Mood of the Boardroom: New Zealand needs visionary leaders to tackle ageing population and healthcare costs (NZ Herald)

Mood of the Boardroom: New Zealand needs visionary leaders to tackle ageing population and healthcare costs (NZ Herald)

With the country facing significant challenges both domestically and internationally, New Zealand, more than ever, needs leaders willing to take decisive action and implement big ideas, one of our most influential lawyers says.

Dentons New Zealand chairman and global vice-chairman Hayden Wilson, says to do this, the nation’s leaders must understand there are big differences between managing a business and running a Government.

“Governments are complex. Compared to business, you don’t have all the same levers to pull – and the lag time between pulling a lever and getting tangible progress is much longer.”

He argues simply applying a corporate mindset focused on short-term wins and quarterly goals isn’t sophisticated enough, on its own, to manage the complex challenges the country faces.

Truce on infrastructure

Wilson is frustrated with the approach to major projects that has persisted over successive Governments.

“Every person you speak to in the infrastructure space in New Zealand recognises that we have got to end the stop-starts and flip-flops on projects.”

He says there is a critical need for political leadership that thinks beyond election cycles.

“New Zealand has significant infrastructure demands over the next five, 10, 15 years and beyond.

“We’ve got an ageing population, increasing healthcare costs, and a changing global environment. We cannot just rely on the same old solutions.”

Wilson says the tendency of new Governments to scrap their predecessor’s projects is a waste of time, money, and planning effort, pointing to the Government’s decision to shelve Auckland Light Rail and the Three Waters reform when it came to power.

“The economy and business community would be better served if both parties took an approach of improving or adapting what’s already there, instead of throwing it all out and starting from scratch.”

Wilson suggests bipartisan agreement on infrastructure is not realistic, because political parties legitimately have different ideas. Instead, he suggests a “truce” on infrastructure.

“Parties are always going to have different ideas. But there needs to be some understanding that Governments should be allowed do the things they want, and once a project starts, it gets finished, no matter who’s in power.”

He references Bent Flyvbjerg’s How Big Things Get Done. Flyvbjerg is an expert on large-scale projects who advocates for “thinking slow, acting fast.”

Wilson explains: “We need to spend more time on planning and testing ideas before breaking ground. Once we start, we should be able to complete it efficiently and quickly”.

He says New Zealand, and others around the world, tend to do the opposite.

“We rush the planning phase because we know that, in political reality, once shovels are in the ground, projects rarely get stopped.

“This leads to poor planning, underestimating costs, and exposes us to risks like political changes or global events.”

Efficiency over cuts

Wilson also sees room for improvement in the Government’s approach to public sector spending.

He believes there has been too much emphasis on cost-cutting, and not enough on making the system more efficient.

“I don’t think you could find anyone who would say that there isn’t waste in the public sector and that it is delivering efficiency,” he says.

“But while the wholesale reduction in spending might be the fastest way to give the Government something it can point to and say it has done, it is perhaps not the best way to go about it.”

Instead, Wilson argues for a more strategic approach that balances the number and quality of public servants, the use of consultants, and the government’s ability to achieve its priorities.

“You can have two of those three things, but not all of them at once,” he explains. “If you want to reduce the size of the public sector while also cutting down on consultants, then you’re going to struggle to achieve all of the Government’s priorities because the capacity to do the work simply won’t be there.”

He suggests a more collaborative effort between the public and private sectors would be more effective in delivering on the Government’s goals.

“It’s about delivering value over the long term, not just making immediate savings. It may be a slower process, but it would yield better outcomes in the end.”

Dentons is a sponsor of the Herald’s Mood of the Boardroom project.

Mood of the Boardroom: New Zealand businesses navigate geopolitical risks amid global instability (NZ Herald)

Mood of the Boardroom: New Zealand businesses navigate geopolitical risks amid global instability (NZ Herald)

As global instability grows, New Zealand boardrooms are increasingly focused on assessing and mitigating geopolitical risks.

Now in its third year, the Russia-Ukraine war, alongside the ongoing Israel-Hamas conflict and rising tensions in the South China Sea, has made geopolitical challenges an unavoidable point of discussion.

These crises are affecting trade, sparking regional conflicts, and driving regulatory changes, with 72% of New Zealand’s top executives in the Mood of the Boardroom survey confirming that their businesses regularly assess vulnerabilities to these risks at the board level.

A further 27% of respondents say they do not have this on their risk matrix, and 1% remain unsure.

The growing complexity of global challenges has led New Zealand companies to adopt a more rigorous approach to risk assessment.

2degrees Auckland Business Awards finalist announcement

Infrastructure: Government eyes tolls and congestion charging to fund roadingICBC: Innovative funding for green infrastructure

Marking a significant shift in the country’s transport policy, the Government Policy Statement on Land Transport indicates that road pricing, such as tolling and time-of-use charging, will play a key role in delivering the Roads of National Significance programme as part of a broader package of transport revenue and investment tools.When asked if all the Roads of National Significance would be tolled, Transport Minister Simeon Brown said: “I imagine we’ll be tolling every single one of them, which is a recommendation.”Infrastructure New Zealand, the country’s peak infrastructure sector body, supports the Government’s proposed use of road tolling to fund the new Roads of National Significance.

“Safe and efficient four-lane and grade-separated highways are not cheap, yet they are a critical piece of the puzzle when it comes to improving New Zealand’s land transport network,” said Infrastructure New Zealand chief executive Nick Leggett.

“Tolling is the way to go to help deliver these new highway projects.

“The reality is if we want modern first-world infrastructure then that will need to come through greater use of user-charging mechanisms such as tolling.”

Time-of-use charging

While the Auckland regional fuel tax was scrapped by the National-led Government on June 30, legislation will be introduced this year to enable time-of-use schemes to be developed to reduce travel times on New Zealand’s busiest roads.

“Congestion is a tax on time and productivity,” said Brown.

“It means that we are away from home for longer, sitting in gridlock. It results in fewer jobs being done, fewer goods being moved, and delays to services across the city.

“Faster, more reliable travel times will increase productivity, and lower costs for businesses and their customers. That is why we are enabling time-of-use schemes to be put in place.

“Enabling time-of-use schemes is a priority for our Government and a commitment under the National-Act Coalition Agreement.”

Brown stressed that time-of-use schemes will improve network efficiency to increase productivity and enable people and freight to get where they need to go quickly and safely – and that they are not about raising revenue.

“Any money collected through time-of-use charging will also be required to be invested back into transport infrastructure that benefits Kiwis and businesses living and working in the region where the money was raised. Councils will not be able to spend this money on other priorities or pet projects,” he said.

Auckland is set to be a focal point, with the Government prioritising working with Auckland Council. The city already faces severe traffic issues, with private vehicle travel accounting for nearly 75% of commuting across the Auckland region.

The Mayor of Auckland, Wayne Brown, has long been an advocate for time-of-use charging – a term he prefered over the broader “congestion charging”.

“What we’re talking about is time-of-use charging rather than congestion charging,” he explained. “Congestion charging is when you put a ring around the city, like London, and you have to pay to go into it.”

His preference is for dynamic charging, which encourages motorists to adjust their travel time, route, or mode of transportation to keep choke points flowing during peak times.

A 2020 Ministry of Transport report found that time-of-use charging could reduce congestion in Auckland by around 8-12% when fully implemented, similar to the traffic levels seen during the school holidays.

A 2017 report from the New Zealand Institute of Economic Research calculated the economic and social benefits to Auckland if the road transport network was operating at capacity Monday to Friday to be between $0.9 billion and $1.3b. If the average speed across the network was close or equal to the speed limit (free-flow), this benefit would be even greater – between $1.4b and $1.9b.

In June, Auckland Council’s transport and infrastructure committee approved a time-of-use charging scheme to be designed for the Auckland region on the city’s motorways and arterial routes.

“It’s about making the most of what we have and bringing Auckland in line with similar cities,” the mayor said. “It’s a tried and tested solution, and one that’s relatively low-cost.”

Auckland Council has suggested that the initiative would need to be supported by “reliable” public transport, and if the scheme designed is successful, it would likely launch alongside the City Rail Link in 2026.

Timeline for implementation

The Government is drafting a bill to amend the Land Transport Management Act 2003. This will establish the legal framework necessary to introduce time-of-use charging schemes aimed at managing road network demand. This is expected to be introduced to Parliament before the end of this year and will be reviewed by the Transport and Infrastructure Select Committee in 2025.

Once enacted, local authorities will be able to propose and develop time-of-use schemes in partnership with the New Zealand Transport Agency (NZTA), who will act as the majority partner. The Government, through the NZTA, will also have the authority to propose a scheme.

After a scheme is designed, it will be submitted to the Minister of Transport for approval, then implemented through an Order in Council with clear rules governing the scheme, providing road users with certainty about where, when and how much they will be required to pay.

To maintain the effectiveness of these schemes, they will be granted some operational flexibility.

For example, they will be able to adjust charges without the need for public consultation, but only at pre-determined intervals and provided the charge remains below the maximum. They will require regular monitoring and reporting, particularly on changes in travel times and traffic volumes.

Reporting on the amount of revenue generated and its subsequent use will also be required.

The Secretary of Transport will oversee the schemes, ensuring they meet their objectives, and the Government will have mechanisms to intervene if an approved scheme fails to deliver its anticipated objectives.

New York demonstrates the challenges

Congestion and time-of-use charging has been successfully implemented in many major cities around the world.

Singapore first introduced a congestion charge in 1975, requiring drivers to pay a flat fee to enter a restricted zone during peak hours, reducing congestion by 20%.

By 1998, it evolved into a fully automated electronic road pricing system, significantly reducing traffic, boosting public transportation usage and lowering emissions.

Stockholm introduced a seven-month trial in 2006, which saw traffic volume drop 22% per day on average and emissions fall by 30%.

This led to a referendum in 2007, which saw the scheme become permanent. Stockholm’s implementation demonstrated that once congestion charging is introduced, explained, and successfully tested, it was supported by a majority of the population.

Research by the Seattle Department of Transportation, which has explored its own congestion charging scheme, found that once a detailed proposal for congestion charging is established, but before its full implementation, public support is usually low. This can be attributed to the disadvantages of pricing becoming more evident than potential advantages or fears that the technical system might be overly expensive or fail to work.

Once a system is in place, public support generally increases, usually driven by the system working and people happy with the benefits, or their initial fears not being realised.

Nevertheless, overcoming initial fears will need to be carefully managed in any rollout in New Zealand, especially in times of economic pressure.

The recent experience of New York City’s implementation highlights this challenge. Despite years of preparation and the installation of necessary equipment, New York City’s congestion pricing plan – due to be rolled out on June 30 this year – was “indefinitely paused” by Governor Kathy Hochul on June 5.

The first-in-the-nation congestion pricing scheme, approved in 2019, would have seen cars charged $15 to enter a large swath of Manhattan.

Hochul slammed on the brakes at the last minute before its introduction due to concerns about the timing and state of the city’s post-pandemic recovery.

She said she feared New Yorkers could face “unintended consequences” if the plan was introduced.

The pause leaves the city’s public transport system without an additional $1b per year in funding, with delays expected for improvements in traffic congestion, air quality, and its dilapidated subway system.

It may also discourage other US cities from pursuing similar pricing initiatives that were looking to New York City’s implementation as a case study for their own rollout.

Government priorities

The Government is prioritising 17 Roads of National Significance, recently highlighted in the Government Policy Statement on Land Transport (GPS). The New Zealand Transport Agency is expected to begin procurement, enabling works, and construction of the first seven within the next three years.

  • Takitimu North Link Stage 1, connecting Tauranga and Te Puna, is already under way, with construction on Ōtaki to North of Levin set to begin next year.
  • The next phase of projects includes Belfast to Pegasus (Canterbury, including a bypass through Woodend), the Hawke’s Bay Expressway, SH1 between Cambridge and Piarere (Waikato), SH29 Tauriko (near Tauranga), Takitimu North Link Stage 2 (Te Puna to Ōmokoroa), Mill Road (South Auckland), and Ara Tūhono Warkworth to Wellsford (northern Auckland).

Research shows appetite for congestion charge

Aucklanders are up for a conversation on congestion pricing, or time-of-use charging.

Commissioned by policy and advocacy organisation the Northern Infrastructure Forum and delivered by Koi Tū: The Centre for Informed Futures, a think tank and research centre at the University of Auckland, research has explored the views of the community on congestion charging.

It found Aucklanders understand that what is happening now isn’t working, and new approaches need to be considered. While panel members surveyed supported congestion pricing in principle, they had some concerns. The research concluded:

  • The primary objective of congestion charging must be to reduce congestion.
  • There should be the strategic use of discounts and exemptions to mitigate social impacts.
  • Revenue collected must be used exclusively to provide transport options for Aucklanders (particularly public transport options).
  • Congestion charging should be kept simple and transparent.

That means: people need to know what they’re paying and when, with timing and pricing reviewed regularly; initial geographical boundary for the charging zone must not be too complex; it must be user friendly with reliable payment systems; there should be clear communication of benefits, particularly decongestion benefits.

ICBC: Innovative funding for green infrastructure

In its latest climate report, ICBC New Zealand, the New Zealand arm of the Industrial and Commercial Bank of China (ICBC), has reaffirmed its commitment to supporting New Zealand’s climate transition and is actively identifying climate-related risks and opportunities.

“We are in the process of dynamically integrating the green financing concept into our operation and development and striving to create greater value for our stakeholders,” says James Gill, director of corporate and institutional banking at ICBC New Zealand. “We will concentrate our efforts on improving governance, strategy, risk management, metrics, and targets, striving to make greater contributions for a good future.”

Gill says the bank recognises the need for innovative funding solutions to address the country’s infrastructure needs and support the development of green infrastructure.

Over its 11 years of operation in New Zealand, ICBC New Zealand has played a significant role in key infrastructure projects. These include the Transmission Gully motorway, developed through a public-private partnership (PPP), and the Ruakura Superhub – a 490ha development in Hamilton – residential development areas, industrial, retail and logistics, including a 30ha inland port. “Supporting these projects is our way of helping to move New Zealand forward,” says Gill.

“ICBC New Zealand is passionate about the opportunity in New Zealand to build productivity-boosting, climate-resilient infrastructure and improve outcomes for the country.”

The bank also acted as mandated lead arranger and joint sustainability coordinator for a $400 million funding package for Wellington City Council’s new sludge minimisation facility, an environmental initiative adjacent to the existing wastewater treatment plant at Moa Point that is set to reduce landfill waste by 80% and carbon emissions by 60%.

The project was facilitated under the Infrastructure Funding and Financing Act 2020 (IFF), which allows debt to be raised without impacting the council’s balance sheet. This approach preserves the council’s debt capacity for other uses. Instead, Crown Infrastructure Partners will manage a special-purpose vehicle (SPV) that will levy most rate-paying properties in the city for 33 years, starting from July 2024.

Gill says IFF as a model provides another tool for local governments to access private financing over the long term, paying for it via targeting the direct beneficiaries of the projects.

“The defined repayment profile is attractive and allows higher levels of leverage than otherwise might have been possible.”

The project, which began construction in May 2023 and is expected to be completed by June 2026, will use chemical and mechanical processes to treat and dispose of wastewater sludge, generating biogas for heat and electricity to power the treatment process. Sludge is now piped 9km across the city to landfill, where it is buried.

“ICBC New Zealand looks forward to supporting New Zealand’s growth objectives as we have previously through the PPP and IFF infrastructure financing models,” says Gill.

“Our long-term commitment to the country positions us well to support these projects from conception to completion and throughout their operation.”

ICBC helps the world to go greener

As the world’s largest bank by total assets, ICBC is a global leader in sustainable development, promoting green finance and supporting projects that contribute to a sustainable future.

The bank’s latest Corporate Social Responsibility Report, released earlier this year, highlights its commitment to green finance and pursuit of innovation-driven development and new sustainable development opportunities.

Some of the bank’s contributions to sustainable projects include:

Uzbekistan wind power plant

The Dubai branch of ICBC acted as lead arranger, organising a US$900m international syndicated loan with international multilateral institutions to finance a major wind power project in Uzbekistan.

Upon completion, the project is expected to cut carbon emissions by 1.4 million tonnes annually.

By enhancing the power infrastructure in Central Asia, it will play a pivotal role in the region’s energy transition, contributing to global efforts towards sustainable economic and social development.

Green bus project in Hangzhou

The Hangzhou branch of ICBC has been instrumental in advancing Hangzhou’s new energy public transportation system.

The branch has provided over RMB4 billion in cumulative working capital loans and extended more than RMB1b in credits for projects including the acquisition of new energy buses and the construction of stations. As a result, all buses in Hangzhou’s downtown areas have been replaced by new energy buses, making low-carbon transportation a viable and popular choice for the city’s residents.

Marine carbon sink ecological products in Guangdong Province

Nan’ao County Island, located in South China, is home to Guangdong Province’s largest oyster cultivation base, with an annual output exceeding 30,000 tonnes.

Recognising the environmental benefits of oysters, which capture and store carbon dioxide as they grow, the Guangdong branch of ICBC introduced a “loan pledged with right to expected earnings of marine carbon sink” financing product.

This allows farmers to secure loans by pledging the expected earnings from the carbon sink value derived from their oysters, providing crucial financial support for sustainable aquaculture practices.

Green building project in Beijing

The Beijing branch of ICBC, acting as the lead bank, provided a syndicated loan of RMB270m to meet the funding needs of an enterprise for an intelligent green building project using prefabricated components.

After completion, it will be able to achieve an annual production capacity of one million square metres of prefabricated components, while solving problems such as noise, dust, material waste, and environmental pollution in the traditional construction industry and building material manufacture.

Agribusiness & Trade: Has offshore investment swamped our dairy sector? (NZ Herald)

Agribusiness & Trade: Has offshore investment swamped our dairy sector? (NZ Herald)

The allure of New Zealand’s dairy industry has not gone unnoticed on the global stage. The country’s reputation for high-quality dairy products and well-established supply chains has seen international investors increasingly drawn to the sector.

A recent report from market research firm Coriolis on the New Zealand dairy industry lays out the investment landscape in New Zealand dairy processing. The industry has attracted foreign investment from across the globe. China, Japan, Singapore, France, the Netherlands, the UK and Germany are all significant sources of investment.

Coriolis managing director Tim Morris says the “smart money” can see New Zealand is winning in dairy.

“New Zealand is really good at dairy and the rest of the world have realised it,” he says. “Since deregulation of the industry, we have had wave after wave of global firms show up because they know they need to have a position here.”

Despite the presence of multinationals in New Zealand, the report shows that most of the capital committed to the sector remains domestic, both into co-operative processors and through private capital.

In total, the industry is made up of investment from five private equity firms, 14 global multinationals, seven state-owned enterprises, three local co-operatives, three locally listed firms, two Māori investor groups and hundreds of private family interests.

The report lays out five key objectives that are driving strategic investment activity in the New Zealand dairy industry.

1. Strengthening existing market positions
In 2019, Westland Milk Products was bought by Chinese dairy giant Inner Mongolia Yili Industrial Group Co Ltd (Yili) for $588 million. Since then, Yili has supported further investments to strengthen the West Coast dairy company’s position.

In 2021, Westland announced it would invest $40m to double its consumer butter manufacturing capacity. The following year it acquired Hamilton-based foodservice butter processor Canary Foods.

Last year, Westland announced a $70m investment to construct a new lactoferrin plant at its Hokitika facility. Supported by parent company Yili, this investment will more than treble production capacity of the multifunctional protein. Lactoferrin has growing international demand across a variety of nutritional categories because of its reported health benefits.

Increased competition as more players enter the market is driving a shift higher up the value chain, with focus shifting to producing higher-margin, value-added products rather than just raw milk.

Morris notes that this more developed competitive framework is a marked change from the past. “This shift necessitates a strategic approach to investment and operations, ensuring that New Zealand’s dairy industry remains competitive on the global stage,” he says.

One such approach is the diversification of product categories into high-value niches such as infant formula (particularly specialty formulas designed for the dietary management of special infant feeding needs), protein supplements, and functional foods that can offer health benefits beyond basic nutrition.

New Zealand produces numerous innovative dairy-derived nutraceuticals. For example, New Image’s Symbiotics brand sells a goat milk drink with phosphatidylserine to support awareness and cognition.

These products not only command higher prices but also cater to growing consumer demands for health and wellness.

2. Arriving to take a position in New Zealand
In the past five years, multinational companies including Lactalis (from France), Froneri (UK), Olam (Singapore), Wilmar (Singapore) and Imanaka (Japan) have entered the New Zealand dairy industry.

The arrival of new players is transforming the sector, with more companies eyeing New Zealand’s milk supply.

One notable entrant stirring up the sector is Singapore-based food and agribusiness conglomerate Olam. It has established a new milk processing and exporting operation in Waikato under the name Olam Food Ingredients (Ofi).

Ofi is challenging Fonterra by offering farmers a premium milk price to entice them away from the co-operative.

Despite this increased competition, the Coriolis report highlights that total milk production in New Zealand peaked in 2015 after a long period of growth but has stalled over the past 8-9 years.

Morris explains that this is due to the balance between milk price paid to farmers and their production costs. With input costs rising faster than milk prices, there has been little incentive to boost production.

3. Seeking new growth platforms
Companies are moving into more attractive areas of the industry. Notable examples include:

Nestle Health Science, a global leader in nutrition, bought The Better Health Company in 2022, which included the supplements brand GO Healthy. Nestle Health Science described the acquisition as a strategic fit, enhancing its global portfolio of active lifestyle and health and wellness brands.
In 2020, New Zealand’s largest seafood company, Sanford, acquired a 50% stake in Two Islands. This merger leverages marine collagen, a by-product of Sanford’s certified sustainable hoki fishery, which is used in Two Islands’ range of beauty and wellbeing products.

4. Investing in increasing sustainability
Companies are investing in sustainability to align with changing customer, consumer and government requirements. Examples include:

Talley’s Group, New Zealand’s second-largest food company, acquired Nature’s Flame, a producer of wood pellet biofuel from Norwegian pulp and paper company Norske Skog. This renewable fuel, derived from timber processing waste streams, is being used to reduce the company’s carbon footprint by replacing coal in some dairy plants.
Fonterra recently announced a $790m plan to decarbonise its operations. The plan includes exploring technologies to phase out coal and transition to renewable energy across its manufacturing sites.

5. Divesting non-core businesses
Fonterra’s recent announcement that it is considering full or partial divestment options for some or all of its global consumer business, which includes well-known brands such as Anchor, as well as its integrated businesses Fonterra Oceania and Fonterra Sri Lanka.

This strategic move will allow the co-operative to focus on being a business-to-business dairy nutrition provider, working closely with customers through its high-performing ingredients and foodservice channels.

Fonterra says this refocus will strengthen its role in the dairy nutrition value chain, leveraging its strength in producing world-class, innovative ingredients for customers to take to consumers.

Another example of divestment was seen from Synlait, which last year announced its plans to sell off its household dairy brands Dairyworks and Talbot Forest Cheese in order to pay down debt. At the time, Synlait said this move would allow it to focus solely on its value-added, advanced nutrition and foodservice businesses.

6. Dairy remains an attractive investment
Morris is clear that the dairy market will remain an attractive investment into the future and doesn’t mince his words on the potential for “alternative milk” to supersede the industry.

“It is easy for people to convince themselves that because their daughter is vegan, or friends of theirs have started to drink oat milk, that everywhere on Earth is suddenly just like them.

“It’s just not true.

“Silicon Valley venture capitalists will try to convince you that we are at peak cow or peak milk or some other such nonsense. Any minute now, mothers everywhere will be feeding their children massive amounts of vat-grown sludge instead of real, natural, healthy milk and dairy products.

“There is no actual evidence anywhere for this common fantasy. Veganism is trending down, fake food start-ups are failing, while milk consumption is heading only one way, up.”

The data supports increasing consumption.

Dairy currently ranks as the third-largest food source by volume, following grains and vegetables, with the average person consuming around 90kg of milk and dairy products annually — equivalent to 117kg of raw milk.

Total global milk consumption is growing. Global raw milk production grew by 169 million tonnes (or 22%) in the last decade, or roughly 17 million tonnes yearly — a figure that equates to a “new New Zealand” (20.7 million tonnes) worth of dairy production every 1.2 years.

In 2022, the global dairy industry produced 930 million tonnes of milk worth an estimated $840 billion — that is at least twice as large as the total revenue of tech giant Apple for the last financial year, and 11,000 times more volume than lithium.

Sunlight of Spain, climate of Bordeaux, and water …

New Zealand is the world’s largest dairy exporter by value, commanding 14% of global trade and a market share that is trending up over the long term.

New Zealand has a robust dairy supply chain, with 4.7 million cows spread across over 10,000 dairy farms. It is the leading dairy supplier for many countries, particularly in Asia, capturing 55% of the China market, 50% of Thailand, 42% of Indonesia, 40% of Malaysia and 61% of Nigeria.

“New Zealand is the size of Italy with the population of Singapore,” says Morris. “It has the sunlight of Spain, the climate of Bordeaux, and abundant water — both on a per-person and a per-square-kilometre basis.”

New Zealand has almost 50 large raw milk intake sites and, depending on definition, 600-700 dairy companies. Extending further into the supply chain, New Zealand also has a farmer-owned dairy genetics firm, two farmer-owned fertiliser firms and three farmer-owned farm supplies firms.

“All of this comes together to make New Zealand the most competitive dairy producer and exporter on the planet,” says Morris.

Project Auckland: Panel discussion on ‘Accelerating Auckland’ (video)

Tim McCready moderates a panel discussion themed “Accelerating Auckland” with CEO of the EMA Brett O’Riley, Deputy Mayor of Auckland Desley Simpson, and Vice-Chancellor of the University of Auckland Dawn Freshwater. The panel discussion was held at the launch of the NZ Herald’s 2024 Project Auckland report following a speech from the Minister for Auckland Hon Simeon Brown.

Engineering Auckland

Auckland Mayor Wayne Brown is philosophical when asked to reflect on his time leading New Zealand’s biggest city.

“Well, it’s like a curate’s egg — it’s good in parts,” he laughs.

When Brown won the election in October 2022, he had anticipated the challenges ahead.

Acknowledging his frosty relationship with media, especially during the initial six months, Brown felt “quite a lot of the press were grieving over the fact the person they’d invested a lot of effort in didn’t make it.”

Tensions heightened during the devastating Auckland Anniversary floods. Criticised for showing a lack of empathy, he defends his approach: “People didn’t want empathy; they wanted an engineer to come out and tell them what to fix.

“I think eventually people saw that. While everyone was out wandering around and having empathy, I was providing engineering inputs.”

The media tone is now more even-handed, he says. “I just want it to be fair, and it wasn’t fair at the start.”

When it comes to the city’s finances, Brown highlights his own foresight: “I predicted that there would be a billion-dollar overrun on the City Rail Link.”

While he had no specific figures prior to the 2022 election, his hands-on experience meant he was aware there would be ballooning costs associated with the project.

“I also predicted during my campaign that interest rates would rocket and so would the cost of living.”

He says one of the advantages he brings to the job is that he has had, and continues to have, businesses “from Hawke’s Bay to Kaitāia”.

“My consulting engineering and building and construction businesses have made me interact with councils all my life, so I am deeply embedded in understanding from both sides of the fence what councils do.”

While Brown views his diverse business experience as an advantage, he is frustrated with the lack of practical, real-world experience among his council peers. “I come with way more knowledge than anyone sitting around me at the table. Some of them have been here for 15 years and pretty much learned nothing,” he claims.

He contrasts this with councillors in the Far North, where he was previously mayor. “The councillors up there are part-time. They go back to their farms, orchards, mechanic workshops, dairies… whatever.

“None of them need to be told by an economist that people aren’t buying as much as they used to, or that prices are going up. They can see it for themselves.”

He describes his fellow councillors as “nice people”, but says they are “full-time, political, and unfortunately some are not directly invested in the daily activities of the city”.

Brown considers the $375 million hole in last year’s budget as his first and greatest challenge.

Last-minute changes were made to the budget, including selling fewer shares in Auckland Airport than he would have liked, and, nudging household rates bills above inflation.

After nearly two days of debate, he secured support from a sizeable majority of councillors. “In the end, we got it through — that was a high point, but also the first real test.”

Get Wellington out of Auckland

Brown is staunchly apolitical.

He is proud of the fact that he has worked with and maintains a good relationship with former Prime Ministers Helen Clark and Sir John Key.

Despite the change from a Labour government to the Coalition Government, his message remains consistent: ‘Get Wellington out of Auckland’.

“The message that the public love, but is not being heard well in Wellington, is that Auckland needs to decide Auckland,” Brown says.

“I’m not going to change. I have very strong views on infrastructure, roads, power supplies. These are things that I know a lot about.”

One of the changes introduced during the Government’s first 100 days was the cancellation of the Regional Fuel Tax (RFT) in Auckland, which will leave a shortfall in transport funding for Auckland of $1.2 billion over the next four years. The loss in revenue will mean that Auckland Council’s debt-to-revenue ratio will increase, meaning the council has less ability to borrow when it needs to.

Curia Market Research Poll commissioned by the Office of the Mayor found that 44 per cent of Aucklanders want to keep the RFT. Only 26 per cent were in favour of cancelling RFT projects, and just 22 per cent favoured increasing rates to make up the shortfall in funding.

“It is very easy to remove things, but you’ve got to put something back,” says Brown, noting that the council is still working out what RFT projects will be cut. “One of the things it was going to fund was the battery chargers that will be needed for the electric ferries. That’s going to make the electric ferries look like a clever investment, isn’t it?”

While the Government might insist it campaigned on the RTF removal, Brown says it didn’t campaign on forcing the mayor to put rates up to cover the losses.

“I am not going to do that. We will just have to do less.”

Turning to the Government’s roads of national significance, Brown points out that the roads outlined for Auckland in the Government Policy Statement (GPS) on Land Transport don’t align with his priorities for the city, and some of them have terrible benefit-cost ratios.

Roads planned for Auckland are Mill Road in south Auckland and the East-West Link connecting state highways 1 and 20 through Onehunga to relieve road freight congestion.

Brown pushes back on what he jokingly refers to as “roads of National Party significance”, insisting they should not supersede priorities identified by the Auckland integrated transport plan.

“This is my city. I was elected by people from every part of this city,” Brown says.

“The political party I stand for is Auckland, I am here for Auckland, and particularly the ratepayers.”

“I am insisting on being treated as a regional government, because that is what we were set up as.”

Looking ahead

With 18 months left on the clock, Brown has a lot he wants to achieve.

A bold vision to establish a new regional wealth fund that he insists will provide a better return on investment from Auckland Council’s assets is a priority.

The Auckland Future Fund’s initial capitalisation of $3-4 billion would come from the proposed sales of an 11 per cent shareholding in Auckland International Airport and the proceeds from a 35-year lease to run Port of Auckland.

Brown says the fund would achieve more for ratepayers’ money. He points out that ratepayers get just over 2 per cent in annual returns for its stake in Port of Auckland. The city’s remaining shares in Auckland International Airport are projected to return less than 2 per cent in dividends in the coming year.

Brown also claims a diversified portfolio would spread the financial risk for Auckland in the event of another flood (which significantly impacted the airport) or a tsunami (which he asserts could damage the port).

That portfolio would make provision for climate change risks through self-insurance and help mitigate rates rises for Aucklanders.

The fund will be voted on by councillors as part of council’s long-term plan, which is currently out for public consultation.

“Those that vote against it will be voting against helping those people who flood next time because the cupboard will be bare,” Brown says.

When it comes to transport, he expects to have the first trial up and running of time-of-using charging, aimed at reducing congestion and speeding up travel times throughout the city. A flat fee, charged a maximum of twice a day and only at peak times, is expected to make motorways function all year round as they do on school holidays.

“We will also have at least two or three of the dynamic lanes in place,” he says, referring to roads that use signs and lights to change the direction of centre lanes at peak times to improve traffic flow.

“People will start to see things happen, otherwise there will be wholesale changes at Auckland Transport, I tell you.”

Brown says he is working hard to stop the “disjointed thinking” going on behind the scenes in planning departments that the public might not see, but he thinks can provide big value to the city — economically and environmentally.

As an example he cites planning departments that restrict the amount of metal that comes out of quarries for environmental reasons: “But the environment they’re protecting by taking less out of a quarry is destroying the environment because the demand for that stuff remains and now trucks have to go twice as far — how does that help the environment?”

Another priority for Brown is reducing council costs. He envisions a streamlined governance structure for the city, with a reduced number of councillors and local boards. Auckland currently has 21 local boards with between five and nine members elected to represent their geographic area. Including the mayor and 20 councillors, this means there are 170 elected members in the region.

“How can that be necessary? How can that be justified?” Brown asks.

He jokes: “How can anyone even know who they are? You can go through life and not meet that number of people!”

Brown says that in principle, “councillors agree that there are too many councillors and we should reduce it — as long as it is the others and not themselves.”

Looking toward the elections in 2025, Brown says his message for business leaders is simple: “You’ve got a business leader as Mayor. Don’t waste the opportunity, it may not happen again.

“We’ve got all sorts of failed politicians lining up who haven’t got an income, trying to use their name recognition to get themselves a job. I’m not here for the income.”

Unitary Plan spurs housing development

Unitary Plan spurs housing development

Auckland Council chief economist Gary Blick says recent research provides compelling evidence that up-zoning has significantly increased Auckland’s housing supply and led to lower rents, compared to a scenario where it was never introduced.

Research on the impact of up-zoning on housing construction in Auckland by Associate Professor of Economics Ryan Greenaway-McGrevy and Distinguished Professor Peter Phillips from the University of Auckland sheds new light on the efficacy of up-zoning to address housing shortages and affordability challenges.

“Different households have different preferences, but in the main people generally want to be closer to jobs, transport and amenities — whether that is parks, schools or shops,” explains Blick.

The study, which considered the first six years since the Unitary Plan was introduced, compared parts of Auckland that were up-zoned and parts that weren’t, and used statistical analysis to determine the increase in housing development as a result.

It found strong evidence that from 2016 to 2021, almost 22,000 additional consents occurred due to the policy change.

Blick says this works out to be about 32 per cent of the total 67,000 consents over that period.

To put this into context, Blick’s own analysis shows a significant increase in dwelling consents per thousand residents since the introduction of the Unitary Plan.

In the 20 years prior to its introduction, the average number was 5.9. Since the change in policy, the average number of dwelling consents has jumped to 9.5 per thousand residents. This figure has seen Auckland surpass New South Wales and almost match Victoria.

Impact on rental prices

Blick’s analysis shows the increased housing supply may have helped limit rental price growth in Auckland.

Data from Statistics NZ’s rental price index shows that although Auckland’s rents are 22 per cent higher in nominal dollar terms since 2017, rents in New Zealand overall have grown about 50 per cent faster than Auckland over the same period.

“Research also shows that for a three-bedroom home, rents are 20-30 per cent lower than they otherwise would have been,” Blick says.

He argues that without the increased supply of housing, rental prices may have been higher, and people may have decided they couldn’t make Auckland work for them and would have chosen to leave or not come at all.

“It has given the city a better chance of holding on to some of our younger people who want to form households and of attracting people with skills who compare us with other destinations.”

Looking ahead

Blick acknowledges development under the Unitary Plan is ongoing and will require continued monitoring to assess its long-term effects.

However, these early indications are encouraging and suggest that up-zoning can be a viable strategy for addressing housing shortages. Blick says the Unitary Plan’s success is being closely observed by other cities facing similar challenges, potentially offering a valuable roadmap for tackling their own housing crises.

The Unitary Plan

Auckland’s Unitary Plan, operative from November 2016, allowed for denser housing options, such as townhouses and apartments, within existing urban areas.

Prior to the Unitary Plan, Auckland’s residential zoning was dominated by standalone houses, making it difficult to accommodate a growing population.

Up-zoning resulted in roughly 75 per cent of Auckland’s residential land being reclassified into denser categories.

Since up-zoning allows for higher-density housing options that require less land per dwelling, it allows lower development costs per dwelling and makes it more profitable for developers to build more houses, ultimately increasing supply.

An economic powerhouse

Auckland’s city centre continues to be the economic engine of New Zealand, outpacing national growth in GDP and employment for the second consecutive year.

The recent Auckland City Centre Overview report from Infometrics reveals that GDP grew by 9.2 per cent in the year to March 2023, reaching $30.4 billion and representing 8 per cent of national GDP.

This growth rate sits well above New Zealand as a whole, which increased by 2.8 per cent in the same period.

“The city centre has grown at a faster rate than the rest of Auckland and New Zealand for many years,” Blick says.

He attributes this growth to the concentration of high-value services businesses.

“The city centre is accessible for the workforce needed in this sector. Although working from home has become more of a thing, people still need to form social relationships at the workplace and engage with clients.”

Unsurprisingly, high-value services account for the largest proportion of GDP, 65.2 per cent, in Auckland’s City Centre (compared with 27.3 per cent of the national economy).

Primary industries account for the smallest proportion at 0.2 per cent (compared to 5.7 per cent in the national economy). Employment in the city centre was also up 7.3 per cent in the year to March 2023, compared with 2.5 per cent for New Zealand as a whole.

Blick acknowledges that the pandemic threw a curveball at the city centre.

“The shock really hit street-level businesses, particularly hospitality and retail, which are heavily reliant on foot traffic from tourism and students.”

Yet he remains optimistic about its long-term prospects.

“The underlying drivers of the city centre are still there,” he says, pointing to the return of tourists, students and workers and the opportunity that the City Rail Link will present. “We may have had a shock that meant that activity, population and jobs took a hit, but we’re now in a period of clawing some of that back.”

Bold investment needed for success

With Auckland’s tourism industry continuing to navigate a post-pandemic recovery, Franz Mascarenhas is urging local and central government to step up investment in attracting visitors.

Mascarenhas has been in the luxury hotel industry for more than 35 years, including leadership positions at ITT Sheraton Hotels, Hyatt Hotels Corporation and the Langham Hospitality Group.

He steered the city’s largest hotel through the pandemic, one of the few that didn’t take on MIQ guests during the Covid years. Unsurprisingly, the hotel saw significant signs of recovery from 2022.

“With international travel not being an option at the time, an overnight stay or a longer staycation quickly became a very popular treat,” he says. “This growth in demand was obviously gratefully received for a business like ours, but it brought its own set of hurdles, primarily in recruiting enough staff to meet the increased demand.”

Since then, the industry has seen a decent recovery and has come through a strong summer period. Mascarenhas says Cordis has seen occupancy rates back close to the mid-70s over the summer months, although looking ahead to the winter season, numbers do not yet look as robust.

Mascarenhas says cost of living pressures seen worldwide along with increased prices of airline fares have undoubtedly contributed to lower inbound travel numbers.

Key markets like China (151,000 visitors in 2023 compared with 407,000 in 2019) and Australia (161,000 in 2023 compared with 196,000 in 2019) have seen a significant decline from pre-pandemic levels.

“An exception we have seen at the hotel has been US visitors, thanks to the strength of the dollar and strong connectivity, with some existing US airlines increasing their schedules and new airlines like Delta flying in,” he says. (There were were 337,000 US visitors to NZ in 2023, falling only slightly from 368,000 in 2019).

To help boost tourism, Mascarenhas wants local and central government to take the importance of the sector to Auckland and New Zealand seriously.

“We are a large contributor to the Government’s GST intake, a large employer, given we are a people-related business, a large foreign exchange earner, and the conduit to much more economic activity such as shopping, eating out and entertainment.”

He says there is not enough ability for the tourism industry to effectively market Auckland or New Zealand as a destination.

“Every major event — be it business, sport, entertainment or cultural — needs significant funding to secure them to the city or country.”

Events like last year’s Fifa Women’s World Cup provide an immediate boost to the tourism industry. So too did this month’s Pink concerts, with Cordis at capacity for the shows.

However, Mascarenhas highlights the disparity between Auckland’s investment and the returns major events can bring. While Auckland struggles to raise $15 million in a year for tourism attraction, other markets pay millions just to attract a single event. Singapore’s recent investment to lure Taylor Swift pales in comparison to the economic boon her Eras show delivered, with economists estimating it generated up to NZ$600m. Had the shows been hosted in New Zealand, they could have amounted to around $70m for the country.

“Bold investments have proven to have an incredible impact on the economy and a large return on investment,” he says.

He proposes a solution is needed that not only helps to attract tourism to Auckland, but all of New Zealand. This could involve a partnership with contributions from the private sector (including all who directly benefit from tourism), central government and local councils. “The fund should be ring-fenced and exclusively used for reinvestment in tourism infrastructure and destination marketing activity.”

According to Mascarenhas, the industry is open to considering contributions through new sources of funding but wants to be involved in finding the solution.

He stresses the urgency of the consultation, given the lead time required for major events.

“We may well be losing out as we speak,” he says.

Migrant workers will help

The border opening has helped to address Cordis’ staffing challenges since the pandemic, with skilled migrants arriving in increased numbers.

“We find that combining local talent with skilled migrants, coupled with the training and development that we offer at Cordis, is a winning formula that elevates our overall standards.”

Mascarenhas says he is pleased with the business-friendly approach of the new Government when it comes to areas like wage growth, fair-pay agreements and migration. “Getting these settings correct help businesses to succeed and ultimately have a natural positive flow on effect to the workforce.”

He would like to see continued efforts to market Auckland as a great place for hospitality workers to stay.

“With the cost of living impacting everyone, the size of Auckland is an advantage compared with smaller cities which struggle when it comes to the likes of housing and job opportunities.”

After 11 years, Mascarenhas will soon step down from running Cordis Auckland and move to an advisory role with the Langham Group.