Additional infrastructure funding is just catching up on years of underinvestment and the sector is calling for the Government to do more about New Zealand’s $210b infrastructure deficit.
Budget 2022 lifts infrastructure investment over the next four years from $57.3b to $61.9b, representing an increase of $4.6b.
Infrastructure New Zealand welcomes this additional investment, but recognises that much of it is aimed at addressing historic underspending on ageing health, education and transport infrastructure.
Civil Contractors New Zealand Chief Executive Alan Pollard says far more will be required to solve the civil construction industry’s worker shortage, upgrade and maintain transport and water networks and help communities mitigate the impacts of climate change.
“Today’s budget is a good start. The Government investment in trades training, rail and telecommunications infrastructure and the Construction Sector Accord initiatives is very positive but it doesn’t go far enough. As a country we are missing a trick when it comes to dealing with other key infrastructure issues.”
The infrastructure sector was facing immense challenges, including a lack of workers, uncertainty around future projects, and spiralling expenses caused by supply chain disruption and rising fuel and materials costs, he says.
Key challenges facing the industry were identified in New Zealand’s first 30-year strategy for infrastructure investment – Rautaki Hanganga o Aotearoa – developed by Crown entity Te Waihanga New Zealand Infrastructure Commission and tabled in Parliament in April.
While the Government was still considering the findings of the strategy and was not required by law to respond until September, the modest Budget 2022 allocation for infrastructure could delay action on many of the report’s recommendations – and many critical infrastructure projects – until 2023 or beyond, Pollard says.
The Government would have a golden opportunity to re-align its infrastructure investment later this year when it issued its response to the recommendations in the Rautaki Hanganga o Aotearoa infrastructure strategy report.
“It’s our hope that the Government takes this report seriously and moves quickly to ensure New Zealand’s infrastructure needs are given the attention, and funding, they deserve.
“Treasury’s 2022 Investment Statement has put our combined infrastructure gap at a whopping $210 billion. If we are going to make headway and create a thriving New Zealand for future generations we need a lasting commitment, from all political parties, to building and maintaining the transport, water, energy, and communications infrastructure that’s desperately needed.”
Significant infrastructure funding was announced in the 2020 and 2021 budgets but some of the ‘shovel-ready’ projects outlined over the past few years are still to begin. Delays have been exacerbated by inefficient consenting processes and insufficient funding to cope with inflation and rising costs.
“We must continue to innovate, look for efficiencies and work smarter, but we can’t build our nation on the smell of an oily rag. The $37 million to progress Construction Sector Accord Transformation Plan initiatives will help foster smarter and more efficient ways of working.”
Construction Sector Accord Transformation Director Dean Kimpton says the funding will support its Construction Sector Transformation Plan 2022-2025.
“This new funding is a significant step forward for the Accord and we are determined that it will help unlock the sector’s potential to transform its productivity, its innovation, its sustainability, and its health and safety record.”
The funding supports the sector to achieve a renewed set of transformational goals under the new plan, to be launched in July. The new Transformation Plan has a greater focus on:
- the Māori construction ecosystem
- strengthening capability and productivity across small to medium enterprises
- driving innovation
- reducing carbon emissions.
These initiatives are aimed at achieving the Construction Sector Accord’s vision of a thriving, fair, and sustainable construction sector that enables the wellbeing of Aotearoa New Zealand’s people and its environment, Kimpton says.
“In its first three years of progress towards industry transformation goals, the Accord has become the ‘go to’ forum for industry to engage with government and vice versa. It proved its worth during the first Covid-19 lockdown and has continued to bring leadership to a notoriously fragmented sector.
“This new funding is a significant step up for the Accord and will allow us to support a greater range of initiatives to transform the sector.”
However Pollard says without additional funding, it will be difficult to make progress against a rising tide of escalating costs.
Lack of workers is another key challenge faced by the industry. The New Zealand Infrastructure Commission strategy forecasts that New Zealand will have a shortfall of approximately 118,500 construction workers in 2024, he says.
“The civil infrastructure and construction workforce shortage is acute. Australia has launched a major international attraction campaign for infrastructure workers and New Zealand must do the same to attract people to our country and dispel the myth we are not open for business.
“We also need to do more to remove the barriers preventing people from being able to work in New Zealand. That means investing in more resources for Immigration NZ to process the number of applications we will need, as well as broadening visa eligibility criteria – we need engineers and planners, but we also need people out in the field doing the work required.”
Taking action on climate change was another big focus of Budget 2022. Pollard says there is broad agreement across New Zealand and within the civil construction industry that more needed to be done on this front, but investment in reducing vehicle emissions was only part of the solution.
“More consideration should be given to the role infrastructure can play in risk management, community protection and mitigating the impacts of the climate crisis.
“There’s an urgent need for more central government support for sea walls, and river- and lakeside- flood protection for vital transport networks and vulnerable communities.”
Infrastructure New Zealand Chief Executive Claire Edmondson says many initiatives in Budget 2022 are a good start, however the question remains whether there are sufficient resources in New Zealand to deliver on our infrastructure pipeline – including people and materials like GIB and steel.
“The sector remains constrained by global supply chain issues and the rising cost of fuel, compounded by the effects of Covid-19 and the conflict in Ukraine. Housing affordability and the rising cost of living is also a factor in attracting and retaining the talent our sector needs to deliver projects.
“The $37m investment in the Construction Sector Accord transformation plan should see increased productivity, capability and resilience of the construction sector.”
We know that we will not be able to build our way out of the infrastructure deficit we face, which is why the Government needs to genuinely consider alternative infrastructure funding, financing and delivery arrangements, including by working with the private sector. Leaving this opportunity on the table will continue to force successive governments to prioritise and stage projects as we have seen through this latest budget, Edmondson says.
