Paying it forward: Understanding our long-term infrastructure needs

Infrastructure lasts a long time. Pipes that carry water to homes are designed to last generations. Road tunnels in our cities have stood in the same place for almost 100 years.

New infrastructure assets are extensions of networks that have been built up over generations. Individual pieces of infrastructure last a long time, but it is our networks that are most enduring.

But while they are enduring, they are never static. They are constantly being added to, improved, or repurposed to meet the needs of current and future populations.

Because infrastructure lasts such a long time, infrastructure decisions need to be made with an eye on the future. We need to consider where and how we should build infrastructure to best meet the needs of current and future generations.

This research compiles our emerging thinking on what will drive future infrastructure spending demands. It identifies three themes which ground our approach and eight drivers of future infrastructure investment.

Key themes and findings

What is the current state of our networks?

• Understanding needs requires first knowing what we have.
• In 2022, New Zealand’s infrastructure was worth around $287 billion in total. This is equal to $55,800 of infrastructure per New Zealander.
• Compared to the median OECD country, we have a typical amount of physical infrastructure per capita.
• Our previous work has highlighted that we also spend a similar share of our gross domestic product (GDP) on network infrastructure as other high-income countries, but we are comparatively worse at delivering infrastructure outcomes for our spending.

What are we willing to pay for infrastructure?

• Over the last 20 years, the share of our GDP invested in all types of infrastructure has ranged from 5.0% to 6.5% of GDP, with an average of 5.8% across government and the private sector.
• However, in the long run almost 60% of this spending will be needed just to renew or replace what we already have, rather than building new infrastructure.
• To give a sense of scale for the year 2024, 5.8% of GDP, the average we’ve spent since 2003, is around $24 billion. This leaves around $10 billion for new or improved infrastructure. While this is a lot of money, given how extensive and valuable our networks are, it is not big enough to avoid thinking about trade-offs.

Where and how should we invest in the future?

• Based on our previous work, our legislation, and a review of international practices, we have identified eight factors that can cause the need for infrastructure investment to change over time, both in total and at a sector or regional level:
  • renewing existing infrastructure  
  • population growth and demographic change  
  • economic development and changing standards 
  • resilience to natural hazards 
  • decarbonising our economy 
  • technology change 
  • construction price inflation 
  • shortage of existing infrastructure 
  • Previous work by the Commission has examined some of these drivers.  
• This report summarises our existing evidence base in each area, and further explores the impact of population growth and demographic change on infrastructure:
  • From 1960 to 2019, population growth explains over 40% of the growth in our infrastructure networks, while population ageing explains about 24%.
  • Future demographic projections point to lower fertility and population growth rates. Future population growth is likely to be increasingly reliant on migration and will be more volatile as a result.
  • Our ageing population will likely have effects on the types of infrastructure that will be required in the future. For example, older New Zealanders are much more likely to use hospital services, while younger New Zealanders are much more likely to use education infrastructure.