Castles made of sand come tumbling down
Has so much ever been spent on infrastructure and so little built?
It’s enough to make you cry. As someone who had the opportunity to help with building some significant infrastructure in broadband, roading and rail during the term of the Key/ English Government, watching what has since happened in this country has been truly soul- destroying. Billions of dollars have been frittered away and so much time and opportunity have been wasted.
Our reputation for building things is in the toilet. We have gone from being a place that could procure some decent kit at a reasonable price, to a story of churning plans, blown budgets, constant restructuring and an appalling lack of delivery. All in six years.
Surely the news of the past two weeks means any vestigial reputation for fiscal competence the sixth Labour Government had has been shredded, on its track record with infrastructure alone. The AuditorGeneral’s report on the $ 15 billion NZ Upgrade and Shovel- Ready programmes was scathing. It now also transpires that the Treasury derided the most recent transport spending plans in the run- up to the election as “unfunded” and “undeliverable”.
Then there are the revelations about the state of KiwiRail’s Interislander ferry replacement programme. How could any Government preside over such a slowmoving train wreck for so long?
The ferry decision was the wrong one from the start. As Finance Minister in 2017, I clearly recall being advised that rail- enabled ferries would be a big, expensive mistake in this day and age. All over the world they were being retired, and virtually nobody was building new ones. The market had long since voted with its feet and we should too. Interestingly, at that time KiwiRail agreed.
The only fiscally responsible move was roll- on, roll- off ferries, which do a fine job of shifting freight and people between islands and continents all around the world. With most freight now in containers, getting it from shore to ship and ship to shore is simple and easy. In 2017, it made no sense for New Zealand to be the last country in the world building ferries with train tracks on them.
However, the Ardern Government knew better, as they claimed in so many areas. One thing that united the new coalition partners was a nostalgic love for all things heavy rail. They swiftly sent the message to KiwiRail that they wanted rail- enabled ferries, and would pay for them. Never mind that four of the five current ships on the strait are not rail- enabled and have no need to be — it was time to go back to the future. The rest of the world was wrong.
KiwiRail said thanks very much and proceeded to do what any organisation would do, given a benevolent funder with a huge chequebook. They designed huge new ferries, rail- enabled, and new terminals which could accommodate them, all things which not coincidentally would give them a legup over their only competitor who couldn’t access the same largesse. They would spare no taxpayer expense, and they didn’t. It is absolutely no surprise that the cost has blown out from $ 775 million to
$ 3b in just five years. And all this for an Interislander operation that had revenue of just $ 151m in the last financial year and a surplus of $ 12m.
Of course, if it was just the ferry story alone, perhaps Ardern, Robertson and Hipkins could be forgiven. But the same theme repeated in almost everything they touched in infrastructure.
It’s hard to understand how they could be so profligate, yet also so ineffective. Other Labour governments have had a reputation for big spending, but they haven’t been this bad.
I think it comes down to four things. First, Ardern and Co wanted to be transformative. They didn’t have well- developed plans but they knew they didn’t want to do ordinary things. The first announcement Jacinda Ardern made as leader was light rail to Auckland Airport. It was an undeveloped idea and there wasn’t any real demand for it or any
If it was just the ferry story alone, perhaps Ardern, Robertson and Hipkins could be forgiven. But the same theme repeated in almost everything they touched in infrastructure.
idea how much it would really cost, but it was different and new, and that was enough.
Second, they believed they had a mandate to spend money, particularly as a result of the pandemic. During Covid- 19, lots of governments opened the spending spigots and these guys truly drank that Kool- Aid. Big government was back. Interest rates were low, so you should borrow more and more. A bike bridge to Birkenhead, no worries. Light rail in Wellington, absolutely. Rainbows and unicorns for everyone.
Third, they had no idea how to execute, and no willingness to trust the private sector in any way to execute and make tradeoffs for them. Their deep suspicion of anyone who didn’t work for the public sector is now legendary across so many fields, but it particularly bit them in the backside on infrastructure, a field where most of the expertise the world over is in the private sector.
And fourth, they were obsessed with restructuring and centralising everything, often for no rhyme or reason beyond leaving their mark. They were obsessive about their legacy, rather than just doing things that worked for the people who put them into office. Ironically, as a result, their legacy will be tiny.
And so we have wasted so much time and so much money. Just think what roads, pipes and hospitals we could have built with the money that slipped through the Government’s fingers over that wasted six years. As I say, soul- destroying.
Still, that is all behind us. The new Government won’t be perfect of course, no Government is. But already it seems to have a refreshing understanding of the value of a dollar, and a realisation that the money they get to play with comes from Kiwis’ hard- earned incomes. Ministers are killing off some poorly- thought- out infrastructure projects and poorlythought- out restructurings. And that’s good. Better that than throw good money after bad.
None of it’s before time. This week’s anaemic GDP print shows what happens if you stop focusing on the economy or investing wisely for growth. The infrastructure we build over the next few years needs to be clearly dedicated to helping the country grow faster and build our prosperity. That will require a laser focus on choosing the right projects, funding them and managing them carefully.
Six years of spraying money around on fanciful ideas must be put behind us. The signs are that they finally will be. Happy Christmas everyone!
Steven Joyce is a former National ● Party Minister of Finance and Minister of Transport. He is director at Joyce Advisory, and the author of the recently- published book on his time in office, On The Record.