As Sir Ian Taylor said: “As a small country, we cannot afford small ambitions” and economic prosperity (ie jobs) comes when we invest in infrastructure.
KiwiSaver funds could be used to invest in public infrastructure projects. Photo / 123rf
Australia, Norway, Ireland and Singapore have matured infrastructure capital markets – and they have used it to transform their nations by channelling it into economy-boosting infrastructure projects like public transport and modern utilities.
For our nation to prosper, we need export receipts, but are we doing enough to direct our savings into growth-generating enterprise and growth-enabling infrastructure: efficient power and water, better rail, faster ports, reliable ferries, smooth traffic, resilient rivers and landforms?
By 2030, we will have over $300 billion across just KiwiSaver, ACC and the New Zealand Superannuation Fund – massive pools of patient capital, saved for the benefit of us all. Our largest sovereign wealth fund, the NZ Super Fund, has a balance approaching $90b, yet domestic infrastructure investment is just 1%.
There’s something mildly frustrating and counterintuitive, however, about seeing these funds parked in international financial markets and boosting other countries’ infrastructure, while our own communities are stuck waiting. This gap between supply (those with capital) and demand (those that need it) is holding our country back and is something that deserves a national debate.
Across the country, insufficient wastewater capacity remains the biggest barrier to new housing and commercial development. This frustration has reached breaking point. Not just because of a lack of central and local government investment, but due to ratepayer affordability.
Affordability and infrastructure investment are inseparable. Affordability determines how much infrastructure gets built, but underinvestment worsens affordability in the long run.
By 2030, New Zealand will hold over $300 billion across KiwiSaver, ACC and the New Zealand Superannuation Fund, yet despite the NZ Super Fund nearing $90b, only 1% is invested in domestic infrastructure. Photo / 123rf
Investment changes this dynamic. A $200 million wastewater upgrade does far more than installing new pipes and ponds. Spending moves through the local economy, supporting workers, suppliers, cafes, builders and many others. Every dollar continues to circulate and multiply, building economic confidence and activity.
Austerity, on the other hand, freezes that flow. It might balance the books in the short term, but it starves the economy of growth.
Bridging our $210b infrastructure gap would take just 2% of our current $363b in total funds under management each year for 30 years – a relatively small slice that could transform our roads, water networks and cities. Yes, we need financial returns. Yes, fiduciary responsibility matters. But we also need a country worth retiring in.
This is not a call to “privatise” public assets or let capital markets run infrastructure. It’s a call to partner with them through structures that preserve public benefit, unlock fresh capital and deliver infrastructure for a highly productive society.
In part two in tomorrow’s Herald, we’ll demystify a key vehicle for making this happen.
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