As you know, yesterday I did the nine yards on a new fresh faced member of the NZ Initiative ( Atlas Network ) who with a Phd in history suddenly set to work as a research fellow focused on Infrastructure on July 18 2022.
A history expert working on Infrastructure?
That new recruit's name is Matthew Birchall and coincidentally he published an article in the NZ Herald yesterday - titled "Deficit obsession ignores abysmal state of Kiwi infrastructure delivery" - Matthew Birchall.
Birchall graduated from mere Research Fellow to Senior Fellow at the NZ Initiative in November 2023 ( after the election ), and perhaps it was telling that his profile on LinkedIn includes how "New Zealand used to get things done" and his article yesterday ends with the sentence, "Recognising the root cause of our failing infrastructure is investment inefficiency is the key to getting back on track."
Yes "get things done" and "getting back on track", where have you seen that before?
Yes well Birchall set about telling us that framing things up as a deficit was counterproductive because it led us to think we could build our way out of the mess - and he lamented that the deficit narrative obscures a harsher truth about the poor state of infrastructure delivery.
"The New Zealand Infrastructure Commission notes New Zealand currently spends around 5.5 per cent of GDP on public infrastructure, a greater proportion than Australia and the OECD median." - wrote Birchall.
But like sands through the hourglass a brand new report at the New Zealand Infrastructure Commission fresh out this morning points out that Birchall was wrong - we don't spend 5.5 per cent of GDP on public infrastructure - we spend 5.8 per cent ( lol ) and this has been the case since after the 1990s. Our rate of infrastructure investment has been extremely consistent. We spend one out of every 17 dollars we earn as a country (5.8% of GDP) on infrastructure investment.
Birchall notes that this investment is higher than Australia and the OECD median but what about the efficiency of investment?
"The efficiency of infrastructure investment is determined partly by geography – larger, more densely populated countries tend to be more efficient and we are a small population, on long shaky Isles. However part of this is effected by the quality of our infrastructure investment decision-making." - NZ Infrastructure Commission.
So Birchall never pointed out that we are at a disadvantage because of our small size - when he wrote, "we rank near the bottom 10 per cent of high-income countries for the efficiency of our infrastructure spending."
Notably Birchall never mentioned he was using a 2021 based report to inform his opinion and he'd used a BIM that was also out of date on this point - nor that we beat Norway ( lol ) - nor that we invested way more than Australia and the OECD median in Telecommunications.
However Birchall skipped past that and cited the briefing to the incoming minister Simeon Brown ( advised by Atlas Network press secretary Ben Craven ) :
"Our infrastructure is becoming more expensive to build and maintain, infrastructure prices have risen one-third faster than prices elsewhere in the economy, while infrastructure construction productivity has grown at one-third the rate of the overall economy.” wailed Birchall ...
Sounds bad but Birchall never told you that we are relatively doing okay :
"New Zealand’s construction productivity growth is in the middle of the pack compared to other OECD countries. Over the last two business cycles (2000-2008 and 2008-2020) we had the thirteenth-fastest construction labour productivity growth in the OECD."
Birchall never explored what the money gets spent on neither.
Okay so look sorry to bore you - let's get more interesting.
I noticed that the article Birchall had rushed to publish yesterday came in the context of a flurry of attention given to the $200 Billion Infrastructure Deficit in Christopher Luxon's State of the Nation speech on Sunday - you know tough decisions and how we are very fragile.
Some of the response in media came almost immediately on Sunday when Thomas Coughlan wrote that Luxon was accusing Labour of mismanagement by stating Labour had underfunded its promises by $200 Billion.
Chippy called that nonsense - and Coughlan then baffled us all with BS and concluded Luxon and Chippy were both wrong and right - something I have called Thomas out for in the past.
The $210 Billion Infrastructure Deficit is an estimate of future needs and is not new - in fact it was talked about back on 10 August in the NZ Herald by Anne Gibson.
Anne wrote a good explainer article where she detailed how money is allocated and paid for projects in different ways...eg. Alliances versus PPPs and how allocation is just reserving funds - and it's not spent until milestones and phases are reached.
But we'll always have a deficit as we grow larger.
Anyway - it did not take long for Bernard Hickey to apply his razor sharp, independent critical mind to the claims being made by Luxon in his State of the Nation Speech and Presser on Monday - and he wrote some stunning material on his blog the Kākā - where he detailed a chat with Standard and Poors.
"However, S&P Global’s Head of Government ratings, Anthony Walker, told me in an interview to air in my When The Facts Change weekly podcast via The Spinoff tomorrow that the nation’s finances were not fragile and there was the equivalent of 30% of GDP ($120 billion) borrowing headroom left before any danger of a credit rating downgrade. He said there was immense investor demand both globally and locally to lend tens of billions to the central Government in vanilla bonds to repair and extend infrastructure such as water and roads.
That would be the cheapest and fastest way for Aotearoa-NZ to address its $100 billion infrastructure deficit, which the Infrastructure Commission has indicated could grow over $200 billion in coming years."
Bernard also comments on what the Government is planning to do anyway despite how Walker told him bond investors would much prefer the Crown used its own AAA-rated balance sheet to borrow the money, which would also be much cheaper for the Crown.
"Instead of using its balance sheet to spread the cost of infrastructure crucial to solving our housing, climate and poverty issues, the National-ACT-NZ First Government is pushing ahead with a piecemeal approach. It plans to encourage councils to fund the investment in dribs and drabs through a series of ‘city deals’ that cobble together council bond issues with public-private-partnerships.." - Bernard Hickey - The Kākā.
Yes and we all know that back on 14 June 2023 Act announced “A new report highlights the need for New Zealand to adopt ACT’s policy of using private enterprise and local knowledge to get its infrastructure up to speed,” says ACT’s Infrastructure spokesperson Simon Court.
Yes that report was written by Birchall. ( Atlas )
One month later and National were announcing their Transport policy on 31 July 2023 - spouting on about how private funding would include a mix of value capture, cost recovery, equity financing and how it was setting up an agency to mange public private partnerships - ( yes a centralised bureaucracy lol ).
At the time Bishop and Brown looked a bit stupid because their Transport policy appeared to use old costings and in only four projects they were low balling costs by $4.8 Billion.
Seems Simeon Brown ( never been a Minister ) did not factor in inflation or up to date costings for roading materials and by 1 August 2023 Chippy was calling these guys out for another $10 Billion hole in their numbers. That was $9.52 Billion in what National called "Private Funding" and Luxon started waffling about pension funds and left the door open to China to fund our roads.
Anyway - then the news broke that Simeon Brown was up to $24.4 Billion out of whack - between what National went into the election selling us all for his Transport Budget and now - "we are working on that" is the excuse as the first 100 days ends on 8 March 2024, and Brown tried to get a new GPS written to explain how he's going to fund that gap.
These were the conditions facing Birchall as he decided to cobble together a stabilising opinion - in the NZ Herald - the one I discussed above how - it's about investment efficiency not the deficit..
I wondered why Bernard's amazing article had not been platformed in the NZ Herald and I noted he normally has a weekly column - and last year he would have been four weeks into it by now...but no...the last article by Bernard at the NZ Herald was way back on 18 December 2023.
Meanwhile the NZ Initiative had multiple articles pushing their Atlas Network thinking in the NZ Herald - whether it was about the Mike Smith court case suing big polluters - or Birchall - and his waffling about Infrastructure efficiency.
We all know that part of the problem here is the election cycle and the likes of Willis ( Atlas ) cancelling projects for ideological reasons ( Tax cuts ) and then - when the next Labour Government gets in - we start again...and in the meantime projects start but never finish.
Maybe if we listened to Standard and Poors and used our balance sheet properly we'd save a heap of money instead of listening to Luxon and Willis and their Atlas Network ideologies.
Atlas Network Watch...
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