75 of New Zealand’s infrastructure leaders visited Singapore, Hong Kong, Beijing and Shanghai this year to see how they have been so successful at accommodating growth and lifting national performance. What they saw was a real wake-up call, says Infrastructure New Zealand CEO Stephen Selwood
We all know about China’s incredible economic story and most now know that Singapore is one of the wealthiest countries in the world. But equally striking was the progress each government is making in terms of social and environmental outcomes. The same development model that the Singapore, Hong Kong and Chinese governments have successfully used to turn their economies around is now being applied to lifestyle and the natural environment.
Cities are becoming cleaner, more sustainable and more liveable.
Further, by growing efficiently, costs are being contained to ensure that rising incomes are not consumed by higher accommodation and living costs. Lower costs of living result in more competitive economies and higher disposable incomes.
The key to this success is a national development approach to enabling growth and tackling challenges.
Singapore and China have become expert in setting a clear vision for national development, defining the outcomes they want the nation to achieve and then delivering on those objectives through joined up agencies, plans and projects.
Certainty of planning enables the market to invest with confidence, enabling a virtuous cycle of public and private sector investment.
This approach to national development planning is similar to that which we have seen in successful western democracies like Ireland, Scotland and Scandinavia, and across the Australian states.
In New Zealand, we don’t manage our economy or our wider society that way.
Our system devolves regional and urban planning to councils. Central government provides little guidance as to how best planning can meet national objectives.
At the same time, major funding sources, principally GST, income and corporate tax go to central government.
This means councils operate on a narrow funding base comprising property rates and user charges with only a weak linkage to economic performance.
Ratepayers typically oppose taxes being increased to pay for growth, so elected officials keep rates low and there is seldom enough money to fund much needed infrastructure.
Under pressure to contain costs, councils regulate land supply and defer infrastructure investment. Lack of infrastructure serviced land causes land and home prices to rise resulting in a housing affordability crisis for those on low to median incomes. Increased housing costs mean less disposable income, a decline in well-being and an increase in inequality and other social challenges.
Compounding matters further, weak infrastructure imposes costs on business, disincentivises investment and constrains our ability to lift productivity.
We all know that Singapore and China have vastly different political systems to New Zealand. But this is no reason why we cannot emulate their ability to set a vision and develop a national plan to unlock the potential of our free market economy.
We are a small nation endowed with natural resources and talented people. While we lack scale, we could be agile and able to respond quickly to national opportunities and challenges. This should be New Zealand’s competitive advantage. But to realise this potential we need to lift our vision beyond self-interest and local parochialism and develop a system which incentivises partnership and collaboration.
The resource management framework has not only failed the environment, its focus on negative effects has left New Zealand with an unclear vision and pathway for how the country should grow and develop. It must go.
We need to simplify local government structure and laws and link funding to investment in regional and national development.
Central government has to get back into planning. New Zealand needs a national plan which identifies and enables investment in land, housing, transport and other critical services needed to enable sustainable development and tackle major challenges like climate change.
Rather than just managing negative effects, the system should promote environmental restoration and development.
Planning is a very powerful tool, so we need to balance centralised power with greater devolution of funding and delivery. We need stronger regions with spatial planning capability and access to GST or a share of income and corporate taxes to fund and deliver their plans.
Central government should transition from a funder and provider of services, to an enabler of strengthened regions via strong national guidance.
This means substantive change. It’s going to take some time to empower regions to plan, fund and deliver national development.
The first milestone could be for the Government to use financial incentives like ‘city’ or ‘regional’ deals, to incentivise councils to work together, partner with business and promote alignment between national, regional and local objectives.
Once benefits of collaboration can be tangibly demonstrated this can be a stepping stone to full reform of our planning laws and the purpose, form and funding of local government.
Establishing a system that aligns central, regional and local council planning, funding and delivery and which promotes individual enterprise, entrepreneurship and local identity provides an opportunity to improve wellbeing for all of New Zealand.
A copy of the latest Infrastructure New Zealand report National Development: Insights from Asia can be found here.