaining it once we’ve got it. Iwi and Māori entities are involved in infrastructure as investors, asset owners, and suppliers. Crown-Māori relationships also play a role. While there is ongoing discussion regarding what the Treaty of Waitangi / Te Tiriti requires, there is generally agreement that Māori and government infrastructure providers are obliged to act respectfully, collaboratively, and that decisions are made only after genuinely listening to what others have to say.
In the National Infrastructure Plan we make 19 recommendations that fall into four areas:
- Establish affordable and sustainable funding – 5 recommendations
- Clear the way for infrastructure – 7 recommendations
- Start with maintenance – 3 recommendations
- Right-size new investment – 4 recommendations.
We’ve focused on these four areas because if we get them right many of our other infrastructure challenges will be addressed too. A brief overview of each of these areas follows.
We’ve focused on four areas because if we get them right many of our other infrastructure challenges will be addressed too.
Establish affordable and sustainable funding
The National Infrastructure Plan provides a fundable and coordinated view of our infrastructure spend. It outlines what is needed to ensure that we’re investing the right amount of money in infrastructure, relative to what we’re willing to spend as a country, and balancing spending between different sectors and needs. This is termed ‘forward guidance’.
Investment must increase to meet future demands. Based on trends over the last 150 years, and future scenarios for demographic change, economic growth, and climate change, New Zealand can expect to spend between 5% and 7% of GDP on infrastructure every year. This means that as our population and economy grows, we must spend more to keep up.
The mix of spending will change as our economy and society changes. Based on what infrastructure we’ve already got, around 60% of investment should be directed towards renewing and replacing existing infrastructure as it wears out. That leaves around 2% to 3% of GDP for new infrastructure, including around 1% of GDP spent by central government. In the future, renewals are likely to take up a larger share of the budget, especially in places that experience slowing population growth. Long-term trends will boost demand for some types of infrastructure and flatten it for others. For example, an ageing population will need more hospitals and fewer schools, relative to a younger population.
Pricing and funding approaches should ensure we get enough investment in all sectors. We differentiate infrastructure services that can pay for themselves and those that cannot. Network infrastructure, like transport, water, electricity, and telecommunications, is different from social infrastructure, like schools, hospitals, courts, prisons, public parks and open spaces, and the defence estate. Network infrastructure usually has opportunities to fund itself by charging people who use the infrastructure or directly benefit from it. But funding from general taxes or local government rates is usually needed to guarantee consistent and equitable access to social infrastructure.
When network infrastructure and ‘nice to haves’ are better at funding themselves, more money is available to invest in social infrastructure. Central and local government have limited tax and rate revenue for investment, so when the cost to provide roads, water pipes, and stadiums spills over into general tax or rate revenues, less is available to invest in social infrastructure.
Long-term investment planning, backed up by funding decisions, is essential for government investment. The existing approach means central government agencies’ investment planning is divorced from what’s affordable, while decisions about how much to invest over the longer-term are limited by top-down fiscal constraints rather than being guided by needs.
The National Infrastructure Plan presents five recommendations for ensuring that we are able to pay for our long-term infrastructure needs. These recommendations identify how we can price and fund infrastructure across all sectors, ensuring that our means match our needs.
Clear the way for infrastructure
The National Infrastructure Plan outlines how we can clear away the hurdles facing infrastructure investment. It calls for a persistent effort to improve the operating environment for infrastructure and build up the capacity and capability of our infrastructure workforce to build and maintain the infrastructure we need. It is often too expensive to deliver infrastructure in New Zealand, too difficult to make best use of the infrastructure we already have, and too difficult to coordinate organisations.
Consumer interests must be protected. Sound oversight mechanisms are crucial for maintaining public confidence in infrastructure providers. Maintaining consensus on investment means being transparent about investment and asset performance and accountable for good performance. Where there’s a need to work across infrastructure sectors, spatial planning can help to coordinate infrastructure and other land uses.
We need efficient legislation and regulations that better serve New Zealanders. At present, our land-use rules often prohibit development in the very areas where infrastructure is most cost effective: Limitations on concerts mean stadia cannot generate the revenue to cover depreciation. Poor transport pricing means we build costly peak capacity that isn’t used at other times. A key area for improvement is the resource management system, which has significant impacts on how we can build, maintain, and operate all types of infrastructure.
Infrastructure providers benefit from predictable processes for reviewing and changing policies. When key policies, from resource management legislation to energy market and emissions reduction policies, are frequently ‘chopped and changed’, it disrupts investment. Infrastructure providers may hold off until policy settles down, leading to a backlog of investment and extra congestion on networks.
We need to invest in our people. The infrastructure workforce must grow to meet our future needs, looking beyond the short-term project cycle. In the context of an ageing society, we need to establish broader pathways into the workforce that draw upon the talents of all New Zealanders. And government must act as a sophisticated client of infrastructure, building up its own capability for project leadership to enable it to engage with the market.
The National Infrastructure Plan presents seven recommendations for improving the operating environment for infrastructure investment. These recommendations identify steps we can take to enable us to clear the way for delivery.
Start with maintenance
The National Infrastructure Plan identifies a need to fund maintenance and renewals first. Nothing is more certain than maintenance and renewals. Some of our most important and essential assets are already around us. Keeping them going is among the most important tasks before us. This requires funding. Without it, access to services will be lost or levels of service will decline.
Deferred maintenance should not be allowed to turn into future infrastructure deficits. We’re already lagging in this area. The OECD ranks New Zealand fourth to last for asset management practices, relative to our peers. That looks like schools with leaking roofs, lessons taught in rotting buildings; sewage leaks in our hospitals; mouldy, poor quality defence accommodation; service outages of commuter rail and ferries; and police stations with black mould, leaks, and asbestos. We can do better. And if we do – the reward is more resources available for other needs and new services.
The cost of responding to natural hazards is rising. New Zealand already faces some of the highest natural hazard costs in the OECD, and climate change will push up costs from extreme weather. Protecting infrastructure against risks is an asset management challenge. Asset owners need to respond to natural hazards that can damage infrastructure, as well as other risks, like cybersecurity threats. Although large, costly events may be relatively infrequent, the costs of responding to them or proactively building in resilience are part of the long-term cost to provide infrastructure assets. When a disaster happens, renewals that might otherwise have been required years or decades later will need to be brought forward.
We need to understand what we’ve got and what’s needed. The first rule of asset management is to understand your assets. This will enable central government agencies to outline their future investment needs and set aside enough money to ensure they can be met. Transparency and independent review can help to ensure that we’re doing the work that needs to be done.
The National Infrastructure Plan presents three recommendations for lifting the bar on asset management for central government infrastructure. These recommendations identify steps we can take to prioritise funding for the services we already rely on.
Right-size new investment
The National Infrastructure Plan lays out an approach to optimise central government’s investment in new infrastructure. In the context of our maintenance needs and fiscal constraints, we need to carefully prioritise what we’re building. This means focusing on funding projects when they’re aligned with our long-term needs, right sized, and ready to deliver.
Information on projects currently in planning is a key component. Based on information submitted to the National Infrastructure Pipeline by over 110 contributing organisations across central government, local government, and commercial entities, we outline upcoming infrastructure investment choices across the infrastructure system. We reflect back what’s already happening, rather than proposing new projects.
All the listed project options require evaluation. The draft Plan presents information on approximately 140 projects valued at above $100 million that are currently in planning. But projects on this list are not always ready to fund. They must develop business cases in line with relevant requirements before decision-makers can formally approve funding and delivery. They must navigate existing governance arrangements, which differ for central government, local government, and commercial entities.
Large transport projects pose the biggest upcoming choices. Most of the value of unfunded projects in the Pipeline comes from a small number of large projects, mostly in land transport. Only 33% of the value of large projects have a confirmed funding source (compared to 78% for small projects). Choices about funding these projects will therefore have a large impact on what else we can afford to do.
The Infrastructure Priorities Programme provides information on readiness for some large projects. A select set of projects have been voluntarily submitted to the first round of a standardised and independent assurance process that gives a view on whether projects are ready for funding, or whether they need further investigation. The first round of assessments closed in December 2024. We received 48 submissions from central and local government, the private sector, and other entities. The Commission endorsed 17 proposals across a range of sectors, including transport, water and wastewater, telecommunications, prisons, and the defence estate.
Improved prioritisation across the full portfolio is possible. The continued application of the Infrastructure Priorities Programme will, over time, give central government decision-makers the information needed to robustly prioritise large projects. Enhancements to the National Infrastructure Pipeline will improve visibility and transparency for both small and large projects, enabling coordination across different public infrastructure sectors.
The National Infrastructure Plan presents four recommendations for lifting the bar on new projects undertaken by central government. These recommendations identify steps we can take to lift the quality and transparency of project planning.
We can have better infrastructure
The National Infrastructure Plan is ambitious about the future of New Zealand’s infrastructure. The challenges we face may seem daunting. But for every problem, there is a solution. Our needs sometimes seem like they will outstrip the money that’s available. But to paraphrase the New Zealand physicist Ernest Rutherford, when we don’t have money, we have to think.
Ambition looks different for New Zealand. Quality infrastructure looks different in a small, spread-out country than it looks in a large or densely populated country. And an ageing population and climate change mean future success will look different to the past. Ambition looks like funding our hospitals properly to catch up on the maintenance backlog and catering for the growing needs of an ageing population. It means a transport system like Finland or Sweden, who spend less but get better, safer roads and better public transport in return. Ambition looks like a massive increase in renewable electricity generation to power our economy and slash our carbon emissions – and it means making that affordable for New Zealanders. Ambition means setting high standards for ourselves so we get the projects right and protect funding for maintaining and renewing what we've already got.
It's time to get on with it. It’s time to start fixing up our essential infrastructure assets, rather than seeing them breaking under our feet because we didn't set aside money for maintenance. It’s time to invest in infrastructure that will lift our productivity and cut our carbon emissions. It’s time to do new projects right, rather than dreaming big and seeing them constantly delayed, rescoped, and cancelled because they're too big for us to afford. It’s time to set out a path that will keep our skilled workers employed here in New Zealand. And it’s time to move forward together, so we can all have better infrastructure.
Our recommendations for change
- Funding pathways: Funding tools are matched to asset type—user-pays for network infrastructure, commercial self-funding for economic-development assets, and tax funding for social infrastructure—to keep the overall capital envelope affordable. User-pricing principles are applied across all network sectors so user charges fully fund investment, guide efficient use of networks, and distribute the benefits of network provision.
- Transport system reform: The land-transport funding gap is closed by requiring user charges to fully fund planned investment.
- Needs based government investment: Fiscal strategy is informed by infrastructure investment and asset management planning and the New Zealand Infrastructure Commission’s independent view of long-term needs.
- Stable central government funding: Multi-year Budget funding is available for central government agencies with strong planning, delivery, and asset management practices.
- Sustainable investment: Forward guidance is refreshed through quarterly updates to the National Infrastructure Pipeline and ongoing updates to the Infrastructure Priorities Programme and the Infrastructure Needs Analysis.
- Consumer protection: All infrastructure providers, regardless of sector have clear and well-understood transparency and accountability mechanisms that ensure that consumer interests are protected.
- Spatial planning: Under the new resource management system, spatial planning informs and is informed by infrastructure investment and asset management planning and the New Zealand Infrastructure Commission’s independent view of long-term needs.
- Maximising use: Land-use policies enable new and existing infrastructure to be used by as many people as possible.
- An enabling environment: The resource management system enables infrastructure with national and regional benefits, while managing interactions with surrounding land uses and negative impacts on the natural environment.
- Policy stability: Energy investors have predictable policy and consenting settings that support affordability, security of supply, and the decarbonisation of our economy.
- Workforce development: Workforce development planning and policy is informed by infrastructure investment and asset management plans and the New Zealand Infrastructure Commission’s independent view of long-term needs.
- Public sector capability: Public sector project leadership is strengthened by standardising role expectations and improving career pathways.
- Asset management and investment planning: Central government agencies are legislatively required to prepare and publish long-term asset management and investment plans.
- Performance reporting: Central government agencies are legislatively required to report on performance against their asset management and investment plans.
- Asset management assurance: Central government agencies’ asset management and investment plans are independently assessed.
- Investment readiness assessment: All Crown-funded infrastructure proposals pass through a transparent, independent readiness assessment before funding.
- Project transparency: All business cases, Budget submissions, and advice on central government infrastructure investments are published.
- Risk management: Project assurance for central government agencies ensures that risks are well managed.
- Learning from projects: Post-completion information on actual project costs, delivery dates and benefits are provided and published in a standard format, enabling comparisons to what was expected when funded.