Financing and funding of infrastructure in New Zealand

The New Zealand Infrastructure Strategy recognises that we’ll need more infrastructure, but it is not free and someone must pay for it. Good infrastructure decision-making takes place within and must be supported by a principled and fit-for-purpose funding and financing system.

We commissioned this independent research on the financing and funding of infrastructure in New Zealand as part of our work on the New Zealand Infrastructure Strategy.

Key findings

• Funding and financing decisions affect what infrastructure is delivered and who pays for it. How we choose to fund and finance infrastructure impacts on what projects are implemented, the community needs that are met and when they’re met, who can access infrastructure and how we use it. 
• A principled-approach enables good decisions about funding and financing to be made. This promotes funding mechanisms that establish a clear link between the cost of providing infrastructure and how the services are paid for. 
• There are many options about how to fund infrastructure. Pricing and user charges are standard practice in some sectors, while public subsidies are more common in others. Either way, infrastructure is ultimately funded by users, taxpayers or ratepayers. Choices about how infrastructure is funded affect how the costs are distributed between different people and over different generations. 
• There are many options about how to finance infrastructure. Some infrastructure is financed on a ‘pay as you go’ basis, meaning that revenues from current users pay for upgrades. Other infrastructure is financed using loans or equity investments, allowing up-front costs to be repaid over time. Choices about how infrastructure is financed can affect intergenerational equity.
• Effective financing spreads the costs of long-lived infrastructure fairly over time and may also speed up delivery by leveraging new sources of finance.