The value of infrastructure investment in securing New Zealand’s COVID-19 recovery

This article was published in the New Zealand Infrastructure Review in May 2022. The full publication can be found here.

The COVID-19 pandemic necessitated significant public health and economic policy responses centred on addressing the human impacts of the health crisis. Yet, measures aimed to slow the spread of the virus are having far reaching impacts on New Zealand society and the wider economy. Progress against COVID-19 remains central to the economic recovery, with infrastructure stimulus providing a key opportunity to keep people employed, stimulate the regions and maintain productive capacity – thereby enabling New Zealand to recover in the quickest time possible. Infrastructure investment is not just being relied upon to deliver economic stimulus; it is critical to the long-term wellbeing of New Zealanders.

How are we tracking since the COVID-19 pandemic hit?

The horizontal and vertical infrastructure sectors were some of the hardest hit by COVID-19 disruptions. Relative to 2019, activity in these sectors experienced marked declines since Q2 2020. Vertical infrastructure, a sector predominantly driven by private investment, experienced the greatest decline in activity, falling by 27% in Q2 2020 relative to Q2 2019, and more recently by 19% in Q3 2021 relative to Q3 2019. The residential infrastructure sector has been alone in showing recovery since Q2 2020.

Gross Domestic Product (E), percentage change in Q2 2020 to Q3 2021, relative to the quarter in 2019

Source: Deloitte, Statistics New Zealand

Delivery of timely stimulus is however not without its challenges. In April 2020, the Government tasked the Infrastructure Industry Reference Group to identify infrastructure projects, above $10 million in value, that were ready to start (Shovel Ready) in the near term, to increase the speed of benefits realisation, and thereby reduce the anticipated economic impacts of the COVID-19 pandemic. Almost two years later, there is still some way to go to achieve the projections set for Shovel Ready projects as shown in the table below.


Looking forward, according to Te Waihanga | New Zealand Infrastructure Commission, the current infrastructure pipeline is $65 billion, including 2,588 ongoing and planned projects. Approximately 47% will be invested in Auckland and a further 9% in Wellington. Over 50% of the pipeline is focused on key enabling infrastructure (transport 35% and water 19%).

Infrastructure investment pipeline by region and sector in New Zealand
(as per the pipeline at December 2021)


Source: Deloitte, based on Te Waihanga’s Infrastructure Pipeline data

What are the key challenges holding us back?

Investment in infrastructure is a key policy focus of Government but requires careful planning and delivery monitoring to achieve desired outcomes. Evidence-based decision making is critical when it comes to prioritising projects in the short-term.

Infrastructure programmes and projects are facing budget, delivery schedule and associated benefits realisation delays. This can be due to a range of factors including supply chain disruptions, a tight labour market and unprecedented cost escalation due to external factors. In addition, complexity and interrelationships for larger scale programmes of work also necessitate time consuming scoping and business case assessment work to be completed before project delivery works can commence.

Supply disruptions

Global logistics are under ongoing pressure, with conditions unlikely to normalise before the end of 2022. Logistics costs are, therefore, likely to remain elevated, and shipping reliability will remain a challenge.

The impact of the pandemic has been significant on supply chain. Shipping capacity was idled in the early stages of the pandemic. However, an unexpected surge in consumer demand in 2020, combined with idled capacity, industrial action and COVID related disruptions at key ports, has caused congestion throughout the global supply chain with consequent flow on effects for New Zealand. There is now an international shortage of containers and most available shipping capacity is in use. Schedule reliability is currently well below pre-pandemic levels, with congestion at major international ports. As a result of this situation, global container rates have increased dramatically.

The New Zealand supply chain is under pressure from global disruption to shipping, combined with congestion at local ports. Based on our engagement with port CEOs and operations managers, the general view is that conditions are unlikely to normalise for at least another 12-18 months, if not longer, keeping upwards pressure on logistics costs. Indeed, an ongoing shortage of truck drivers and increasing fuel costs in New Zealand could likely add further pressure to logistics costs. Further, New Zealand’s transition away from a zero-COVID approach will also likely cause ongoing disruption.

Access to labour

Even during the pandemic, the infrastructure sector was a significant contributor to the New Zealand economy. In 2021, the sector accounted for 10% of all jobs in the economy. The sector has a relatively high proportion of self-employed workers, at around 19%.2 Total employment in the sector has increased since 2019 as shown in the chart below. However, access to labour and labour shortages to meet heightened demand is expected to persist. As noted by Te Waihanga recently, industry projections suggest New Zealand will have a shortfall of approximately 118,500 construction workers in 2024.3

Persons employed by employment status in the construction sector, 2019 vs 2021

Source: Deloitte, Statistics New Zealand

Border restrictions have increased the pressure on an already stretched construction sector, which is suffering from a shortage of workers. While international borders are starting to reopen, it may still be some time off before that readily extends to skilled permanent and temporary migrants – New Zealand’s general solution to short term skill shortages. In addition, the high level of global infrastructure investment means that New Zealand contractors may not see immediate relief when international borders are reopened.

Cost escalation

There have also been construction materials shortages – with prices increasing for key inputs such as timber and steel. Rapid cost escalation, as illustrated by the product price index for non-residential buildings below, is expected to continue due to high demand and supply chain issues set to extend into 2022.

Product price index (non-residential buildings), Q4 2009 to Q2 2021

Source: Deloitte, Statistics New Zealand

A lack of workers and material shortages present key challenges for the construction industry. With record amounts of infrastructure work set to be completed, in addition to a material pipeline of residential construction activity, it will be challenging for contractors to deliver projects on-time and on-budget.

What can we do now?

Efficient and effective investment in infrastructure should be leveraged as an opportunity to keep people employed, keep businesses afloat and to maintain the productive capacity of the economy. Illustrative steps to help accelerate infrastructure as an economic stimulus could include:

  • Government further removing impediments to fast tracking infrastructure delivery, such as planning and complex procurement, looking towards optimising existing assets for ‘quick wins’, to deliver near-term national stimulus.
  • Improved forward planning, including the use of technology, to help deliver infrastructure more efficiently. Better project planning and coordination will allow scarce budget dollars to be spread further (or help offset cost escalation pressures), enable improved project pipeline forecasts and enhance visibility of delivery resource requirements.
  • Further facilitating access to labour resource by streamlining and clarifying border exemptions and targeted initiatives aimed at transitioning workers into infrastructure.



  1. Crown Infrastructure Partners, Quarterly Infrastructure Reference Group Update, 20 September 2021; accessible at: CIP-IRG-Quarterly-Sep-2021-FINAL.pdf (
  2. Based on 2021 (June-year) Statistics New Zealand data
  3. Te Waihanga, Infrastructure Quarterly, October 2021; accessible at: 210102 INFR Te Waihanga 2nd Quarterly v04

Fullwidth SCC. Do not delete! This box/component contains JavaScript that is needed on this page. This message will not be visible when page is activated.

Did you find this useful?