The development of New Zealand's infrastructure: current and future needs

Good afternoon and thank you for inviting me to address you at today's Korea New Zealand Business Forum.

Before I start I would like to acknowledge the co-chairs of the Korea New Zealand Business Council, Mr Lee Kum-ki and my parliamentary colleague the Honourable Dr Richard Worth, for extending the invitation for me to address this audience.

One of the keys to greater economic cooperation between countries is sharing information - talking, listening and learning from each other.

I understand this joint meeting is being held for the 25^th time so obviously there are plenty of lines of communication already open.  I commend you on the ties you have built and maintained.

As Minister of Transport, Minister for Communications and Information Technology, Associate Minister of Finance, and Associate Minister for Infrastructure I have a strong interest in the way New Zealand's infrastructure needs are progressed to assist economic growth and allow our country to play its part in the global economy.

Good infrastructure is vital to a well-running economy and that's what I will focus on today.

Good infrastructure enables the movement of people, goods, energy, ideas and information around our country and around the world.

It supports the quality of life within our communities.

And it connects those communities with each other and with the rest of the world.

This Government is committed to building better infrastructure to ensure New Zealand can achieve higher levels of economic growth in the years ahead.

There are two components to this:

•  Ensuring the regulatory environment is amenable.
•  Providing an investment plan that gives greater certainty and that can bring about better coordination.

National Infrastructure Plan

Later this year, the government will be spelling out its investment objectives in a National Infrastructure Plan.

This 20-year plan will be developed in conjunction with local government and with New Zealand's business infrastructure users and providers. 

It will set a clear direction for vital national infrastructure investment, including top priority projects. 

Sitting behind this plan is a commitment to invest an additional $8.6 billion over the next six years in new capital projects. 

We've already flagged some initiatives that will be part of the infrastructure plan, such as:

•  Ultra-fast broadband network ($1.5 billion over six years).
• New roading and transport initiatives.
• An additional prison ($315 million)
• 21st century school building programme ($500 million over three years).

Some of the priority projects we will be bringing forward, to provide some much-needed additional stimulus.

It will give more New Zealand firms the opportunity to lock in long-term contracts and it will give them the confidence to take on new employees.

It will also improve the incentives for firms and employers to invest, and it will bolster their confidence in New Zealand's future growth opportunities.

In addition to providing New Zealanders with jobs and security in the midst of domestic and global recession, The Government's step up in infrastructure investment will also be an important part of sparking economic growth in the medium term.

It will play a key role in improving the productivity of the New Zealand economy as we begin to move out of the recession and into a period of growth.

Accelerated State Highway Projects

We are already well on the way with some of this investment as part of a wider economic stimulus package.

Last month, the Prime Minister announced that $483.7 million would be spent on accelerating infrastructure projects. The announcements included:

• 216.7 million of spending on Education;
• $124.5 million of spending on Housing; and
• $142.5 million of spending on Transport

This additional transport funding, spread over two years, has allowed a number of sizeable State highway projects to be accelerated, and boosted the budget for ongoing road maintenance and renewal work.

This was the first of a number of announcements to be made about the transport sector over the coming months as we look to gear up our ongoing State highway construction programme. What is important to me as we look to the future is ensuring we get value for money for our investment. 

The regulatory environment

Of course infrastructure development cannot go ahead without the wider regulatory environment to see it progress. The government wants to provide for more efficient decision making on infrastructure, reduce the costs and delays of consenting, and speed up planning processes.

To this end this month we introduced legislation that will cut through red tape and speed up the consent processes required for all infrastructure projects.

These reforms will address the costs, delays and uncertainties of the current legislation and, at a time of economic difficulty, will remove barriers that stand in the way of helping our country's future prosperity.

Routes of National Significance

With this in mind we are looking at a new category of State highway and transport corridors called Routes of National Significance, which will be singled out as essential routes that require priority infrastructure treatment.

These routes are important for the movement of freight, commuter transport for employment and as a country with a strong focus on tourism - key tourist routes.

It will examine the possibility of public and private sector intervention required to achieve greater efficiency and enable the government to make investment decisions on transport infrastructure.

Broadband

The New Zealand government has committed to contributing $1.5 billion, alongside additional private sector investment, to accelerate the roll-out of ultra-fast broadband to 75% of the population within 10 yeas. 

By ultra-fast I mean network access capability of at least 100 Mbps.  In general, only fibre will be able to provide this capability.

Within six years, we will have rolled out ultra fast broadband to schools, hospitals, businesses and the first tranche of homes.

In the last four years we'll complete the roll out.

The achievement of this objective will be consistent with the following principles:

• making a significant contribution to economic growth;
• neither discouraging, not substituting for, private sector investment;
• avoiding entrenching the position, or 'lining the pockets,' of existing broadband network providers;
• avoiding excessive infrastructure duplication;
• focusing on building new infrastructure, and not unduly preserving the 'legacy assets' of the past; and
• ensuring affordable broadband services

The government is considering how best to work with private investors to build the new network as considerable additional matching investment from the private sector will be required.  I expect to make detailed announcements about possible investment partnership structures and associated project timings within weeks.  The participation of serious committed investors will be necessary in achieving the government's objectives.

Policies for improving rural broadband infrastructure are also being developed.  The government made a pre-election commitment to spend $48 million to help address this issue.  I am currently considering several options for how this funding can best be spent, and intend to consult with industry and users when I have worked through the issues and likely possibilities. 

I believe that investment by the public sector in delivering improved broadband services will help deliver the economic step change that New Zealand needs to significantly lift average incomes over time. 

There is an ever increasing ability to use communication networks and terminal devices to gather and process information centrally and to support new business models.  New communication services empower people to find better solutions and make quality informed decisions. 

This is perhaps best reflected in the health and education sectors, with access to high-speed broadband allowing for the development of innovative distance learning applications and improved health services such as those being developed by ETRI Korea and the University of Auckland to support elderly healthcare.

Widespread access to fibre will deliver major economic benefits for our country in terms of enhanced productivity, improved global connectivity, and enhanced capacity for innovation and enterprise.  It will help improve our energy use efficiency, open up access to new markets, and provide better communication tools to address our many economic and environmental challenges. 

Korea, as a world leader in broadband infrastructure and associated technology, provides an excellent example for New Zealand to look to in achieving our ultra-fast broadband goals. 

Public Private Partnerships

My mention of public and private sector intervention leads me to the topic of how we fund large projects.

While we are keen to see investment continue to increase, for larger projects which are expected to deliver benefits over long periods of time, over generations in fact, it is worth looking at the option of debt funding.

Public private partnerships are a very useful mechanism to help with the quick and efficient construction and maintenance of some of our major infrastructure projects. 

Sharing of the risk and the knowledge between the public and private sector ensures innovative solutions while the use of private finance provides stronger and more focused performance incentives and more appropriate risk allocation.

Finally, Public Private Partnerships also ensure that projects that proceed are designed in the most cost-effective manner possible. Making the appropriate tradeoffs to ensure money is well spent will be a very strong consideration.

Closing remarks

While much of the current focus is, rightly, on taking some of the harder edges off the impact of the recession, it's important to remember that this recession will end.  My colleagues and I need to ensure that our country is ready to move quickly into a higher gear when it does. 

The new government's plan is for better infrastructure, sooner.  We are committed to large-scale investment to lift our economic potential and raise environmental standards. 

Without well-targeted and well-planned investment we will be handing our children and grandchildren a country that is poorer - both in terms of living standards but also in the quality of its environment.

Thank you.