Editorial: A country struggling to afford its ambitions

Saturday, 11 July 2026

EDITORIAL: In the end, everyone gets mugged by reality. Sometimes it is slow, sometimes it is fast. You can never face up to reality too soon. So it is with individuals, households, companies and governments. In the end, reality has to be acknowledged. The sooner it is, the sooner the work of fixing things can begin.

And so it is with the National Party's Roads of National Significance. The RoNS, as they are wonkishly known, were an invention of Sir John Key’s first Minister of Transport, Steven Joyce: a way of prioritising and creating a modest pipeline of politically chosen roading projects.

In the lead-up to the 2023 election, the RoNS – like a number of Key-era policies – were dusted off by the National Party’s then-spokesman on transport, Simeon Brown, and taken to an electorate weary of inflation, crumbling infrastructure and sitting in traffic. After the election, Mr Brown, the new Minister of Transport but never a noted enthusiast for cycling or public transport, proceeded with the wish-list of major roads around the country.

Finally, this week, Mr Brown’s successor, Chris Bishop, admitted what had been apparent for some time. In the absence of a major foreign company willing to build and operate privately tolled roads, the Government would not be able to finance many of the projects.

Mr Bishop deserves credit for acknowledging reality before the election, despite what must have been a strong temptation not to. He and the Government should also be credited for retaining an Auckland-heavy focus in the revised programme. For Mr Bishop himself, and his Wellington colleagues, kicking the second Mt Victoria tunnel into the long grass after promising to build it must have been a bitter pill to swallow.

Since those promises were made in opposition, Government borrowing costs have risen sharply. At the same time, demands on the Crown balance sheet have continued to grow: superannuation, healthcare, debt servicing, defence and adapting New Zealand to climate change all require both different choices and more money. That leaves less money for roads, and what money there is comes at a much higher cost.

The Government is also attempting to crawl out from under large OBEGALx and cash deficits. The former is possible by 2029; the latter not in sight. If the past 15 years are any guide, even the planned fiscal consolidation will struggle to keep pace with future exogenous global economic and weather-related shocks. That makes the RoNS saga part of a much larger problem: New Zealand's weak economic growth.

For almost two decades, New Zealand has largely abandoned meaningful and sustained supply-side reform, policies aimed at increasing the productive capacity and efficiency of the economy. The current Government has undertaken worthwhile microeconomic reforms in some areas, but its limited political skills have prevented it from turning them into a compelling programme, or part of a broader economic story. The advantages a small, relatively liberalised trading nation should possess – agility and the ability to adapt quickly – have gradually been lost beneath a growing legislative and regulatory thicket that makes it harder and more costly for things to get built and for companies to expand.

Indeed, New Zealand is now failing to live up to the myths it tells about itself. A country that prides itself on a can-do attitude and No. 8 wire ingenuity has become anything but at a governance level. Given government spending accounts for more than a third of the economy, its inefficiency inevitably weighs on everyone else. Most senior politicians and senior levels of the public service recognise change is both inevitable and desirable.

This does not mean wholesale chopping up of the public sector or the hard working public servants within it. But it almost certainly means a redirection of its efforts into enabling economic activity and regulating at low cost, rather than being a sprawling morass of good departments, mixed with ginger groups, advocate regulators and questionable ministries.

The Ardern Government delivered respectable headline growth, but much of it was fuelled by exceptionally cheap money from the Adrian Orr-led Reserve Bank and unprecedented fiscal stimulus. GDP per person has barely grown since mid-2021.

Meanwhile, high levels of public spending have steadily increased the state's reliance on income tax through bracket creep. Income taxes have become harder to reduce, while New Zealand's 28% company tax rate, once relatively competitive, now sits squarely in the middle of the international pack.

The result is a bind. The country needs more money to pay for the things New Zealanders expect – including roads – but raising taxes further risks making the country even less competitive and increasing the outflow of talent to Australia.

Ultimately, improving living standards – material, social and environmental – is what sustains public confidence in governments and the legitimacy of democratic systems. Yet New Zealand's politics has increasingly become an argument over how to divide the existing pie, rather than how to make it bigger.

Reality has arrived. The harder task now is confronting what that means.