Government looks to fund large 'shovel-ready' infrastructure projects after COVID-19 lockdown

The Government is looking to fund large "shovel-ready" infrastructure projects to boost the economy after the COVID-19 lockdown, as the infrastructure sector projects 30 percent fewer jobs in three months. 

A group of industry leaders have been tasked by the Government to seek out projects that are ready to start as soon as the construction industry returns to normal, to help reduce the economic impact the lockdown has on New Zealand. 

The new projects will be funded in addition to, and build on, the Government's already massive $12 billion New Zealand Upgrade Programme announced in late 2019, and existing Provincial Growth Fund (PGF) infrastructure investments. 

Infrastructure Minister Shane Jones said on Wednesday the group tasked with finding the projects will be looking for those with a value of more than $10 million, to have an immediate stimulatory effect on the construction industry and the economy. 

The types of projects the Government would consider funding include water, transport, clean energy, and buildings. They would also need to have a public or regional benefit, create jobs and be able to get underway quickly. 

"Smaller projects will be considered if they demonstrate a direct and immediate benefit to the regional economies and communities in which they are based," Jones, a New Zealand First MP, said. 

"In the meantime, the Provincial Development Unit will continue to work with local councils to identify regional roading projects, particularly in the identified surge regions, to provide employment and boost local economies."

It comes as Infrastructure New Zealand CEO Paul Blair warned that 30 percent of construction workers could be laid off over the next three months unless immediate measures are taken to protect them and restart construction. 

"We have been speaking with a cross-section of our 140-plus members over the last two weeks to better understand the impacts of the lockdown on their business and the broader infrastructure sector," Blair said. 

"Contracting and construction companies could let go of up to 30 percent of their staff within three months under the current conditions... In six months, those providing advisory and other support services will be in a similar critical position."

Blair said Government subsidies, such as the wage subsidy scheme, might help the industry tick over, but said the sector is hoping for a reduction in the COVID-19 alert from level 4 to 3 so that some work can continue. 

"The infrastructure sector will be essential to New Zealand's rebuild and recovery. If we can mitigate infection risks and provide for a staged return of construction, New Zealand can emerge from this crisis as quickly as possible."

The Infrastructure Industry Reference Group, to be led by Crown Infrastructure Partners chairman Marx Binns, will suggest projects to ministers from the private and public sectors that would be ready to go within six months. 

Economic Development Minister Phil Twyford said the Government will then decide which could be funded, contracted and ready to go as soon as the construction workforce can return to work, which at this stage is expected to be in about three weeks.  

"We are focused on the health and wellbeing of New Zealanders first and foremost, and we need to get through the lockdown and out the other side of this pandemic," Twyford said. "However, the Government is also planning ahead for when that time comes."

Jones said while the economic impact of COVID-19 is yet to be understood, the Government "does not wish to see red tape stymie our eventual economy". 

He said the projects will help address the country's infrastructure deficit as well as create jobs.

The COVID-19 pandemic has weighed heavily on the Government's finances, with several billion-dollar packages announced to help workers as the country experiences four weeks of lockdown. 

  • Wage subsidy scheme that will be worth between $8 billion and $12 billion 
  • $500 million increase to public health funding for the immediate response
  • A six-month deferred mortgage scheme for home-owners affected by the virus, part of $6.25 billion package to support businesses 
  • A doubling of the Winter Energy Payment 
  • An increase to main benefits
  • Rent freezes and a ban on terminations of tenancies/evictions other than in exceptional circumstances