KiwiBuild spearheads $42b capital spending programme

The new government will pump in $2 billion over the next three years to kick off the KiwiBuild programme targeting 100,000 affordable houses being built over the next decade.

The policy is one of the new administration’s headline programmes in a planned $41.7 billion capital spend over the next five years, the Treasury’s half-year economic and fiscal update forecasts show, with an available capital allowance of $12.6 billion and including $7.7 billion of contributions to the New Zealand Superannuation Fund.

Under the KiwiBuild programme the government will buy private developments off the plans and build new houses over the next three years, after which the $2 billion of capital will be recycled as dwellings are sold and reinvested.

The net result is expected to boost nominal residential investment by about 10% in the June 2022 year, which would be $5.4 billion across the forecast period. Residential investment is seen contracting 1.5% in 2018 as capacity and finance constraints grow in the construction sector, before expanding in subsequent years to a peak 8% in 2021.

“There is a high degree of uncertainty about the impact of policies designed to alleviate capacity constraints, given the limited detail on what form they will take or when they will come into effect,” the document said. “These policies could be more effective than assumed and mean that aggregate residential investment expands faster to meet the demand created by KiwiBuild.

“Conversely, constraints may have a more prolonged impact and it could take longer until policies take effect,” it said.

Finance Minister Grant Robertson said future capital spending would be “significantly larger” than the previous administration to make up for what he said was an “infrastructure deficit.”

Education is set to get $4 billion of capital spending on physical assets over the next five years while the New Zealand Transport Agency will get $6.7 billion for the national road network.

“Capital investments will be a key focus of our budgets, in particular, ensuring that infrastructure and services are in place to support improved well-being and that as a country we are actively planning for our future,” Mr Robertson said in his budget policy statement. “Investing in infrastructure relating to housing (through KiwiBuild), integrated urban development and sustainable transport will also be key priorities for the government.”

The increased capital spending also delivers on Labour’s coalition agreement with New Zealand First and the confidence and supply deal with the Greens. Those agreements amounted to $3.7 billion, which Mr Robertson said “will deliver sustainable and inclusive growth and the strong public services want and need.”

The $1 billion provincial growth fund, overseen by Regional Economic Development Minister Shane Jones, is expected to be spread across three tiers of investment, small-scale projections, medium- to large-scale projections such as the one billion trees programme, and large infrastructure. 

(BusinessDesk)