Govt to spend up big on infrastructure

FINANCE Minister Steven Joyce intends spending up large on new capital infrastructure over the next four years, perhaps opening the way to announce tax changes in Budget 2017 next month.

In a preBudget speech in Wellington yesterday, Mr Joyce announced an allocation of $11 billion over the next four Budgets, in addition to spending already included in previous announcements.

Putting the announcement into context, the net new capital allocated in the last four Budgets was $4.8 billion, of which $4.1 billion was funded through the proceeds of the mixedownership model programme.

In Budget 2016, the Government was forecasting $3.6 billion in new capital spending between Budget 2017 and Budget 2020 compared with the $11 billion announced yesterday.

The new capital investment, along with existing funding, came to $23 billion over the next four years — an average of nearly $6 billion a year, Mr Joyce said.

The Budget on May 25 will be Mr Joyce’s first as finance minister after he took over the role from now Prime Minister Bill English.

The capital commitment in Budget 2017 would be the biggest addition to the government’s capital stock in decades.

‘‘We are growing faster than we have for a long time and adding more jobs all over the country.

‘‘That’s a great thing. But to keep growing, it’s important we keep investing in the infrastructure that enables that growth.’’

The focus would be on infrastructure supporting growth, and capital investment this year would be increased to $4 billion,

including $812 million for reinstating State Highway 1 north and south of Kaikoura.

The Government wanted to extend its capital investment further through a greater use of publicprivate partnerships (PPPs) and joint ventures between central and local government and private investors.

Details of how the first tranche of money would be invested would be included in the Budget.

‘‘In anyone’s language, this is a very big capital spend over the next four years.’’

As a country, New Zealand was growing a bit like southeast Queensland or Sydney, when in

the past New Zealand grew in fits and starts, he said.

Other announcements made by Mr Joyce yesterday included setting a new mediumterm fiscal target of reducing net debt to between 10% and 15% of GDP by 2023.

Net debt was expected to be at 24.3% of GDP by the end of the current financial year and it was time to set a new target, he said.

‘‘It is appropriate any new debt target helps provide the capacity to absorb future shocks when they come along.

‘‘We have learnt from the global financial crisis and the Canterbury earthquakes shocks can

come along at any time and sometimes they come in pairs.’’

The Government had to borrow the equivalent of 20% of GDP to support New Zealand’s most vulnerable people through the global financial crisis and to support Canterbury after the quakes.

That allowed the Government to spread the cost of both events and allowed the economy to recover without extra taxes and without slashing entitlements — as was variously recommended by critics on the left and right, Mr Joyce said.

Now was the time to get net debt down, making sure the

country had the capacity to absorb and respond to the next challenges New Zealand faced.

The Government would also provide $2.5 million in funding over three years to help three local councils affected by the November earthquake.

They were the Kaikoura, Hurunui and Marlborough District Councils, which shouldered additional responsibilities after the magnitude 7.8 earthquake last year.

BusinessNZ welcomed the new spend of $11 billion on infrastructure supporting growth.

Chief executive Kirk Hope

said in key areas, including Kaikoura and Auckland, there was a need for priority spending on road and rail.

‘‘Deficient and congested roading have a direct impact on business productivity, so additional investment in transport infrastructure is welcome.

‘‘Also encouraging is the Government’s intention to use publicprivate partnerships and joint ventures in building appropriate infrastructure.’’

The challenge of Auckland’s infrastructure demanded a creative approach that could be better achieved by publicprivate partnership, he said.