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78. Infrastructure faces major challenges. How well equipped are we to identify and respond to emerging needs?

79. An understanding of government's role is important to assist decisions on the policy issues in the discussions that follow. This section provides an overview of government's role in infrastructure. Attachment 3 contains further details on government's role and also summarises critical issues for good quality infrastructure policy and planning.

80. At the highest level, the Government's infrastructure role is to ensure that infrastructure makes its full contribution to sustainable development and growth. Central and local government, and the private sector own all infrastructure. Hence, the Government must give attention to over-arching regulatory policy issues that impact directly and indirectly on infrastructure (e.g. resource planning legislation) as well as to sector-specific regulation.^12,13

81. In essence, government's role in infrastructure provision is to ensure that policy and institutional arrangements promote infrastructure providers' and users' confidence. This means adopting policies to:

• Monitor infrastructure issues actively;
• Facilitate a smooth response to new infrastructure pressures as they emerge;
• Reduce the incidence and severity of unexpected service failures; and
• Assist transitions such as those arising from technological changes and shocks (including disasters).

Price rises can be expected as these adjustments take place, and the government has a role to ensure that rises are reasonable.

82. Infrastructure investment needs to be timely - early enough to avoid bottlenecks and promote confidence, but not so early that financial and other resources are committed too far in advance of need and asset stranding risks arise. Government may need to take the lead in promoting investment where bottlenecks are likely to be particularly costly in eroding confidence.

¹²Issues relating to market responsiveness will need government attention from time to time. For example, in electricity, a dry-period security margin is justified where commercial arrangements have been found not to provide infrastructure services to a level that is optimal from a societal point of view. Decisions on issues like this may need to be accompanied by decisions on funding, and in some circumstances, by decisions on ownership and governance as well.

¹³Some of government's general programmes to support economic development also impact on infrastructure. For example the Foundation for Research Science and Technology (FRST) has restructured its investment portfolios to reflect GIF and SDPoA principles and is now developing a new investment strategy for R&D on infrastructure to take account of Government and industry priorities. See Attachment 2.