‘It makes sense to borrow’

A $12 billion infrastructure investment being made by the Government will take advantage of low interest rates while stimulating the economy, the prime minister says.

Speaking at a Business Nz-hosted ‘‘state of the nation’’ event at Sky City in Auckland Jacinda Ardern went over the Government’s planned infrastructure investment package, announced on Wednesday.

Dubbed the New Zealand Upgrade Programme, the infrastructure spend is the biggest infrastructure package in a generation, Ardern said.

The programme would result in $6.8b being invested in transport projects, with $5.3b of that going towards roads and $1.1b being spent on rail.

But Opposition leader Simon Bridges said on Wednesday that the Government had failed to deliver on its infrastructure promises and was now using National’s ideas.

‘‘The Government has seen sense and restarted the previous National Government’s plan that was put on ice in 2018,’’ Bridges said.

Ardern said during the previous National government’s nine years in office, $32b was spent on infrastructure. Under the current coalition Government’s planned infrastructure projects, $62.6b would be spent over seven years, she said.

The previous government focused on roads of national significance while her government had focused on spreading the investment more evenly across the country with a focus on road safety and rural roads, she said.

The health sector was also getting a $300 million injection, with a focus on hospital upgrades, maternity care, children, and mental health.

More than 2000 schools were set to benefit from the infrastructure investment, she said.

In 2020, $4.8m would be spent on ‘‘decarbonisation’’ projects, which involved switching eight schools’ coal boilers to biomass boilers. ‘‘We have to start making that transition.’’

Ardern said, according to Treasury figures, New Zealand’s GDP growth was forecast to be 2.5 per cent in 2020, higher than growth forecasts of Australia, the UK, the US, Canada and Japan. It was forecast New Zealand would remain at higher growth levels than those countries through to 2021, she said.

The Government had aimed to reduce New Zealand’s debt to 20 per cent of gross domestic product (GDP – a measure of economic production) within five years of taking office.

‘‘We achieved that.’’

Treasury then advised that it was better to work within a range of between 15 and 25 per cent.

Ardern said the highest debt over the next four years would be 21.5 per cent relative to GDP, she said.

‘‘That is lower than the debt we inherited when we came into office. That puts us in a very good position to make some decisions.’’

Ardern said it made sense to borrow more while interest rates were low. ‘‘The cost of borrowing is incredibly low. It does make sense for government to borrow for those initiatives.’’

The International Monetary Fund, the Organisation for Economic Cooperation and Development and rating agencies had been saying now was the time for governments to invest in infrastructure projects as a way to stimulate the economy, she said.