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Hard Slog For Infrastructure

The New Zealand infrastructure sector is facing exceptional challenges – economic, financial, environmental, logistical and regulatory – as the Government seeks to create a more sustainable and climate resilient economy in a world which is becoming less predictable.

This is a central theme of New Zealand Infrastructure Trends & Insights 2022, the third in Chapman Tripp’s biennial infrastructure series, released today.

Partner and infrastructure team co-lead Mark Reese said the optimism which had infused the firm’s 2020 issue was now harder to maintain.

“Transactions are beginning to trickle through under the Infrastructure Funding and Financing Act, although the process can be cumbersome. The Three Waters package has an uncertain future. And, while the introduction of the Natural and Built Environments Bill (NBE Bill) and the Spatial Planning Bill have provided some clarity as to what the post-RMA era will look like, they are a mixed bag so far as infrastructure is concerned”.

The alternative infrastructure and specified housing pathway, provided for in the NBE Bill, would carry some of the efficiencies available under the COVID fast track legislation into the new structure. But there is little sense of how the transition phases would be managed and the Bill, as currently drafted, contains no provisions to facilitate the relocation or upgrade of infrastructure facilities in response to climate change.

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“We had added a caveat to our 2020 report, noting that the border restrictions had exacerbated New Zealand’s persistent skills shortages and that the economic damage created by the pandemic had put many businesses into retrenchment mode. We can now say that the recovery is going to be longer and more difficult than we had anticipated,” said Mark.

Much of this was due to forces beyond New Zealand’s control - global inflation, continuing supply chain disruption, the Russian invasion of Ukraine, and the spluttering Chinese economy.

But there were also factors specific to New Zealand – the deterioration in the revenue base for the National Land Transport Fund, rigidities in the IFFA model, a directionless regime for new renewable generation, and a lack of coherence among the various National Planning Statements and between them and the Emissions Reduction and National Adaptation Plans.

The sector is experiencing significant policy reform, and while the broad contours are now in place, there are gaps that need to be filled before the full picture becomes clear.

“To some extent this is unavoidable, given the volume and pace of change, as it is impossible for policy-makers to do everything at once and to anticipate exactly how a policy will land. But the effect is that, while there are a lot of projects in progress and in prospect, there are also a lot that are in trouble”.

Read the full report: New Zealand Infrastructure Trends & Insights 2022.

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