Infrastructure priorities
Investment in significant infrastructure projects – and a consequent funding need – is a significant component of the New Zealand high-grade bond-market story. Government-sector issuers say engaging with investors, including offshore, about changes in capex trajectory is a key part of their job.
JOHN Domestic investors are well informed and, unsurprisingly, fully across developments in this regard. Offshore investors want to get a feel for what the challenges are. Even as the biggest city in the country it is more the New Zealand story that we try to sell, but there is a general acknowledgement that there has been considerable under-spend in infrastructure in Auckland.
BUTCHER We have an infrastructure deficit in New Zealand but the need to invest is not unique to us. It is also evident in the Australian states, for example. We all accept we need to make the infrastructure investment.
The issues we must overcome are whether we have the resources to deliver the projects and the availability of alternative revenue streams to pay for them.
Offshore investors are nervous about the Australian housing market. They are also more concerned about the equivalent story in New Zealand than they are with any theoretical oversupply of infrastructure-related bonds.
My sense is that, because of the broad multiparty support for fiscal discipline, investors take the funding programme as a given. We do not take a lot of queries around whether a given government will change strategy and therefore increase funding requirements.
MARTIN These questions come up when we are offshore, in the context of the fact that investors understand the government is running a surplus and that – because of the capex, of which infrastructure is a component – there may be an increase in short-term net debt. Domestic investors may initiate conversations around the form of funding the infrastructure requirement may take and whether it will be centrally or locally funded.
HAGAN My sense is that, because of the broad multiparty support for fiscal discipline, investors take the funding programme as a given. We do not field a lot of queries around whether a given government will change strategy and therefore increase funding requirements.
DIREEN We find investors have very different questions depending on what part of our business they are most interested in. Some are focused on environmental, social and governance outcomes and considerations, others are interested in what we are doing on industry leadership, and then there is the supply of state and affordable housing.
Concern around house prices as more of a macro consideration doesn’t come up as much as interest in our build programmes.
