As it works on its National Infrastructure Plan this year, the New Zealand Infrastructure Commission is asking, how NZ infrastructure can pay for itself.
This year, the New Zealand Infrastructure Commission will be releasing a National Infrastructure Plan. This is about bringing the Commission’s independent advice to the Government on New Zealand’s long-term investment needs and how they can be met.
“We expect to share a draft of the Plan for feedback mid-year and present the final Plan in December. After receiving our advice, the Government will consider it and issue a statement of how it plans to respond by mid-2026,” says Peter Nunns, GM of Strategy.
“The Plan will be informed by project data that we are collecting from the infrastructure sector, the Commission’s ongoing research programme, and by ongoing stakeholder engagement and feedback.”
In March, the Commission released a report which investigates how public infrastructure projects could recoup investment costs. “This question is more important than ever as we face long-term fiscal constraints, driven by our ageing population and slowing productivity growth, and the need to continue investing in infrastructure,” said Nunns.
Key findings of the report include:
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Project quality is the most important factor for determining whether new infrastructure can generate enough revenue to pay for itself. Projects that are cost-effective to build and which serve more users or beneficiaries are more likely to generate positive fiscal returns. Conversely, expensive projects that serve relatively few users will struggle to pay back their up-front costs. This pattern is consistent across different types of projects with different funding tools.
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Cost-benefit analysis can help to identify projects that are likely to have higher returns. Projects with higher benefit-cost ratios tend to also have higher financial returns. Likewise, financial returns from local government growth infrastructure are higher when it serves more new private investment.
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Spending a large amount of money up-front does not necessarily mean larger returns. A better approach may be to invest incrementally, expanding networks gradually over time in response to proven demand.
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When we have quality projects that serve demand in a cost-effective way, revenue tools can play an important role in determining how much new revenue we can bring in.
