National's Infrastructure Plan: Fixing NZ Land Transport Funding and Costs

Good morning, everyone.

I’m excited to be here at the Civil Contractors New Zealand conference.

I’d like to acknowledge David Howard, Alan Pollard and their team at Civil Contractors for hosting and for inviting me to speak.

It’s great to see you all here.

Today, I want to talk to you about this Government’s track record on infrastructure.

Then, I’ll announce our first steps on improving the land transport system, including how we plan to respond to Recommendation 2 in the Infrastructure Commission’s National Infrastructure Plan (NIP), which calls on Government to reform land transport funding and investment oversight.

But first, it’s election year – so forgive me, it’s about to get a little bit political.

National is the Party of Infrastructure.

Roads, rapid transit, hospitals, schools, fibre, and energy – the infrastructure services New Zealanders rely on everyday get built when National is in government.

We know that achieving genuine economic prosperity – the great challenge facing this country – depends on infrastructure that meets our needs, is good value for money, and is deliverable.

It’s the foundation everything else is built on.

As all of you here know, good infrastructure isn’t about the physical structures themselves – it’s about what those structures enable us to do.

New rapid transit projects are about unleashing growth – new homes, shops, offices, eateries, and jobs that follow.

Investing in our state highway network is about getting people and goods where they need to go, more quickly and more safely.

The education estate is about providing warm, dry, and safe classrooms so that our kids can focus on learning and thriving.

The Ultra-fast Broadband rollout was about modernising our country, helping to unlock our wildly successful gaming industry.

Renewable energy is an opportunity for our country to take advantage of our extraordinary competitive advantage, which will put downward pressure on power bills, reduce emissions, and secure our energy independence.

And, every $1 billion invested in infrastructure is estimated to support around 4,500 jobs.

For me, getting infrastructure right means people less occupied by the backdrop of an ordinary day, like when is my train coming? or will my street be OK in this rain?– and freer to focus on the ideas and opportunities that are important to them.

I want kiwis to be ambitious, knowing they are backed by an equally enterprising nation. I want all of us to enjoy better lives.

I truly believe that our country, at the bottom of the world, can choose to be wealthy, and modern, and prosperous.

That’s the vision.

National also has the track record in infrastructure to back it up.

By the end of this year, the Coalition will have started construction on over $20 billion worth of central government infrastructure projects.

We have signed two major Public Private Partnership (PPP) contracts: Stage 1 of the Northland Expressway, and Christchurch Men’s Prison – supporting thousands of jobs between them.

By early 2027, we will have started construction on six Roads of National Significance, which – within the space of just three years – is a significant achievement. And one that I need to talk about more often.

Behind it all sits a pipeline of funded projects across transport, health, education, and justice.

We are delivering better value for money too.

The average cost of a classroom has dropped from about $1.2m to around $620k. At the same time, we delivered more classrooms in 2024 than Labour did in 2023 – and even more again in 2025.

When it comes to Kāinga Ora (KO), they were building state homes for up to eight, nine, ten thousand per square metre. In late 2023, the average cost per square metre was about $3,400.

In the year to June 2026, the average cost had fallen to around $2,700 per square metre, and KO tells me that they are now contracting for as low as $2,600 per square metre.

This reduction in cost means that Government can provide and renew more social homes for those in need within the same funding envelope.

This is the power of value for money – it gives us the ability to do more with what we have.

Policy reform agenda On top of this, we have delivered a bold policy reform agenda in infrastructure.

Before we came into Government, in 2023, National campaigned on five infrastructure policies.

We have delivered on all five.

The first policy was a national infrastructure agency.

We established National Infrastructure Funding and Financing Limited (NIFFCo) on 1 December 2024 to be New Zealand’s shopfront for private capital in public infrastructure as well as the government’s centre of expertise on funding and financing.

To date, NIFFCo has delivered key transactions including: Arranging the Te Awa Lakes Infrastructure Funding and Financing (IFF) Act Levy, which will support 1,500 new homes in Hamilton.

Leading the early monetisation of the Crown’s loans to Chorus, which we provided to accelerate the UFB rollout. This deal delivered $702 million in net proceeds to the Crown and allowed the Government to reinvest funds into more of the infrastructure New Zealand needs – including Cambridge to Piarere, upgrades to hospitals, and hundreds of new classrooms.

The second policy was a National Infrastructure Plan.

We asked the independent Infrastructure Commission to produce a 30-year National Infrastructure Plan (NIP), and the Government responded – supporting all 16 recommendations in full or in part.

I won’t go into all the detail, but there are a few main actions that I think are worth pointing out.

For example, the Government has agreed to legislate the requirement for asset registers, asset management plans, and 10-year long-term capital plans, and reporting and auditing requirements for these in the Public Finance Act.

Regulated utilities and local government are required to have these artifacts by law – but we currently don’t hold central government to the same standard.

That is going to change.

We are also shifting independent assurance for infrastructure projects from Treasury to the Infrastructure Commission.

Ministers want better quality information when making investment decisions, and we want clear, actionable advice from the experts – Is this a good project? Is it needed now? Is it consistent with the asset management or long-term plan? How could it be improved? Could we strip some cost out? Is the project just bad or undeliverable, and we need to walk away?

We want those answers, because ultimately, we – Ministers – are accountable to the public for spending decisions. And rightly so.

I’ve heard the sector’s concerns around certainty and continuity of pipeline. I understand that.

Right now, there is about $290 billion worth of infrastructure projects in the pipeline – around $190 billion with a confirmed funding source.

Now, all parties probably agree on 90 to 99% of those projects. But there will be disagreements on some.

It’s a handful of big projects that make the headlines, but it is often the small projects that make New Zealand.

When it comes to those big projects, we need to move away from the rhetoric of needing a bipartisan pipeline – we are never going to agree on every single project, and that’s OK. That’s the nature of politics and of people having different views.

Instead, as I’ve often said, we should commit to building bipartisan consensus on the idea that governments of all flavours should use best practice to plan, select, fund and finance, deliver, and look after infrastructure.

And that’s something I have worked incredibly hard on over the past three years, including our response to the NIP.

Fixing the fundamentals of our system is the single best thing we can do to build a pipeline that endures political cycles.

A strong system will make it politically untenable for Ministers to just go out and announce unfunded, inadequately planned projects.

Where these farce projects have been stopped – like in the case of Auckland Light Rail – there are legitimate reasons for that.

Equally, a strong system should make it absolutely punishing for a new government to stop or pause genuinely good, funded projects that make it through the rigours of the system.

That’s the bit we have been missing – a credible and clear evidence-base for the public, the sector, and others to properly hold governments to account for their investment choices.

The third policy was innovative funding and financing tools.

National has progressed several tools to enable a responsive supply of infrastructure to support growth including: amending the Infrastructure Funding and Financing Act – which was passed into law last month, establishing the Incentives for Growth Fund for councils so that they are rewarded for every home consented, and progressing the replacement of the failed Development Contributions regime with a more flexible Development Levies system that will match our flexible planning system.

The fourth policy was City and Regional Deals.

The National-led government has signed two deals so far. One with Auckland and the other with Western Bay of Plenty – and a third is not so far away, so watch this space.

The Government already has a range of tools that interact with local government, such as NZTA co-funding for local roads, Urban Growth Partnerships, and Crown funding for significant projects.

So, these Deal aren’t intended to reinvent the wheel and create another layer of bureaucracy.

They are about identifying shared priorities and establishing strong lines of accountability, where sufficiently senior people from central government and council – who have the authority to make decisions – meet regularly. The deals will make it easier to work together, invest together, and get stuff done.

The fifth policy was a fast-track consents process.

31 projects have been consented under our Fast-track legislation representing tens of thousands of jobs and billions in investment – with more in the pipeline.

Legacy of infrastructure We have made significant progress in the infrastructure space this term, with a core focus on getting the underlying system settings right.

This progress is off the back of a long legacy of infrastructure delivery under National.

Under the Key Government, we rolled out the incredibly successful Ultra-fast Broadband on time, on budget.

National also electrified the Auckland rail network, built Waterview Tunnel, and started the City Rail Link project – which is opening on Sunday 13 September, and will be a game changer for Auckland.

Other parties talk a big game on infrastructure: The ironically named Shovel Ready programme, $30 billion Auckland Light Rail, the Auckland cycle bridge across the Harbour, the $45 billion mega-monstrosity twin three-lane road tunnels and a separate light rail tunnel under the Waitematā Harbour.

National delivers.

If we are re-elected, our plan is to continue the momentum, We did all of this in three years. We can and will do more.

Improving the land transport system Now I’d like to move onto transport.

New Zealand’s economic growth and productivity depend on a high-performing land transport network.

It connects people to jobs, education, and amenities; keeps goods and services flowing; and builds resilience by maintaining critical supply chains and community connections.

This Government has accomplished a lot in the transport space.

We are progressing major revenue reforms via the fleetwide transition to RUC, and time-of-use charging. We have reformed transport governance in Auckland. And we have supported productivity by overhauling inefficient land transport rules.

Our changes to warrant of fitness requirements alone are estimated to deliver $2.6 to $4.1 billion in benefits to the economy over the next 30 years.

The Government Policy Statement (GPS) on Land Transport 2024 outlined an ambitious programme of transport investment including 17 RoNS and major public transport projects.

NZTA is delivering on the GPS, and good progress has been made.

Ōtaki to north of Levin, the Hawke's Bay Expressway, Takitimu North Link Stage 1, and SH29 Tauriko West (Omanawa Bridge) are all under construction.

The first stage of the Northland Expressway (Warkworth to Te Hana) is due to start construction by the end of the year, and Cambridge to Piarere is due to start construction in early 2027.

By early next year, six RoNS will be under construction.

Key issues in the land transport system For the past decade, the land transport network has also been under significant strain and is facing complex and enduring challenges, which are only becoming more acute.

Today, I want to focus on two of these issues.

The first issue is that there is a funding gap between planned investment in land transport and National Land Transport Fund (NTLF) revenue.

Essentially there is a mismatch between what we are spending on land transport and the user revenue the land transport network generates.

New Zealand’s land transport system was set up to operate on a principle of user pays.

This serves two purposes: it helps generate enough revenue from users – the main beneficiaries – to maintain and expand the system to meet demand, and it encourages efficient use of the network because users face the costs of their choices.

But our system has been moving away from the principle of user pays for some time, with successive governments having to top up the NLTF with Crown grants and loans.

In 2018-21, only 3% of the National Land Transport Programme (NLTP) was funded by the Crown.

This grew to 24% in the 2021-24 NLTP, and 39% in the current NLTP (2024-2027). This Crown funding comes at the expense of other Government priorities.

One reason for this imbalance is because Fuel Excise Duty (FED) and Road User Charges (RUC) have not been changed since 2020, resulting in FED falling in real terms by around 21%.

This funding gap is also a long-term issue.

Based on current estimates, delivering the RoNS programme in full over the next 20 years would cost $56 billion. Funding this entirely from petrol tax and road user charges, would require a one-off 70% increase. Equivalent to a 49 cent per litre increase in petrol tax.

To be clear, this 49-cent-per-litre increase, would only allow the RONS to be delivered. It would not provide any funding for other major transport projects such as the Second Waitematā Harbour Crossing, or the Northwest Busway.

That kind of increase is obviously not going to happen.

So, on the ‘revenue’ side of narrowing the funding gap – we will need to utilise a mix of the NLTF (including FED and RUC settings), Crown funding, as well as a broader range of funding tools.

Infrastructure Funding and Financing Act levies, tolls, toll concessions, and time of use charging will be effective tools to accelerate and support specific projects, localised networks, or groups of projects.

However, these project-specific tools will not provide general funding for the land transport system as a whole.

As such, the Government will use them where they make sense, like on corridors with high vehicle movements per day, significant land value uplift potential, or projects with a large, identifiable group of beneficiaries.

This will take pressure off the NLTF and take pressure off the demand for Crown funding.

There is another side to narrowing the funding gap – getting costs down.

Which brings me to the second issue, major transport project costs in this country are too high. Delivering major transport projects in New Zealand – including motorways, expressways, and public transport – is expected to cost more per kilometre in real terms than earlier New Zealand projects, and significantly more than the OECD average.

Benefit to cost ratios in land transport have also fallen from a minimum of 4:1 in the 1990s to 1.2:1 in the 2010s.

These cost comparisons have largely been made against business case estimates. But, in practice, major projects frequently underperform against cost estimates in both the frequency and extent of overruns.

This is not a system that is delivering cost-effectively.

Ministers are deeply frustrated, and we simply cannot continue to accept it.

I was on a Stuff Political Infrastructure Panel last week and my friend and colleague, Matua Shane Jones, said that he thinks the Northland Expressway (Warkworth to Te Hana) will be the last four-lane highway built in New Zealand.

I see where he is coming from.

But I respectfully disagree.

I think we can and should build more four lane highways.

Perhaps just not at their current design, scope or specifications – or not under the current institutional or regulatory settings.

We can build more.

We just need to find a way to do it in a more cost-effective way. I challenge and encourage all of you in this room to help with that.

According to research from the Infrastructure Commission, New Zealand’s infrastructure cost premiums are concentrated in complex, large-scale projects such as motorways, road tunnels, and underground rail.

These premiums, relative to other countries, are driven in part by: higher input costs for equipment and machinery, land, and some construction materials (especially concrete); more difficult geology and terrain; and more costly consenting and planning processes.

They may also be driven by factors internal to the land transport system such as weak institutional incentives to prioritise low-cost solutions, over-specification and over-scoping of projects, or system settings that allow cost and delivery commitments to be made too early.

It’s worth noting that construction costs have also increased due to factors largely outside of our control such as global supply chain disruption, – initially from COVID-19 and more recently from conflict in the Middle East.

So those are the two key problems: The funding gap, and The cost of major transport projects being too high.

First steps to fix land transport system Fixing the land transport system will take a sustained effort over many years. To start, we should focus on decreasing costs of major transport projects, utilising a broader range of funding tools (which is work we already have underway), and reforming land transport funding and oversight.

So today, I am pleased to announce that Cabinet has agreed to a focused programme of work in the short-term, which includes: An independent report on the cost drivers of major land transport projects in New Zealand, led by the Infrastructure Commission; and Progressing work on detailed options to reform land transport funding and oversight as a first step to responding to Recommendation 2 of the NIP.

Independent cost driver report Let’s get into the independent cost driver report.

In my view, the first step to decrease major transport costs is to get an evidence-based and detailed understanding of why current costs are so expensive in New Zealand relative to other OECD countries and relative to earlier projects in our own country.

Every time I ask a different person, I get a different answer.

It’s the RMA and consenting, it’s the IPCC’s RCP 8.5 scenario, it’s the Alliance model, it’s gold plating, it’s lack of competition for building materials, it’s poor procurement practices, it’s poor institutional settings and incentives, it’s the excessive risk transfer to contractors, it’s any number of things.

Most likely, it’s a mix. But I want to get to the bottom of it.

As such, I have directed the Commission to prepare a report on the cost drivers of major land transport projects in New Zealand.

This report is due by Q1 2027.

Once we have a better understanding of cost drivers, we can consider actions to reduce premiums where possible, as some may be driven by forces that we can’t control.

As part of this report, I’ve asked the Commission to provide sensible recommendations on how we can get costs down on projects.

Reform land transport funding and oversight Now I’ll briefly touch on our work to reform land transport funding and oversight.

We are doing this work in response to Recommendation 2 in the NIP: Reform the land transport funding and investment oversight system to ensure financial sustainability and enhance economic and social outcomes by aligning investment expectations with available revenue and strengthening efficiency and accountability in delivery.

As part of the Government response, we supported this in full, and there are many ways to go about it. We could: return to a system where investment is confined to user revenues, with investment and borrowing decisions made at arm’s length from Government; establish economic regulation or other independent oversight; create rules or structures that must prioritise funds for renewals and maintenance; put in place independent assurance and clear performance standards; and/or review institutional structure, legislation and funding instruments.

Long story short is that I remain open to all of these options – and others.

I have asked the Ministry for Cities, Environment, Regions and Transport (MCERT) to develop more detailed options and a plan for this reform. I will report back to Cabinet on these detailed options in early 2027.

My overall goal is to create a high-performing land transport system where maintenance and renewals are prioritised, the network is mostly funded from users and beneficiaries, investment aligns with demand, and where major projects are sequenced according to value for money.

We are on our way there with the Major Transport Projects Pipeline, and the recent transfer of central government infrastructure assurance to the Commission – but there is more we can do.

Timing of GPS 2027 Given the challenges facing land transport, I am intending to undertake public consultation on a draft GPS 2027 early next year, after the election.

This staging will give us time to consider both: the findings of the Infrastructure Commission’s report on cost drivers, and the direction of land transport funding and oversight reform.

Waiting a few months to get GPS 2027 right is critical. This document will shape land transport investment for 10-years.

We have big ambitions in land transport. We want to land a GPS that balances our fiscal strategy, economic growth agenda, and resilience and asset management objectives.

I am conscious that Regional Transport Committees are awaiting clarity from the Government on our investment strategy and intentions for the next period.

The current land transport investment cycle means Committees have already started to develop Regional Land Transport Plans.

As such, today I am issuing a statement that outlines the fiscal realities and the priorities for land transport to signal the likely direction of GPS 2027.

The statement signals that the Government is focused on value for money and cost control, maintenance and resilience of the transport network, productivity enhancing investments, ongoing improvements to safety, and maximising the use of the existing network – especially where it creates opportunities to increase housing development.

And I just want to highlight that last point.

That the GPS will likely include a focus on transit-oriented development – or TOD.

This means supporting housing growth through alignment with spatial plans and concentrating development around transit nodes, key corridors, and strategic connections.

It seems completely nuts that TOD has not been featured in a GPS before. The consideration of housing and transport – together – is critical.

Getting it right will allow more people to make the most of our big transport investments like City Rail Link, it supports growth and investment in housing and businesses, and it’s a fantastic opportunity to lift productivity.

I want to ensure that any GPS we deliver recognises the potential of TOD.

Conclusion To finish, I’d like to thank Alan and the team at Civil Contractors NZ for inviting me to speak.

I’d also like to thank you all for your hard work in the sector and for your commitment to building a better New Zealand.

I look forward to your questions.