National Infrastructure Plan

Key investments

• State highways: $10.7 billion over the next 10 years
• National grid: $3.3 billion over the next five years
• Urban broadband: $1.5 billion over the next 10 years
• New schools and buildings: $2.7
  billion over the next five years
• Total Budget capital spending: $7.5 billion over five years

 

National Infrastructure Plan outlines large programme

By Stewart Milne

The release in March of the National Infrastructure Plan (NIP) has provided a vehicle for interested parties to gain an overview picture of the current situation with respect to this country’s infrastructure development, as well as what the government sees as priorities in its goal to maximise economic growth.

The long-term fiscal outlook for New Zealand which was released by Treasury
in October 2009 showed an alarming upward trend in the net debt situation under
a ‘do nothing’ scenario, with net debt rising to the totally unacceptable level of 220 percent of GDP over the next 40 years. The urgent need to lift economic growth and keep a tight control on government spending is clearly an imperative.

The construction and transport sectors are two of the most affected, interested
and important sectors in this whole matter of infrastructure development.

 

Why spend more on infrastructure?

In its simplest form, the argument for increasing the spend on transport/supply chain infrastructure goes something like this: for a country to progress and improve the quality of life for its people in the medium and long term, there needs to be a healthy economy. A healthy economy requires efficient supply chains for moving goods and people. A fundamental part of efficient supply chains is transport infrastructure.

There is an increasing appreciation of the vital relationship between communications (the movement of information) and the physical movement of people and goods, but transport and communications infrastructure is expensive – funding requirements are very large. In addition, supply chain and communications infrastructure is likely to be competing for funds with a range of
other demands on the government’s agenda.

The issue then becomes what priorities should be given to development of transport and communications infrastructure and which projects should be favoured. This leads to the question of whether we can justify borrowing internationally and adding to our net debt burden to spend on these projects.

While we may agree on the importance of efficient supply chains and the part
that transport and the infrastructure users play in creating value and developing
the economy, we also need to acknowledge that over-provision can have a negative effect. Many countries (including our own) have wasted money on transport infrastructure.

The need for an analytical approach which looks across the economy to establish
the sectors where spend will provide the most value – and then goes on to analyse the projects within those sectors and justify the spend on them – is essential.

Steps in the right direction

It is encouraging to see the steps that have been and are being taken towards
meeting this need for an analytical approach. A National Infrastructure Unit (NIU) has been set up within the Treasury. A National Infrastructure Advisory Board has been established with membership outside of central government. This board is chaired by Dr Rod Carr, and members are Sir Ron Carter, Lindsay Crossen, Dr Arthur Grimes, Dr Terrence Heiler, Rob McLeod, John Rae and Alex Sundakov. The board reports, through the secretary to the Treasury, to the Minister for Infrastructure, Bill English. The board has lines of advice to both the minister and the NIU.

A National Infrastructure Plan (NIP) has been produced and published. This plan provides an overview of public and private infrastructure, planned investment and the government’s priorities. In addition, the NIP importantly identifies bottlenecks and future gaps and issues requiring further attention. The NIP sets out the government’s five key infrastructure priorities as being broadband, electricity transmission, regulatory reform, roads of national significance, and
Rugby World Cup 2011. There is a commitment to continue to investigate the gaps in knowledge about the country’s infrastructure needs, and to ensure that
the plan is a living document which keeps up with the current situation and looks
out to the future. In releasing the NIP, Bill English highlighted the finding that there are gaps in knowledge about the country’s infrastructure needs 10 to 20 years out, and that identifying these gaps will be a major focus of the next NIP.

It is probably this last point (i.e. the ongoing commitment) that is most
encouraging. Too often in the past we have had studies undertaken and reports produced which may or may not have had an effect on direction and actions taken, but all too soon they become ‘another piece of work’.

The indications are that a process has now been put in place which will provide the analytical approach and the prioritisation which is so important for the future of this country.

Stewart Milne has been an executive director of the Board of Airline Representatives of NZ, an international president of the Chartered Institute of Transport, and is today an active member of the Chartered Institute of Logistics
& Transport NZ