Government announces billions of infrastructure spending, with roads the big winner

Wednesday, 29 January 2020

The Government has opened the floodgates, announcing a $12 billion surge of infrastructure projects to 'upgrade New Zealand'.

Roads are the big winner, making up $5.3 billion of the $6.8 billion spent on transport, with $1.1 billion spent on rail. Hospitals and schools also get a slice. See a rundown of all the projects being funded here.

Prime Minister Jacinda Ardern said the programme was 'a once in a lifetime opportunity to invest in New Zealand - modernising our infrastructure, preparing for climate change and helping grow the economy'.

The top of the North Island will be the biggest beneficiary of the transport package, with $3.48 billion spent in Auckland, $991 million in Waikato and the Bay of Plenty, and $692 million spent on a single road in Northland, a 22km four-lane corridor from Marsden Point to Whangarei.

**READ MORE:

* Live: Govt's infrastructure announcement: Where will the money be spent? 

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* Melling interchange, Ōtaki and Levin highway part of $1.35 billion spend 

* $12 billion infrastructure announcement: Big Auckland projects advance 

* Govt pumps $300m into maternity, mental health, and other health infrastructure

* $9.5m boost for Hutt Valley maternity after damning report into baby's death

* Government unveils $12b infrastructure boost, much of it focused on roads and rail**

This is large in comparison to the South Island, with Canterbury receiving just $159 million of projects and Queenstown getting $90 million.

High-profile and contentious roads will be funded and brought forward, including the Tauranga Northern Link, Penlink, and Mill Road, as well as the extending a four-lane expressway on SH2 from Te Puna to Omokoroa.

ROADS THE WINNER

Auckland's roads alone will receive $2.2 billion, with most projects being brought forward by about five years.

The big Auckland projects include the new Mill Road connection, costing $1.35 billion, the new Penlink corridor, costing $411 million, and a connection between Papakura and Drury South, costing $432 million. 

In the Wellington region, the contentious Melling interchange will now be funded and built, alongside an extension of the Kapiti expressway from Otaki to north of Levin. 

The projects have been selected based on how quickly they can be funded and built.

The new $411 million Penlink corridor in Auckland will be out for tender almost immediately, with construction finished by 2025. 

The Tauranga Northern link, costing $478 million, will begin construction later this year and be completed by 2025. Likewise the Melling interchange will begin construction in late 2022 and finish in 2026.

One of the reasons why construction can begin so quickly is that many of these roads, including the Tauranga Northern Link were planned under the previous Government, but delayed under the coalition's new transport plan. 

Many of those projects are now back and funded.

Despite the focus on roading, the Government announced three large rail projects, including $371 million to extend electrification of Auckland's rail network from Papakura to Pukekohe. Wellington will also see an injection of cash to its commuter rail network, with $211m for improvements to the connections between Wellington, the Wairarapa and Palmerston North.

HEALTH UPGRADE

The Health system is also getting an upgrade worth $300 million, with a focus on maternity care, children, and mental health.

Mental health and addiction will receive $96 million and $83 million will be be spent on child and maternal health.

Neonatal care facilities at Counties Manakau, Auckland, Hutt Valley, and Capital & Coast will be upgraded, as will maternity facilities in South Canterbury and Hutt Valley. 

New acute mental health facilities will be built in Tauranga, Whakatane, and Hutt Valley.

The Government has already announced $400 million of upgrades to schools. It's keeping $4 billion of the $12 billion up its sleeve for future budgets.

'WASTED OPPORTUNITY'

National leader Simon Bridges accused the Government of 'two and a half years of wasted opportunity' saying the projects were already in progress under the previous government.

'It's literally all of National's work. It's all things the Government cancelled at the start of their time in office, whilst they have done nothing since then other than argue and discuss and faff about on light rail'.

Pointing to the Government's record on light rail, Bridges said it couldn't deliver infrastructure: 'There's nothing about light rail today, they've given up on their own promises as they swipe ours'.

SO WHY NOW?

New Zealand has an infrastructure deficit. The infrastructure that we have, like roads, trainlines, schools, and hospitals 

Government borrowing costs are at historic lows, which the government says is one reason it is spending money on infrastructure now - it's much cheaper than it was even a few years ago.

The Government borrowed $150 million last Thursday, paying just 1.6 per cent in interest, a far cry from the rates it was paying just five years ago. 

Another reason for the Government's big spend up is to stimulate the economy.

Spending on infrastructure helps to simulate economic growth as the money spent paying people to build things cycles through the rest of the economy, stimulating growth. 

This is especially important at a time like now. Fears around the US-China trade war, Brexit, and general political uncertainty have started to weigh on growth. While the New Zealand economy is still growing, the pace of that growth has slowed. 

Treasury has crunched the numbers and believes the package will lift GDP growth by 1.4 per cent (or $3.9 billion) over the next four years thanks to the package. 

But to stimulate the economy, the Government needs to make sure that spending gets out the door quickly. Infrastructure spending is easy to announce, but can be quite difficult to actually spend: consenting, contracting, and building all takes time.

To get the stimulus boost the Government wants, it's prioritised projects it thinks it can start quickly.  

Most of the money will be spent in just four years.