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Does New Zealand's 2024 budget do what's right, or what's easy?

10 June 2024

The 2024 budget offers short-term tax relief, but productivity will be key long-term, writes Policy Fellow Robert White.

Does New Zealand's 2024 budget do what's right, or what's easy?
Historic underspending on maintenance has led to rising costs. Image credit: Shutterstock

The Te Ao Māori approach to kaitiakitanga (guardianship) of the environment is based on lore, rather than law: doing what’s right, rather than the minimum required.

This may be the aim of the average engineer, but it’s challenging from a financial perspective.

Most infrastructure funding comes from charges or taxes. But customers and communities don’t want to pay more than is necessary, especially when they’re struggling with rising costs.

On Thursday 30 May, the New Zealand budget 2024 outlined how the new National-led government’s aims to balance cost-of-living relief and economic growth.

At a glance: New Zealand 2024 budget infrastructure measures

  • Total investment: $68 billion over five years.
  • $4.1 billion for priority land transport projects, including Roads of National Significance.
  • $1.2 billion to support resilience and regional growth through a new Regional Infrastructure Fund.
  • $1 billion for flood and cyclone recovery.

In a three-year electoral cycle, politicians – centrally and locally – are always thinking of the next election.

With such limited time, they often focus on what’s expedient, rather than what’s necessarily right.

Infrastructure costs money to build and maintain.

A historic lack of maintenance has resulted in higher costs, as infrastructure assets fail and need replacing.

Councils rely on property taxes to fund local infrastructure

While the budget covers national infrastructure projects, core services such as water and roads are funded locally, typically via local property taxes, called rates.

Alongside the national budget, local councils are currently setting rates for the coming year.

Politically, the pressure is on to keep increases low. But local councils have “reached tipping point”, according to the Local Government New Zealand (LGNZ).

Auckland Council has announced the lowest rate rise in the country, at 6.8%. This is compared to rises of 16.4% in Wellington and 19.9% in Hamilton.

Inflation, meanwhile, is currently reported as 4.0% (in the 12 months to March 2024).

‘Sweating assets’ has contributed to New Zealand’s infrastructure challenges

Depreciation expenses – the cost of renewing the assets that councils own – feeds directly into rate calculations.

This has made it easy for councils to minimise rates in the past.

Underspending on renewals frees up money for other, more visible activities, without needing to increase rates.

Considered ‘sweating the asset’, this has contributed to the infrastructure deficit New Zealand is now experiencing.

Public spending cuts are paying for tax relief

The political pressure to provide tax relief, with no political will to increase debt, ultimately results in spending cuts.

This is happening across the board, with public service departments asked to identify savings of up to 7.5%.

With limited funding available for infrastructure, how the money is spent is critical.

Productivity is key

New Zealand’s productivity has been declining since the late 1980s. Performance has further weakened since the COVID-19 outbreak.

The government has identified productivity as a critical focus.

Increasing productivity generally, and within infrastructure specifically, will increase output, achieving more for less – without stretching physical and human resources – and generate more tax revenue.

This will help to close the gap between ‘lore’ and ‘law’, achieving better environmental and social outcomes.

As engineers, we need to do our bit: solving problems rather than just building things and using CPD to keep up to date with current issues, available technologies, and suitable innovations.

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  • Robert White, ICE Council member for Asia Pacific (non-Hong Kong) and consultant at Water Acumen