Giving New Zealanders more bang for buck from infrastructure

Our new research shows how water and transport pricing can help us afford more infrastructure and make better choices about what we build.

“We face a critical challenge around the affordability of infrastructure,” says Te Waihanga Acting Chief Executive Geoff Cooper. “New Zealand has a wall of renewals – infrastructure built since World War Two that is wearing out – at the very time that population is surging, the urgency to decarbonise is acute and cost of living is ever-present.  We’re at a moment in our development when the need to secure value in the face of such challenges has arguably never been greater.”

“This latest research gives some clues on where we should look. Water metering, road tolls and congestion charging are often framed as answers to funding challenges, but they do much more than that. These approaches can help reduce demand, unlocking capacity and helping us make better-informed investment decisions. They can also be more equitable, providing options to avoid costs for low-income households”

The water pricing report, Valuing water: sustainable water services and the role of volumetric charging, demonstrates that charging for metered water can significantly reduce the infrastructure we need by moderating household consumption, improving leak detection, and ultimately deferring the need for expensive upgrades.

“New Zealand is one of the world’s highest per-capita water users, but in communities where there’s volumetric charging, use and leakage is lower” Cooper says.

Halfway through its water meter rollout, New Plymouth District Council was already saving the equivalent of 68 Olympic swimming pools of treated water each year – through leak detection and repair. While in Kāpiti, water savings through volumetric charging have allowed its council to defer construction of a proposed $30 million dam by an estimated 40 years.

The transport pricing report, Buying time: toll roads, congestion charges, and transport investment demonstrates how pricing (through ‘time of use’ charging) can reduce peak-time use, and improve the efficiency of our urban road networks, again deferring or preventing the need for expensive upgrades.

“Infrastructure networks are commonly challenged by peak loads, as many New Zealanders share common lifestyle habits” Cooper says. “Some sectors are effective in managing peak loads, while others, like water and transport, tend to build for the peak. This is an expensive way to go.”

Poor water quality, high rates of leakage and motorway congestion are common stories in the media, leading to calls for more investment. Better pricing of water and urban road networks can help decrease road congestion and water leakage, reducing the need for further expensive investment.

The Buying time report also shows how road tolls can help identify the most valuable roading investments. Today, tolling is often characterised as a simple solution to fund new roads, but full cost recovery is only possible in certain circumstances. Projects need to benefit large numbers of people, keep costs down and offer meaningful service level improvements to users. For most roading projects, it is likely that tolling will recover less than 25% of the capital costs – which is a challenge to planners and design teams to think more broadly about the value proposition against competing priorities.  

“In cases where toll revenues are enough to cover the cost of a new road in an affordable way, we should get cracking,” Cooper says. But when tolling revenue is dwarfed by the costs, there is reason to pause. In these cases, we need to weigh up these projects against other competing priorities for investment, and look for ways to deliver them more cost-effectively.”

“New Zealand currently spends more than the average OECD country on infrastructure, but frustratingly lags on measures of value. We need to get creative.  When we build the right infrastructure and use it more efficiently we’re better positioned to meet the full set of infrastructure challenges before us. The right pricing for transport and water infrastructure is one intervention that can help us get there – and give us better value from what we build.”