New Zealand’s crisis is political, not just plumbing

Saturday, 7 February 2026

In the wake of the failure of the wastewater treatment plant at Wellington’s Moa Point, Luke Malpass says this Government’s Local Water Done Well scheme suffers from many of the same failures as the previous government’s Three Waters, with little having changed in the decade since the disastrous Havelock North water contamination.

Luke Malpass is politics, business and economics editor.

OPINION: In some ways, this was the week that demonstrated precisely what is wrong with New Zealand’s management of both infrastructure assets and public finances.

One of Wellington Water’s four wastewater treatment plants, Moa Point, failed. The result is that New Zealand’s capital city will be sending raw sewage out onto its south coast, rendering it unusable by humans for an as-yet-undetermined period of time.

This is the result of gross mismanagement of assets that have not been properly provisioned for - with insufficient money set aside for maintenance, replacement, or long-term asset management. Run by local councils, there have historically been very few votes in infrastructure that people cannot see and simply expect to work.

And the longer assets are poorly managed and improperly depreciated, the bigger the price tag when they eventually need replacing.

This problem clearly pre-dates Wellington Water, just as it pre-dates many councils around the country with poorly maintained water assets. Nevertheless, this is precisely what debt funding should be used for — and the sort of thing local councils, and indeed central government, should be willing to borrow for.

And yet many local councils, along with central government, run significant and regular deficits simply to pay for ongoing expenses.

The previous government’s answer to this was Three Waters. That was a political failure — though not a conceptual one. The current Government, having riled up mayors and councils up and down the country — many of them rural National Party fiefdoms — is now trying its own version of centralisation. Branded Local Water Done Well, the Government is discovering that what mayors did not want compulsorily taken, they also do not wish to voluntarily give up.

The whole thing is emblematic of a political class that has its priorities in the wrong places. It is all very well to complain about council bureaucrats, but clearly many decisions are politically led. And the political incentives have pointed in the wrong direction: problems have been pushed down the road for someone else to deal with.

The Government’s answer to this has been rate-capping — no doubt popular among ratepayers. But it will not fix the underlying problem and, while it may deliver a short-term political solution for the current Government, it will almost certainly leave an even worse set of structural problems for ratepayers.

That is because the services councils provide have experienced far higher levels of price inflation than the general inflation rate. Maintaining and fixing buildings, roads and pipes has become relatively more expensive than other consumables. Councils also face rising electricity and insurance costs, both of which have surged.

None of this is to say there are not councils up and down the motu that have prioritised nice-to-haves ahead of essentials. But for a central government that will have run close to a decade of deficits by the time a surplus appears near the end of this decade, there is a fair bit of pots calling kettles black.

Like councils, central government has a large number of locked-in expenses — particularly those driven by demographic change — such as superannuation and health, not to mention a substantial infrastructure deficit.

The wastewater situation is part of a much wider systemic problem. When in government, Labour took what was, politically, a slam-dunk infrastructure issue triggered by the Havelock North contamination, over-consulted for five years, deliberately elevated co-governance into a central political project of the reform (rather than a quietly assumed feature), and attempted to placate mayors while simultaneously delivering ultimatums.

Objectives became muddled, political management ineffective and unclear. And at both a political and public service level, precious few people were prepared to describe the scheme for what it was: a centralised system in which larger rating bases cross-subsidised smaller ones, lifting water management quality across the board.

Local Water Done Well suffers from many of the same failings.

The Havelock North contamination — in which 5000 or more people were poisoned — was 10 years ago. Very little has changed.

The difference is that in 2016 central government was running a budget surplus. It is now running perma-deficits, overall council debt has roughly doubled, and instead of Havelock North it is raw sewage pouring into Cook Strait.

As this election year begins to wind up, these failures should be symptomatic not only of New Zealand’s problems, but of what those seeking election or re-election are prepared to fix.

I was in New South Wales recently, where I had lived for more than a decade. Around 2010 the state was considered a basket case: a government with multiple corrupt ministers — some of whom later served jail time — a massive infrastructure deficit, and a political system paralysed by cancelled projects. Today it has more than 33 kilometres of new road tunnels under the city, new suburban train lines, a vastly expanded light rail network, and a driverless metro system.

There were, and still are, arguments about which projects went ahead. But decisions were made, defended, and the city of Sydney has been transformed.

Part of that formula was asset recycling: the state’s electricity transmission network was sold and the proceeds rolled into a fund that continues to finance new projects. The state builds infrastructure upfront, then sells it to private operators with regulated returns, using the proceeds to fund the next project.

The current Government wants to pursue asset recycling, and both NZ First and Labour have proposed Invest New Zealand-type funds, so broad support exists. However, the bogeyman of privatisation remains a political roadblock.

In the end, this is about political choices. Leadership matters. So does making the case and accepting that projects are expensive, unpopular during construction, and guaranteed to attract critics - at least until they are finished.

The real question for this year is “whether political parties can identify, campaign on, and deliver the things people care about”, Luke Malpass says.

Then there is the not so small matter of growing the economy so New Zealand can afford the kind of First World infrastructure other wealthy countries take for granted, while also paying for the baby-boomer bulge moving through superannuation and health systems.

2026 is likely to be another year of uncertainty. AI will reshape the economy, but the eye-watering levels of investment suggest bubble-like risks. Will the Trump administration’s international adventurism continue, and to what extent will China’s influence expand in this region? Closer to home, how will the Australian economy weigh on New Zealand?

It is now clear Australia has not fully brought inflation under control. More rate hikes are likely, while governments continue underwriting job growth through deficit spending. At some point the music will stop — and when it does, New Zealand will feel it.

Economic signals are improving, but it will still be a tough year. The real question is whether political parties can identify, campaign on, and deliver the things people care about — and tell a convincing story about how it all fits together.