Will shovels in the ground lead to the road to recovery?

It’s now been 18 months since the Infrastructure Reference Group was established to identify a list of shovel-ready projects for the Government – those that would be ready to start as soon as the construction industry could get back to normal after the Covid-19 pandemic.

The criteria under which the projects would be assessed were clear and precise: the projects had to be ready (or near ready) for construction; they would provide either national or regional public benefit; they were aligned with Government policy; and could be deployed as part of a regional or national stimulatory package.

Over 1900 submissions were received from the public and private sector with a combined value of around $136 billion, from the Far North to Southland, ranging from the very large (those costing up to $250 million), such as Auckland’s Northwestern Busway, to the small (less than $5 million), such as a new surf lifesaving club at Taylors Mistake in Christchurch.

The Government announced a shortlist of 150 shovel-ready projects that would receive funding on 1 July 2020. A number of these projects have since been split into smaller components. Now here we are, 15 months further on, the pandemic is far from over, and the construction industry is grappling with a dire shortage of skilled workers and supply chain issues which are causing major delays for the supply of materials.

At a global level, some international shipping and building supply companies are no longer including New Zealand in their supply routes, with materials only travelling as far as Australia. New Zealand Building Industry Federation chief executive Julien Leys has pointed out that this is forcing building supply companies here to ship what they need at additional costs – as much as $65,000 per week according to one NZ company spoken to by Leys.

At a more local level, by mid-September some building product suppliers reported that they were running out of stock because of the ongoing Level 4 lockdown in Auckland. The Building Industry Federation estimates that around 90 per cent of building supplies are imported into or made in Auckland. This forced the Government to do a U turn, announcing a rule change to enable the release of critical building materials from the Auckland yards, including plasterboard, insulation and coated roofing steel.

All this does not bode well for progress on the Government’s shovel-ready projects. As of June 2021, of the 239 approved projects, 225 have been approved for Government funding, but construction had commenced on just 151 – less than two-thirds. Just 20 have been completed. There are so many that don’t even have shovels yet in the ground.

The whole point of the Government’s flagship programme was speed. Instead, we have seen a typical lack of urgency from the Government when it comes to delivery.

More concerning though is whether these projects still offer the best value for money. They were presented largely as ‘make work’ programmes that could be up and running in six to 12 months at a time when the Government thought it needed to get as many people in jobs as possible, helping to offset job losses elsewhere in the economy, such as from tourism and hospitality which have been decimated by the ongoing closures of our borders and the recurring lockdowns.

Even under these criteria, the projects have not been successful. Of the 12,900 FTE (full-time equivalent) jobs that were projected to eventuate, just 4280 have materialised.

Now that we are effectively at full employment, we have a labour shortage in the construction sector and there are supply constraints for construction resources. When the private construction sector is struggling with these issues, are these projects still the best way forwards?

What options provide the road to recovery?

In June this year, the NZ Infrastructure Commission released He Tūāpapa ki te Ora: Infrastructure for a Better Future – a high-level strategy consultation document that projects a 30-year plan for infrastructure in Aotearoa New Zealand. The draft document is now being prepared for submission to the Minister of Infrastructure.

Through an earlier NZ Infrastructure Commission survey, New Zealanders offered their views on infrastructure issues. The key messages were that it takes too long to build new transport options; that affordable housing and our ageing schools and hospitals are holding us back as a country; that more investment in our water networks is needed along with more investment in technology to save water; that the environment is a top priority; and that as a nation we create too much waste and our cities can’t keep up with its growth.

Instead of pursuing shovel-ready projects that have so far failed to meet the original objectives, we should be looking to build infrastructure that will allow the adoption of smarter transport solutions, including a stronger nationwide road network that would help bolster public transport networks.

We need to be planning to replace our ageing health and education facilities, ones that would enable all Kiwis to be healed and educated in 21st century facilities.

We need to be building the infrastructure now that will enable transport to switch to low-emission fuels – not just for electric and hybrid light vehicles, but also those that would allow freight operators to invest in more fuel-efficient, low- or even zero-emission heavy vehicles.

We should be supporting energy providers to develop more options for wind and water power generation and start to think about mothballing our fossil-fuel power stations.

Roads are key to growing our economy post Covid, and we need to move away from the current Government’s fixation on building walking and cycling lanes that cost more than $2 million per kilometre to build. They are nice to haves, but offer very little value for the money spent.