Explore infrastructure funding options, OECD urges


The OECD has called for greater exploration of options for funding public infrastructure in its latest New Zealand survey

The Organisation for Economic Co-operation and Development notes in its 2017 OECD Survey of New Zealand that the recent Auckland Unitary Plan will allow greater housing densification and some expansion of urban development limits, thus helping boost housing numbers.

However, it says “insufficient” infrastructure has constrained the extent to which densification is possible in central parts of Auckland.

As in other parts of the country, the OECD says, infrastructure provision is primarily the responsibility of local governments, which face financial constraints and weak incentives to invest in amenities to facilitate growth.AP_16203766592134-1040

It recommends options to broaden funding sources for public infrastructure be explored, including:

  • more user charging
  • targeted property taxes
  • more cost-reflective developer contributions
  • sharing in a tax base linked to local economic activity
  • further recourse to alternative delivery models such as public-private partnerships.

The OECD also says reforms to the urban planning system are also needed, and recommendations from the OECD’s Environmental Performance Review and the Productivity Commission’s Inquiry into Land Use Planning should be considered in order to deliver a more responsive and efficient planning system.

These criticisms notwithstanding, Finance Minister Steven Joyce has welcomed the OECD’s latest review of the New Zealand economy

“The 2017 OECD Survey of New Zealand notes New Zealand’s strong economic growth off the back of a booming tourism market, strong net inward migration, solid construction activity and supportive monetary policy,” Joyce says.

The report is also positive about New Zealand’s sound fiscal position with low public debt and a balanced budget.

“The report highlights that New Zealand outperforms most OECD economies in regards to our standard of living, health status, the quality of our education system and our overall environmental quality.

“It shows that New Zealand’s labour market is performing strongly with high levels of employment and relatively strong real wage growth since the Global Financial Crisis.

“New Zealand also has one of the lowest gender pay gaps in the whole of the OECD.”

The OECD makes recommendations under three key themes, making growth more sustainable and greener, improving productivity, and adapting to the changing labour market.

“The report is consistent with the government’s economic policy direction, with our strong focus through the Business Growth Agenda on increasing our international connections, encouraging more international investment, improving environmental outcomes, lifting the level of business research and development, and training young people in the skills needed for the modern world, especially in fields like engineering and ICT.”

“One of the OECD’s recommendations is adding debt-to-income limits to the Reserve Bank’s macro-prudential toolkit with attention to satisfying a cost benefit analysis,” Joyce says.

“Last week the Reserve Bank released its consultation document on that proposal, and I am looking forward seeing the responses to it.”

The OECD also recommend bringing forward the age of eligibility for Superannuation increase, lengthening the transition period, and indexing the pension age to life expectancy.

“The government is confident its existing plans for adjusting superannuation policy strike the right balance between ensuring sustainability of the scheme and providing time for current generations of working New Zealanders to respond to any change.”

Joyce said the OECD report will be helpful in assisting New Zealand policymakers to respond to current and emerging economic issues.

“It is always good to have our thinking tested by international agencies like the OECD. While we don’t always agree with the OECD’s proposed policy response, it is encouraging to see that government agencies and the OECD broadly aligned on the future opportunities and challenges facing the New Zealand economy.

Perhaps not surprisingly given that it is an election year, the Green Party has taken a different view, believing the survey has highlighted a “significant need” to green New Zealand’s economy if we want to sustain our current growth into the future.

The OECD found that short-term growth was being driven by tourism, migration, and construction activity’ however the longer term was being undermined by low productivity, the pollution of water from farming and urbanisation, and high and growing greenhouse gas emissions.

“Securing New Zealand’s long-term prosperity requires us to make the switch to a greener, more productive economy,” Green Party Co-leader James Shaw maintains.

“Productivity is low relative to the rest of the OECD and has gone nowhere after nine years of National. Another three years will change nothing.

“Lifting productivity is one of the key ways we can improve living standards for all New Zealanders, providing workers share in the productivity gains fairly.

“We need to invest more in R&D and lift the performance of our manufacturing sector in particular, rather than throw more and more money at the primary and extractive sectors to simply produce more.

“We need a Minister for Manufacturing.

“The OECD has also highlighted the risks of National’s short-term economic strategy for our rivers and the climate.

“Pollution from the uncontrolled expansion of farming and urbanisation is reducing water quality, while greenhouse gas emissions are high and continue to grow.

“Only the Green Party has the determination to clean up our rivers and put a fair price on carbon to help make the shift to a low-carbon economy,” Shaw claims.