The year gone by was tough for all New Zealanders, and the civil construction sector has not been immune. With the change of government in 2023 leading to uncertainty across central and local government and private markets, and with New Zealand in poor economic shape, a planned and committed programme of work has essentially stopped as clients paused investment.
Practically overnight, infrastructure construction work dried up, severely impacting our civil construction members, and the partners who supply goods and services to them. The market has not yet recovered. The situation in Hawke’s Bay, the East Coast and Gisborne was exacerbated by the ongoing and devastating impact of Cyclone Gabrielle, not just inflicting emotional and physical pain on our communities but leaving wrecked infrastructure in its path.
Civil contractors build the “horizontal” infrastructure, constructing and maintaining the roads connecting our cities and towns; installing and caring for the water networks that bring fresh water to houses and wastewater to treatment plants; installing the cables that bring the internet to homes and businesses, and performing the earthworks that enable vertical construction. These are services all businesses and communities need, and you would think cyclone recovery would be a time of rebuilding and massive demand for the civil infrastructure construction sector, but that has not been the case.
Despite the recovery programme, levels of committed project work remain low in Hawke’s Bay and across the country, putting continuing strain on contractors. Across New Zealand in 2024, the industry set about taking necessary steps to survive the downturn, reducing staff and parking up equipment. Again, Hawke’s Bay and Gisborne have not been immune.
The real risk this gap in workflow now poses to central and local government clients is that once the government’s ambitious infrastructure programme gets underway in earnest (and it will), the civil construction industry may not have the workforce needed to deliver the projects. Building a reliable and skilled workforce is a shared responsibility between the contractors and their clients.
Businesses invest in people and equipment when they have confidence in a committed and continuous programme of work. Despite this, and while I believe the
first half of 2025 will continue to be challenging, there are signs we may start to see some improvement later in 2025, giving cause for some optimism. This comes on a number of fronts.
The government has now established a new infrastructure agency, National Infrastructure Funding and Financing Limited, responsible for the administration of infrastructure funds, partnering with agencies to deliver projects involving private finance, and connecting investors to relevant funds. Having alternative sources of funding for future major infrastructure investment is critical. Income tax, local body rates and excise taxes are falling well short of providing the finance required to fund and maintain infrastructure. Recent rate rises such as those experienced in Hawke’s Bay are unacceptable and unsustainable, and individual communities cannot and should not be expected to shoulder this burden alone.
The government campaigned on alternative infrastructure investment, and progress may result in critical infrastructure being built earlier than anticipated. The government has shown it is up for debate about the use of tolls to fund major roading projects, with consultation already held on tolling some roads of national significance. Whilst community opinion was mixed the reality is that our taxpayer and rate payer base is too small to fund major roading projects – they simply can’t get built without some form of user pays. Projects under the Government Policy Statement on Land Transport are beginning to be scoped and programmed.
It is pleasing to see enabling work for the four-laning of the Hawke’s Bay Expressway get under way, but actual construction of phase one doesn’t start until later this year, with the whole project delivered in four stages over a number of years. Under Local Water Done Well (the replacement for Three Waters under the previous government), some councils have already come together to look at establishing their new water entities, one of the barriers to progress to date. On that latter point, there may need to be some further government intervention to remove barriers created from local government parochialism.
It is essential that the five territorial authorities in Hawke’s Bay come together quickly to form a single water delivery entity – most individual councils simply don’t have the scale needed to deliver the major water infrastructure projects our communities need. There are, however, some continuing warning signs we need to be mindful of – a worse than expected New Zealand economic situation and outlook, growing geopolitical instability as new administrations come into power around the globe, and the increasingly fractious New Zealand political scene which makes cross party agreement for infrastructure investment unlikely, just to name a few.
Critical infrastructure is multi-generational, but infrastructure strategy and planning generally isn’t approached in that way. We have three year central and local government electoral cycles, and council long term plans only look out 10 years. Ideologies also shift as governments (central and local) change, bringing with them a “cancel culture” that does nothing to support a proper strategic view of infrastructure.
Until infrastructure is considered in a long-term, bi-partisan way, it will continue to be used as a political football and our communities will continue to suffer. Perhaps there is an opportunity for our Hawke’s Bay councils to demonstrate to the rest of the country that parochialism and partisanship can be set aside for the long-term benefit of our communities.
