Economic overview

Public and private infrastructure is so deeply embedded in every part of of our daily lives that we take it as given. When we turn on the switch we expect the lights to come on. We expect water to come out of the tap and to conveniently disappear down the drain when we want it to. When we send a text or email we expect it to reach the intended recipient and to get an immediate response. We expect that the roads, trains, airports and ports will transport us or our goods to the desired destination. We just expect it all to be there an to work.

The reality is that than enormous amount of planning and capital is required every year just to “keep the lights on” and to keep up with New Zealand’s growing infrastructure demands. By way of example, Statistics NZ estimates that by 2031 the country’s population will have increased by 22%. Over 60% of that growth is anticipated to be in the Auckland region – with the combined Auckland, Waikato and Bay of Plenty regions expected to grow by some 31%. Agribusiness will remain a key driver of the economy and by 2031 transportation demand for bulk commodities such as milk and wood is forecast to grow by up to 70%. Both the traditional economy and the new economy comprising tourism and other services will require substantial on-going investment in a first-class telecommunications network. As such, the pace of investment demand across the whole economy will increase dramatically over coming decades.

Bay far the majority of infrastructure investment to date has been made by the the public sector. The Crown owns infrastructure assets valued at around $110 billion and spends in excess of $6 billion annually to maintain and replace these assets. In addition, the various territorial authorities are expected to spend a further $3 billion annually on infrastructure. In response to competing public sector expenditure demands and in keeping with international trends, the level of private sector participation and investment in New Zealand is anticipated to increase substantially from current levels.

By international comparisons New Zealand’s overall infrastructure needs to improve markedly – as highlighted in a recent report by the World Economic Forum which ranked New Zealand 35th out of 133 countries. In addition, our total fixed public and private sector investment in the economy is languishing at around the OECD average. Given local and world population forecasts, global industrial commodity demand and the increasingly competitive and complex global context, the Government has responded proactively by establishing the National Infrastructure Unit and developing a 20 year strategic infrastructure plan. This plan, which is a ‘work-in-progress’, signals prioritised investment in broadband, electricity transmission, water irrigation and roads of national significance – together with increased scope for private-public partnerships.

As leading New Zealand infrastructure and property specialists, Crighton Anderson is well placed to support clients already actively involved, or contemplating investment, in the sector. Our detailed infrastructure services brochure can be downloaded by clicking this link.

Data source: Statistics NZ, World Economic Forum, OECD, National Infrastructure Unit