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Paradigm shift needed to address infrastructure deficits

Paradigm shift needed to address infrastructure deficits

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New Zealand’s decades-long pattern of under-investment in infrastructure is about to end, but it will take more than money to address the huge job ahead, according to an independent report.

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Photo: RNZ / Russell Palmer

The report by the legal firm Chapman Tripp says there would also need to be a meaningful improvement in productivity, social wellbeing and emissions reduction to address the infrastructure deficits.

It said the electricity sector’s infrastructure was well short of where it needed to be.

“The size of the job is huge, especially in the electricity sector where Transpower estimates we will need a 55 percent increase in generation capacity to achieve New Zealand’s Paris Agreement commitment to net carbon neutrality by 2050,” the report says.

“In our view, it will take a paradigm shift to pull this off.”

It says some of the barriers to infrastructure investment and development were difficult for the government to address.

“Although Covid-19 has opened the government’s cash faucet, the border restrictions are exacerbating New Zealand’s persistent skills shortages and the Covid-induced recession has put many businesses into retrenchment mode.”

Chapman Tripp finance partner and report co-author Mark Reese said private investment may also be harder to attract because other asset classes, such as health care, may be a more profitable investment opportunity while larger countries would also be competing for investment.

“New Zealand may be less attractive due to our remoteness and lack of scale, and the government may need to do something special to counter-balance this,” the report says.

Reese said that for example, the government could take on more of the risk posed by large infrastructure projects, particularly during the construction phase.

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