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• Infrastructure Development

• Infrastructure Stocktake

• Infrastructure Audit
• Sustainable Development
• Linkages
• A Policy Framework
• Stocktake Reportback
• Media Statements

1. Based on analysis of the output from the various work streams, officials identified several critical issues for good quality infrastructure policy and planning.

2. Growing and maintaining an economy's reputation as an attractive location for investment requires assurance that high quality infrastructure will continue to be provided at reasonable cost, with arrangements for managing price volatility. This calls for:

• integration of infrastructure developments across sectors and regions;
• high quality asset management planning practices; and
• regular audit and/or ongoing monitoring against a comprehensive range of indicators²² in order to identify bottlenecks in a timely manner.

3. Where infrastructure is provided within a commercial framework, firms will invest in infrastructure if they expect to receive a reasonable return on that investment. Factors that impact on commercial investors' expected rates of return include:

• General economic conditions, e.g. cost of capital
• Demand conditions, e.g. household disposable income
• Supply conditions, e.g. behaviour by competitors, input costs
• Regulation and regulatory (un)certainty.

4. Intervention in infrastructure sectors should only occur when it is necessary to achieve the Government's objectives. Factors that suggest a need for government intervention include:

• Market dominance by providers resulting from natural monopoly characteristics
• Lack of information for market participants
• Co-ordination failures impeding the effectiveness of networks as a whole
• The existence of positive²³ and negative externalities
• The public good characteristics of some infrastructure services, e.g. non-excludability
• Differences between societal and commercial providers' objectives for investment, e.g. supply security and equitable access versus profit maximisation.

5. When intervening in infrastructure, the Government should consider the net benefits. Care should be taken to avoid regulatory failures such as:

• Contributing to over-supply and asset stranding
• Imposition of excessive costs on providers and users
• Regulatory uncertainty and undue reduction of expected rates of return, impeding investment
• Creating allocative and dynamic inefficiency by distorting price signals, e.g. when intervening to promote equity for target populations
• Use of inappropriate financing / funding mechanisms, e.g. those that "crowd out" more efficient investment by the private sector.

6. Government needs to select interventions appropriate for each instance. Possible interventions include:

• market creation and facilitating competition
• market adjustment, e.g. price adjustment through taxes, subsidies or regulation
• public provision
• other behaviour changing instruments, e.g. education, information, "norm shifting", arbitration and facilitation or income redistribution, quadruple bottom line reporting.

7. A substantial amount of capital is invested in infrastructure in New Zealand. The magnitude of capital invested in infrastructure sectors means that there is an emphasis on facilitating efficient and effective management of these assets, including re-investment and maintenance practices.

8. To achieve sustainability objectives, infrastructure policy should encourage:

• Sustainable use of scarce resources
• Demand management through pricing, education and other behaviour-changing instruments²⁴
• Efficiency improvements in supply
• Innovative solutions such as use of smaller scale alternatives and alternative supply sources.

9. Government policy should facilitate identification of tradeoffs and complementarities among sustainable development objectives. Decision-makers should be provided with high quality information that allows them to make informed decisions.

10. Government policy should facilitate identification of relevant externalities and, where possible and appropriate, ensure these are taken into account when decisions are taken on:

• consumption, to encourage demand management
• investment, to ensure supply options are adopted only where necessary.

11. National and regional economic, environmental and social impacts of infrastructure investment should be considered via inclusive, well-resourced planning processes.

12. Governance arrangements should facilitate:

• Co-ordination of infrastructure services, e.g. where service provision crosses Territorial Authority boundaries
• Efficient market operation, e.g. rule development and enforcement
• Secure service provision, including a clear understanding of roles and responsibilities.

²²Indicators should cover demand-side factors such as the quality of service and user satisfaction as well as supply-side measures such as physical asset stocks and financial performance.

²³Positive externalities arise when there are benefits of infrastructure investment over and above those captured by the supplier. In the case of broadband infrastructure, investment may stimulate horizontal productivity gains or contribute to achievement of social objectives. A private supplier would not capture these external benefits and may therefore invest to a level below that where net benefits are maximised, or in a timely manner.

²⁴In many instances, successful demand-management programmes require alternative modes of service to be available to users.