The New Zealand Infrastructure Commission has just released ' Paying it forward: Understanding our long-term infrastructure needs' to share our emerging thinking on what will drive future infrastructure spending demands.

"One of the roles of the Commission is to provide a long-term view on New Zealand’s infrastructure needs. This is a key part of our work on developing the National infrastructure Plan," says Peter Nunns, Acting General Manager - Strategy, the New Zealand Infrastructure Commission.

"Our work identifies eight drivers of future infrastructure investment, including population growth and demographic changes, decarbonising our economy, and building resilience to natural hazards.

"While the future is uncertain, some pressures on our networks are easier to foresee than others. For instance, so long as we have good information on the size and condition of existing assets, we can forecast what we will need to spend to maintain and replace them.

"Other future drivers, like population growth and demographic change, are harder to predict. Looking back, we estimate that population growth and population ageing accounted for over 60% of the growth in our public infrastructure networks from 1960 to 2019," says Nunns.

"Looking forward, we know that New Zealand’s demographic future will be different than its past, but it’s hard to be certain about how, where, and when we will see the impacts. Declining fertility rates mean overall population growth is expected to slow, and that it will be increasingly driven by migration, which is difficult to predict.

"Our population is also ageing and diversifying. This affects not only how much we need to invest in infrastructure in the future, but what types of infrastructure we need to invest in. For instance, older people use hospital and medical facilities more, whereas schools and universities are used mainly by younger people. This has implications for what we’re thinking about building today and how we’re preparing for tomorrow," says Nunns.

"We also need to be realistic about how much money we have to invest. Over the last 20 years, we’ve opted to spend around 5.0% to 6.5% of our GDP on all types of 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.

"However, not all of this money is available to build new infrastructure. After accounting for what we need to spend replacing and renewing existing infrastructure that is reaching the end of its life, this leaves around $10 billion for new or improved infrastructure across all levels of government and the private sector. 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," says Nunns.

"So, we need to carefully consider how we will address our infrastructure challenges. The work we’re doing on this will feed into the National Infrastructure Plan and help us begin to spotlight the types of infrastructure investment that can help meet our needs and represent strong and credible investments in New Zealand’s future."

Background information

The Commission’s approach to assessing long-term infrastructure needs considers trade-offs. Infrastructure is not free, so our approach to meeting needs must balance the benefit of investment against its costs. With this in mind, our approach to assessing needs is grounded in the following three themes:

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; and 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.

The National Infrastructure Plan: The New Zealand Infrastructure Commission, Te Waihanga, has been asked by the Government to develop a long-term National Infrastructure Plan. The final Plan will be delivered to the Government in December 2025. The Plan will build on the New Zealand Infrastructure Strategy and set out what’s already planned to be spent on both looking after existing infrastructure and investment intentions over the next 10 years. The Plan will also begin to spotlight the projects that can help meet our needs and represent strong and credible investments in New Zealand’s futures.

Home Page | Auckland | Previous Story | Next Story

Copyright (c) Scoop Media