A Managed Retreat
6 years, 1 month, 11 days, 1 hour
11 June 2023
Kia Ora.
Last week I had the privilege of a glimpse into the challenges being faced in New Zealand, a country that I suspect I am not alone in simply thinking offers one of the best qualities of life in the world, when the reality is far more complicated. And in particular it surfaced for me the question of what does a country do when it just cannot afford everything it needs to do.
In late January and early February this year the North Island suffered the worst flooding in its modern history, after an entire season’s rain fell in a single day. The experience intensified the country’s awareness of its exposure to increasingly frequent and severe climatic events. And it underlined the urgent need to invest much more in asset resilience, alongside rapid decarbonisation and business-as-usual investments, for example in more and better housing and transport.
The infrastructure funding gap for all this is estimated at more than NZ$200 billion, which leads to the hard conversations about how to pay for that investment. With a population of only just over 5 million, and household affordability under pressure in the same way as everywhere else, real hardship and political backlash lie in the path of trying to get today’s generation to pay more. Then you turn to borrowing, but many of the country’s authorities are already at debt limits, and the country finds it hard to attract foreign capital.
This then leaves three options. First drive much greater efficiency in what is done, so the limited resources available go further. For example if social housing is procured as a programme, a supply chain can develop economies of scale in offsite and modular production, and dramatically bring down the unit cost. Second deploy user-pays models, but critically those have to be targeted, so they capture wealth from the richer in society, and help offset growing financial inequality. New Zealand is, for example, looking at value-capture from developments that benefit from public infrastructure investments.
Third, and perhaps hardest, strike some things off the to-do list. New Zealand is already at the point of recognising there are parts of the country that they cannot afford to, for example, put onto mains water supply. But they are also going further with the government publicly committed to developing strategies for managed retreat from some areas currently populated but which cannot reasonably be supported as such in the future. As the consequences of climate change become even more serious, expect more of the world to have to face up to this too.