Last week Infrastructure Minister Shane Jones announced the creation of a new government infrastructure entity. It seems that much of the work this new entity will do is currently undertaken, poorly, by Treasury’s existing infrastructure unit.

A new independent entity will be established so New Zealand gets the quality infrastructure investment it needs to improve long-term economic performance and social wellbeing, Infrastructure Minister Shane Jones has announced today.

Speaking at the annual Building Nations Symposium in Auckland, Shane Jones said the new entity would provide greater certainty to the industry and better advice to Ministers to ensure adequate, long-term planning and investment happens.

“When we first came into Government, it quickly became clear that we’re facing a major infrastructure deficit with no plan to tackle it. We’ve struggled to get a clear picture from officials of its scale, when it would hit us the worst and in which sectors.

“Treasury is currently unable to properly quantify the value of the deficit we’re facing – it doesn’t hold accurate or up-to-date information about all infrastructure projects across all sectors and advises that agencies themselves may not necessarily know the extent of their future capital needs.

“This is just not good enough. This Government has a firm eye on the future and not just the next few years. We’re determined to improve economic performance, and social and environmental wellbeing for generations to come and getting on top of our infrastructure challenge is key.

“That means ensuring New Zealand can make the timely and quality investments in vital infrastructure, such as hospitals, schools, transport networks, water and electricity. And it means being open to innovative solutions to sourcing the capital we need.

“We’ve listened to industry and local government – they need greater visibility of our infrastructure needs. 

“This new entity will provide that certainty so we can make the right investments, in the right places and the right time.

“We’re already making a significant dent in our infrastructure deficit. Net capital spending in the next five years will be more than double that of the previous five years with the Government investing about $42 billion through to 2022.

“This is a good start, but we need to do better over the long term and I’m confident the new infrastructure entity will help us really sharpen our planning for the future.

“Treasury will now lead the development of the detailed policy working alongside key industries and I’ll report back to Cabinet early next year with options on how to structure the new organisation,” Shane Jones said.

It is anticipated the new infrastructure entity will be operational by late 2019.

This is probably a step in the right direction. It seems that Treasury focused far too much on trying to stop each and every project and not enough on developing strong systems to actually help good projects get built. Along with the Ministry of Transport, Treasury spent a great number of years trying to kill off the City Rail Link, and rumour is that Treasury is still trying to undermine light-rail (apparently putting their hopes on new bus technology that doesn’t yet exist).

More than a year to set up the entity does seem quite long. The new Ministry of Housing and Urban Development was only announced in June and will be operational by October this year.

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30 comments

  1. When Roger Douglas became finance minister and the treasury ideologues were unleashed, their very first target were those centres within the civil service that offered alternative thinking. In particular, the policy offices within the Ministry of Works and Development were singled out for rapid liquidation. Treasury made sure it had gutted, corporatised then privatised their main ideological opponents within four years of Labour gaining power.

    Good to see some sort of comeback.

    1. My first thought was “wasn’t this something the old MOW used to do?”.
      And it seems, yes, it was.

      Mind you the MOW approach at times seemed to be, “here’s the concrete and the bulldozers, now whats the problem you want us solve”?

      Treasury is still trying unfortunately to be the “MBIE” of finance and policy making, unfortunately, like MBIE, it is not delivering good enough value to NZ nor is really fit for purpose any more – If it ever was.

      I note that the UK decided that their super ministries like MBIE [and by extension Treasury] don’t actually “deliver the goods” they promised they would when set up.
      So the UK is proposing to ditch their MBIE – on which our MBIE was based, and they were doing this, about the time we set ours up.

      Maybe Treasury ought to write a paper about “the suitability and effectiveness of Treasury guiding the rest of the country and the Government and the civil service policies and what not for the 21st century.”

      That will take them so long to do, we can get in the meantime and get some real policies and advice underway as they continue navel gazing.

        1. Well, often its the same people. We get the Poms that have failed with something over there, and then they emigrate to New Zealand to try and do a half-arsed version over here. Quite amazing how many people with broad British accents you hear in Government jobs in Wellington…

  2. Like Sanctuary I am glad there will be this new infrastructure focused agency. The loss of the MoW has led to decades of infrastructure deficits. But lets not kid ourselves into thinking a centralised infrastructure institution is the only remedy needed for difficult problems like localised rising housing and transport costs.

    I see too much over reliance on infrastructure advocacy from this website and from the likes of the Green party and not enough acknowledgement that zoning reform is also essential for housing affordability and to get the best bang for our buck from transport investment -especially rapid transit investment.

    This website claims that the Unitary Plan is working (it is an improvement) but fundamentally the Unitary Plan has not changed the default setting that stand alone housing is the most protected/favoured housing type. This can be best seen in the recess plane rule that even for areas zoned for apartments and terraced housing limits any new construction to 3m at the boundary.

    The standalone housing default setting issue can only be resolved by finding a mechanism for building more housing in existing suburbs in a way that provides benefits not nuisances to the neighbours. Fundamentally this is a local problem that a centralized government institution by itself cannot resolve. There is a huge possibility that without clarity on what its role is and is not an infrastructure agency will blunder around without purpose.

    This problem will be compounded if the coalition government is inconsistent with its brand of being about reform not the modified status quo. If Green party local government politicians continue to vote against the most sustainable and affordable housing developments like they have in Wellington (https://twitter.com/FrankMcRae/status/1031343771567321088) then they are voting for the status quo in the area (housing) that the public most want reform.

    If the Green Party obstructs reform then they may find the TOP party will claim they are the true reformists. This could be an existential crisis.

    Many pieces of the policy puzzle to make our cities better are being developed. This is an exciting time. I hope the reformers do not lose faith and the status quo elements are pushed aside.

    P.S here is how many overseas cities are building more houses around rapid transit without being a nuisance to the neighbours.
    https://medium.com/land-buildings-identity-and-values/do-we-need-to-think-small-to-solve-big-problems-like-rising-housing-and-transport-costs-e5047cff0418

    1. Brendon you won’t get any disagreement from us about the limitations of the Unitary Plan. But the evidence is clear, limited as it is, it is already having effects, and good ones. Is it enough? No. Is it perfect? Hell no.

      The great news is that if this tentative step towards freeing up urban development is working imagine what can be achieved with more, and, with the concomitant necessary urban infrastructure investment….

      And NIMBYism, sadly, is not the prerogative of any one political party; its adherents cross traditional political groupings, but so do its opponents.

      1. Thanks for your comments Patrick -you are quite right -it is very exciting to imagine what could be achieved if we took more than a tentative step towards freeing up urban development….

        It is also true that NIMBYism is sadly found across the political spectrum.

      2. I’m not sure the evidence is that clear that the Unitary Plan is having an effect, actually.

        I know prices have plateaued since it was released, although that coincides with the general trend in major Australian cities.

        The best that can be said is that it may have helped stop prices rising further? I’d say that’s cold comfort given the pickle Auckland is in with respect to housing costs.

    2. Re: My “Thinking small to solve big problems” paper a friend wrote the following.

      “For me your paper highlights a crucial question concerning urban development: who defines urban shape and content? Public authorities quite unequivocally exert most of that power currently. But that power, when poorly exercised, comes at the massive cost of unaffordable housing and the subsequent impacts on the economy, health, education and other outcomes. It can also put a direct brake on economic well-being through sub-optimal urban layout and excessive accommodation costs for business….

      ….. and Brendon have separately advanced a variety of suggestions for ways in which residents could bypass planners to create denser housing while still mediating nuisance internally and externally. Their suggestions are logical and straightforward so, conceptually, I can see no reason why developers and/or residents could not organise the layout and the permissible activities within a sub-boundary of a city. The advantages of allowing freedom at the micro level are obvious. Then we would find out whether people are or are not OK about having commercial activities sprinkled among residences. We would find out whether there was an appetite for medium-density housing. We would find out what amenities by way of green space and community facilities people would pay for by choice. We would find out whether we really need two car parking spaces per property. We wouldn’t need to rely on a handful of technocrats making their best guess to find out these things.

  3. That only works if the new infrastructure agency is politically independent and focus on long term consistent policy.

    Otherwise its effectiveness is weakened by change of government.

    1. Yes, but it also needs to adapt over time, because even the most aware and data-driven sectors of society shift in understanding over time. If not through government saying “our voters are clear that now the priority needs to shift to x,y, or z” how can the natural adaptation happen? Would it work at arm’s length somehow – so while the Ministries in charge of policy on climate change, social equity health, transport, land use will be more quickly influenced by voter preferences, this one then has a damping mechanism to keep policy more stable?

      I find it confusing – that was supposedly the rationale behind AT’s independence of political control. Has it worked, or are very clear progressive steps being hindered because of this independence of political control?

      1. I think there need to be some thoughts about how to make the Agency accountable to their result, as well as having some policy continuity.

        AT at the moment becomes a monster and lacks public accountability and performance audit, while at the moment AT agenda are influenced by the change of government.

        It is a worst case scenario.

        We don’t want the infrastructure agency to follow the same path.

  4. Matt this is a naked attempt by Infrastructure New Zealand to become the perfect hybrid of industry membership organization, bank-paid think-tank, and government department.

    Ask yourself: of the GA and Gen Zero people, and INZ, who would get jobs in this new entity?

  5. Personally, I’m a bit nervous about the idea.

    I’m not sure that sewerage or telecommunications services, for example, are best delivered by central government. Or electricity, come to that. If you believe that electricity comes from vast centralised generation projects, this may seem to make sense. But if you anticipate a future with a lot more distributed and even home-level generation, you might not want to disturb the grave of the Ministry of Works.

  6. Sounds like the ‘if we all knew what everyone was doing then we’d get better outcomes’ argument. We currently have 30 year infrastructure plans required by all TLAs, a National Infrastructure Unit already in treasury, new requrements for govt agencies such as health to have 10 year CAPEX plans (a good thing). got to wonder about the outcome of this and other work…more understanding but no more insight?

    1. Yeah I think that’s a risk too. On the other hand, if the focus is on coordination and evaluation across departments then it could be a positive development.

  7. WRT the Unitary Plan, did anyone attend Al Ray’s talk in the Jasmax Urbanism series last month? Very interesting – his view was that we are far too regulated in NZ and district plans make it very difficult for anything to get built. He believes the English model is far better, where there are a series of nationwide guidelines that are not very complex and rely on a panel of experts judging each application as to whether it is fit for purpose and appropriate for the location. They follow 5 simple rules and they are applicable all across the country. Then you don’t need a bevy of lawyers to get your project across the line.

    1. I would totally disagree. The English system is corrupt and full of Nimbys. There is little chance of planning for something to be within the rules, as the “panel of experts” can make up their mind and change their mind as they see fit. Remember this is the country that had a 9 year hearing from whether Heathrow Terminal 5 could go ahead or not. Very difficult to design as you don’t know what the parameters are.

      Here at least, we have a District Plan, and we can design things that fit the District Plan and can have debates with the Council over things that almost fit the District Plan.

      Personally, I’ve never had anything had any problems getting Resource Consent – no problems getting things built. Life here is a breeze compared to the UK.

        1. Jase – have you worked in England? Not so easy to KISS unless you’re talking about a Liverpool kiss…

          It’s hard to keep Nimbys out of local boards etc – because to be honest, it is never that much fun being on a local board, and so few people want to do it. So no one stands except for Nimbys – after all, they are well-versed in what the local issues are, and they will work damn hard to make sure that things don’t happen that they don’t want. They make up the rules as they go along. No taniwha, but many other creatures below the ground, including Roman remains, Saxons, Normans, areas of specific scientific interest, areas of outstanding natural beauty, etc – rules after rules after rules, most of which are not written down but instead the power resides with the individual planning officer who can say yes or no. The “5 simple rules” bit, applicable “all across the country” is complete rubbish.

  8. This seems like another non-idea, the sort of thing you do when you don’t know what to do or don’t want to take ownership of your role in doing the right thing. At worst it will be jobs for boys.

    An immediate note of caution is that Infrastructure New Zealand have been advocating for a long time for some kind of stand-alone government infrastructure agency modelled off Infrastructure Australia and the state- and territory-level mini-mes that it has inspired. How big do we think the talent pool really is? Keep this in mind as you read on.

    What is neglected, which kelvin alludes to I think, is that the political dimension of infrastructure strategising and investment puts a constant crib on the work of independent bodies. This is why Infrastructure Australia is less influential than its mandate might suggest. Everything most people hate about investment appraisal under the Land Transport Management Act derives from the fact that it is forced to retain significant political levers – via the GPS, revenue settings and the debt, tolling and PPP control mechanisms – that enable political distortion of priorities, but are necessary for effectively managing the national accounts…

    (But also don’t forget that institutional cultural preferences also create distortions that this website often rails against.)

    Real influence requires a proper hand on procurement, which also requires some independence of funding.

    The National Infrastructure Unit used to be quite hefty and with a high-level senior manager in charge, a situation which has changed dramatically over the years. When it started it had the challenge that government had very few consolidated infrastructure levers – really only one in Transit NZ/the NZTA, and the legislative framework put that lever, the procurement power, at arm’s length with a statutory board. (Which, btw, politician’s hate even as they revel in the influence a consolidated sector actually gives them.)

    And yet, in contrast, the lack of any equivalent mechanism for 3 waters, telecoms, and housing; the weak (i.e. infrequently and irregularly engaged) levers for hospitals, schools and prisons, all created barriers to NIU actually doing anything in those other sectors.

    In consequence, you got work on a 30-year infrastructure pipeline etc in an attempt to impose some shape on infrastructure thinking in the absence of anything really substantial to push on… except the NZTA which was substantial enough to push back…

    So, do we see a new agency replacing the NZTA? Or replicating the NZTA for other sectors, but leaving the NZTA out?

    If the latter, that means there is tax, funding and governance reform to do, including at the local government level.

    If the former, given the absence of any other entity of similar weight and heft, do you see a new entity not being captured by the NZTA? How does that prospect impact on the new entity’s ability to deliver non-road infrastructure or the lenses it will bring to its role?

    Perhaps a Royal Commission into infrastructure strategy and planning interests and needs would be a more useful/less dangerous first step?

  9. At least this coalition governemnt is thinking outside the square. I totally agree with a new Infrastructure agency being established and I hope the agency operates independently from other government agencies and is responsible for NZ’s infrastructure requirements at regional and/or national level, whether its roads, building, housing, rail, etc planning and development.

    I would like to see the government to create an infrastructure fund – Infrastructure NZ Fund, similar to the NZ Superannuation Fund, that provides funds for regional and national projects, similar to what the NZ Superannuation Fund is proposing to fund Auckland’s light rail system. The infrastructure fund would be governemnt guaranteed.

    Infrastructure NZ Fund is funded by central government through fuel tax, domestic and international institutional investors, banks, domestic and international fund mangers like NZ Superannuation, ACC, etc, private investors like mum and dad investors, etc, to fund regional and national infrastructure projects like Kiwibuild, roads, upgrading NZ’s under utilized national rail network, upgrade town/city/regional water and sewerage systems and so on as a public or public/private projects, etc. The infrastructure fund is government guaranteed.

    By having this fund, DHBs, NZTA, Kiwirail, port companies, HNZ, town, city, district and regional councils can ‘borrow’ at competative rates from the fund, for projects that has been approved by the national Infrastructure Agency.

    By having this fund, it will reduce the government borrowing on domestic and international markets for national projects and town, city and regional council projects.

    The National Infrastructure Agency and the Infrastructure NZ fund, it is a modern take of the old Ministry of Work and Development.

    1. I can’t see how your proposed fund would reduce government borrowing. It looks like the major providers are investors, who will be looking for a return on investment from the money they provide up front. Sounds very much like a PPP to me, which is basically an expensive loan.

      1. It will reduce government borrowing and setting aside funds in yearly government budgets for major infrastructure projects.

        The Infrastructure Fund will speed up infrastructure projects like Kiwibuild, upgrading the national rail network, etc. As you know, there is growing chorus from people, to why they should paying extra taxes and/or rates to fund infrastructure projects, when a central infrastructure fund can pay for it.

        In essence, the Infrastructure fund is some what like a PPP but would cover a greater range of projects instead of the current one off individual PPP projects currently used at the present.

        With regards to return on investment, what is the ‘interest’ rate that NZTA is paying under the Transmission Gully PPP project or what will NZ Superannuation Fund return on investment to fund Auckland’s light rail system?

        What interest are town, city, district or regional councils are paying on central governemnt loans? What is the difference borrowing from the government or borrowing from an infrastructure fund. There is very little difference.

        Whilst I can not comment on what the loan interest rates would be, if you take for an example – a 4% interest is charged on an infrastructure loan, 1% would cover the funds administration and 2-3% to the investors. It would be cheaper than a normal PPP arrangement.

        A national infrastructure fund is a modern take on the old town/city council, health and harbour board loans of the 1940’s, 1950s, 1960’s and early 1970’s. The interest rate on these investments was about the same interest rate being paid on a Post Office saving account, which I think was 2%.

      2. Direct lending to the NZTA/government at a fixed return over a long period of time would be the easiest model. The ‘bond’ would essentially form part of the lender’s low risk portfolio, while government accepting the demand risk (like it does under paygo) does away with the need for the complex and expensive PPP overheads. The rate would be commercial, too, so while ‘more expensive’ by being above the rate for government debt, it would keep Treasury happy that there is some degree of market-referencing efficiency pressure built into it.

        PPPs are difficult to do well. The main concern is to place risk with the private party to encourage innovation and deliver better value for money. The more complex the risk, the more complex the contract, and the higher the probability that the risk you tried to place on the private party will get shifted back onto the public purse anyway. They are a lawyer’s happy place.

        If you do not have the ability to properly frame the risk, and if the scale and nature of the risk does not allow for much chance of successful innovation relative to conventional means, then a PPP is not the right tool. It is easily the most expensive way of doing financing short of a mafia loan.

        (IMHO)

  10. While the idea of an Urban Development Agency is a good one and has been around for decades, the idea of the UDA being able to ignore the District Plan (and the Unitary Plan is just after all another District Plan) is very worrying. Large scale developments will almost certainly require their own Structure Plan or similar, but this should be done within the District Plan framework by way of a Plan Change or similar mechanism. While the UDA should be encouraged to think outside the square and come up with innovative solutions, they should not be given the power to “just do it” – their proposals should be tested through a publicly notifiable process with the decision making in other hands – where else do we allow an organisation to be “judge & jury” in determining their own case?

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