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The massive infrastructure task ahead
The Infrastructure Commission has released its first New Zealand Infrastructure Strategy covering 2022 to 2052.
The report lays out the massive infrastructure task ahead of the country in the coming decades to address existing need, meet growth and renewal requirements, and bring the economy on to a zero-carbon footing.
ACE New Zealand provided feedback during the consultation phase, emphasising the need for workforce planning, the need for better funding and risk-sharing, and a predictable pipeline of infrastructure work, to allow firms to invest with certainty. We are pleased to see the Strategy reflects these points.
Key areas of investment
Key areas of investment will need to be increasing electricity generation capacity by 170% to power electrified industry and transport; $90b on fixing water networks; eliminating the 115,000 home deficit while meeting new demand; and adapting existing infrastructure to rising sea levels. All with costs rising 60% faster than general inflation, and a 118,500 construction worker shortage projected by 2024.
While the purpose of this strategy is not to identify specific projects or sequencing, it throws into stark relief the scale of the task ahead of the sector. It concludes that it is possible to meet the country’s infrastructure needs over the coming decades. For instance, the rate of growth in electricity generation capacity needed is half than what was achieved from 1960 to 1990, although 60% above what was achieved from 1990 to 2020.
How much will it cost?
The Commission finds that trying to build all our infrastructure needs over the next 30 years would cost 9.6% of GDP, compared to current expenditure of 5.5%. Half this task would be renewal of existing assets, with new infrastructure, cost pressures, and the existing deficit contributing the remainder. The Commission concludes that such a large spend is not feasible, but the task can be reduced by more efficient use of existing infrastructure, better project selection, streamlined deliver, and broadened funding and financing.
The Commission makes a total of 68 recommendations to government from goals (the most important of which is zero carbon) to steps to reduce the infrastructure task (such as promoting water efficiency, housing densification, energy efficiency, waste reduction, and reducing peak travel demand) through to regulatory changes, more efficient consenting, workforce planning, and creating a reliable pipeline of work to allow firms to get on with the job.
The next stage of work is for the Government to provide its formal response to the strategy's recommendations within the next six months.