New Zealand: What is at stake on 23 September (NZ elections) for infrastructure policy?

The big areas of difference between National and Labour in infrastructure policy are around transport, water, housing and funding mechanisms.

Generally speaking, New Zealand First seems closer to Labour than to National on these issues, but we would not expect infrastructure to feature strongly in coalition negotiations.

Transport

The difference here is over the emphasis – roads or public transport, in particular, rail. The next government – whether led by National or Labour - would invest in both, where they would diverge is on the spread of that investment.

National's big election play is the ten new Roads of National Significance: Labour's is the rapid rail network connecting Auckland, Tauranga and Hamilton.

The same divergence is evident in their competing transport packages for Auckland:

  • National would put in a new four-lane highway from Manukau to Drury and a north-western bus way
  • Labour would build a rapid rail link from the CBD to the airport and to West Auckland (instead of the bus way)

But National would also commit up to $267 million over the next three years to support commuter rail in Auckland and Wellington, and Labour would double the funding for regional road projects across the country (making the current ceiling of $140 million the floor and creating a new upper limit of $280 million).

Funding mechanisms

The broad point of difference here is that National sees a bigger role for the private sector, while Labour may be more inclined to equip local government with direct funding options.

Labour would engage in Public Private Partnerships (PPPs) for things like transport projects but would not use them for social provision – hospitals, prisons, schools. A case in point: National has said it will consider a PPP for the $1.2 billion Dunedin Hospital project, but Labour has ruled this out, saying the experience in the health sector internationally is that it would be too risky.

By contrast, Labour would allow Auckland Council to impose a fuel tax to help meet its transport funding shortfall – a request that National has been strongly resisting. Labour is also talking about targeted rates to capture the value uplift created by the new transport routes.

Both parties would use infrastructure bonds.

Water

National says no-one owns the water. Labour, the Greens and New Zealand First say that it is part of the public estate and that everyone owns it. This forms the basis for Labour's royalty scheme – still at this stage very much a work in progress.

Labour is committed to charging royalties on bottled water, irrigation schemes and other commercial uses. This would apply to large users only (although this has yet to be defined) and the royalty rates would be a matter for stakeholder consultation and Treasury input after the election.

The charges would vary depending on water scarcity and quality, and according to the policy architect, David Parker, will be "pretty low" – fewer than 10 cents a litre for pristine water which can be simply bottled and sent overseas, a few cents per thousand litres for irrigation.

The revenue raised is expected to be less than $500 million a year. Some of this would be directed to settling iwi interests and rights in freshwater with the balance being returned to the relevant regional councils for water management.

Labour would cancel the Crown Irrigation Fund, put in place by National in 2013 to promote development, but would leave in place the Freshwater Improvement Fund.

The reason National has avoided asserting ownership is that it will prompt claims under the Treaty of Waitangi, but water issues are lapping at National's feet also – primarily because it is widely recognised that the first come first served allocation system under the Resource Management Act cannot cope effectively with capacity constraints or with competing demands.

The Land and Water Forum in its final report, released in November 2012, discussed at length water use charges or taxes but did not make a recommendation because it could not reach a consensus. Nevertheless, shortly after the report's release, then Finance Minister Bill English accepted in response to questions from the Green Party in Parliament that water reform may include " developments in the pricing area".

Since then, the government has been mostly engaged with matters of water quality and irrigation infrastructure and is engaged with the Iwi Leadership Council on how to resolve Maori rights and interests.

From comments English has made recently, it seems that National's preference is to apply the template applied through the Marine and Coastal Areas (Takutai Moana) Act 2011. This is National's replacement for Labour's doomed Foreshore and Seabed Act and establishes a "non-ownership model" through which iwi can seek customary title in localised areas with which they have a long association.

Housing

Both Labour and National are promising big build programmes within the next 10 years – Labour 100,000 affordable homes nationwide, 50,000 of them in Auckland; National 34,000, all in Auckland, around 7,250 of which will be priced at less than $650,000.

National has also introduced a number of reforms to the Resource Management Act aimed at streamlining the construction consents process.

But, while increased supply is the only durable solution to the shortage of affordable housing, building is necessarily slow and New Zealand's population growth is currently very high by historic standards so despite the government's best efforts, the housing shortfall in Auckland gets worse every day.

National has been reluctant to act on the demand side, leaving that largely to a Reserve Bank concerned at the damage a property bust would do to the financial sector. This is a key point of policy divergence as Labour is all but committed to some form of capital gains tax excluding the family home. (We will discuss this in further detail in our tax commentary, due out soon.)

Labour would also:

  • extend the bright line test put in by National from two years to five
  • remove the ability to use tax losses on rental properties to off-set tax on other income, and
  • discourage residential property investment by foreigners.

Because the Reserve Bank's initiatives have hit first home buyers hardest, National has developed a series of measures aimed at mitigating this effect.

Both parties also have a range of initiatives to assist renters. Labour would proceed with increases to the accommodation supplement announced in this year's budget. It would also strengthen tenants' rights more significantly than National is prepared to do.

Chapman Tripp comments

This is not an exhaustive comparison. In many cases, the distance between the parties is not great in terms of their immediate policy intentions – e.g. telecommunications and energy (now that Labour has dropped its NZ Power proposal).

We have focused on the points of greatest or most practically significant divergence. New Zealand First is generally closer to Labour than to National in that it is pro-train, has supported a royalty on water and has criticised National's housing response as inadequate.

We would not discount NZ First seeking some sort of charge on foreign companies bottling New Zealand water but otherwise would not expect the issues we have discussed here to feature largely in any coalition negotiations.

The information in this article is for informative purposes only and should not be relied on as legal advice. Please contact Chapman Tripp for advice tailored to your situation.

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