Infrastructure - where's the plan?

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Where’s the plan?

Simon Carlaw

Big decisions are being made about infrastructure - the physical assets that underpin the economy, like power generation, transport, telecommunications and water and waste amenities.

In all these areas, the size and quality of investment and reinvestment are the big issues.  Whether prompted by the need to prop up aging assets, to cater for increased population, or to meet higher expectations, some big decisions are being made either about investment now, or regulation that will impact on investment in the future.

Under-investment in generation and grid infrastructure contributed to soaring spot electricity prices and the risk of blackouts this winter.  Investment is needed to build more power stations, and the Resource Management Act remains a barrier. What private company would want to invest millions for the longer term and compete against the majority competitor that is now also the core regulator? 

Under-investment in rail infrastructure has also come to a head.  As with energy, short-term problems are being tackled, but the terms of the Government’s rail package will deter private investment. Buying back control of the tracks may have a feel good factor but the buzz depends on a perception that someone else is paying - the real challenge will be to cap future taxpayer expenditure.

 As the Government gets more involved in rail transport again, signals go out to other transport modes.  Coastal shipping interests are calling for the reintroduction of cabotage – expensive protection against overseas competitors in the coastal trades- from the Shipping Industry Review, from which the final decisions are due soon.

Roading is another infrastructural knot.  Decades of under-investment have resulted in gridlock in Auckland and a national network that is not as safe or efficient as it should be.  Roading is crying out for private sector investment, but the Land Transport Management Bill, currently before a select committee, puts rigid constraints on private investment that would make it almost impossible for the kinds of public-private partnerships that successfully fund roads in Australia and elsewhere, to happen here.  And new taxes and charges on road users may go to other transport modes, including rail, to meet minority political agendas that are, at best, ambivalent about growth.

There are other possible tags on growth.  The Government has effectively ruled out private investment in water assets. In the telecommunications area it’s not yet clear how heavy-handed the regulatory regime will be or its impact on future investment in a globally competitive national telecommunications infrastructure.  The ramifications of taxpayer reinvestment in aviation are similarly not yet clear for either travellers or the tourism industry.

Investment problems in all these sectors are not the Government’s fault – they’ve taken decades to achieve.  But the current Government is certainly increasing its involvement in infrastructural investment, regulation and control without much evidence of an overall strategy that would contribute to its OECD top half goal. 

Each intervention gets debated, and some may be justified, but how does it all add up?  Where’s the core strategy?  How well are the parts integrated? Ten years down the track, how will we view all these decisions?

The seemingly ad-hoc response to infrastructure problems is also a concern. There needs to be debate on national infrastructure policy overall, and on the principles that guide it.  Infrastructure affects our ability to do business, and therefore affects New Zealand’s growth prospects and every New Zealander’s standard of living. It is critical that key decisions that will shape the economy for years to come be carefully considered on the basis of the widest debate possible.

Simon Carlaw is Chief Executive, Business NZ