Feb 19 2020
The New Zealand Government has recently announced its intention to lift investment in the country’s infrastructure to the highest level in more than 20 years. The New Zealand Upgrade Programme is expected to cost taxpayers $12 billion, with $8 billion allocated to specific projects. Most of this spending will be used to upgrade New Zealand’s roads, with a smaller share to be spent on rail infrastructure, as well as on health and education.
‘The goal of these investments is to ensure New Zealand’s infrastructure can continue to cope with projected population growth well into the future by improving the efficiency of the country’s freight network, and making roads safer for consumers,’ said IBISWorld Senior Industry Analyst James Caldwell.
Winners & Losers
While the overall economy is expected to benefit from the uptick in infrastructure investment, some industries are projected to benefit more than others. The Road and Bridge Construction industry, Heavy Industry and Other Non-Building Construction industry, Institutional Building Construction industry and Rail Transport industry are all forecast to benefit strongly from the infrastructure investment. Conversely, the programme is projected to constrain demand for the country’s Road Freight Transport industry, despite the substantial investment in New Zealand’s roads.
‘New Zealand has traditionally relied on road freight transport to carry out domestic freight tasks. However, the large investment in rail infrastructure is anticipated to improve the competitiveness of The Rail Freight Transport industry, and limit demand for road freight,’ said Mr Caldwell.
The New Zealand Upgrade Programme involves significant investment in New Zealand’s vital infrastructure, including:
- $5.3 billion on road upgrades
- $1.1 billion on rail infrastructure
- $300 million on health
- $400 million on schools
‘This splurge in infrastructure spending is expected to have a positive impact on the New Zealand economy, contributing to stronger GDP growth over the next decade. IBISWorld expects New Zealand’s GDP to grow by 2.4% in 2019-20,’ said Mr Caldwell.
New Zealand’s population is expected to expand at an annualised 1.8% over the five years through 2019-20, and is anticipated to surpass 5 million people in the current year. This growth has been fuelled by a booming economy and a relatively high standard of living. However, spending on the country’s vital infrastructure has struggled to keep pace with this growth. IBISWorld analysis suggests this result has led to rising instances of traffic congestion and overcrowding in the country’s major cities.
‘The New Zealand Upgrade Programme aims to reduce congestion and overcrowding by improving the country’s road network, particularly in urban areas. Additionally, the programme aims to encourage a move away from the Road Freight Transport industry, in favour of supporting the Rail Transport industry, in an attempt to reduce the number of vehicles on the country’s roads,’ said Mr Caldwell.
The New Zealand population is projected to grow at an annualised 1.0% over the five years through 2024-25. If not properly managed, this growth can lead to further overcrowding and traffic congestion. According to the New Zealand Transport Agency, traffic congestion costs the New Zealand economy over $1.3 billion per year in lost productivity. Additionally, an expansion in rail capacity is anticipated to limit the number of trucks on the country’s roads, by encouraging logistics companies to use rail infrastructure.
‘This infrastructure package represents an important step in future-proofing the New Zealand economy, by ensuring New Zealand has the infrastructure required to maintain economic growth in the future. Additionally, the investment in New Zealand’s rail network is likely to limit the number of freight trucks in New Zealand, improving the safety of road networks,’ said Mr Caldwell.
IBISWorld reports used to develop this release:
- Road and Bridge Construction in New Zealand
- Heavy Industry and Other Non-Building Construction in New Zealand
- Institutional Building Construction in New Zealand
- Rail Transport in New Zealand
- Road Freight Transport in New Zealand
For more information, to obtain industry reports, or arrange an interview with an analyst, please contact:
Strategic Media Advisor – IBISWorld Pty Ltd
Tel: 03 9906 3647