Trends (continued)

Climate change

Climate change is a very significant environmental and economic issue. While the extent of the change is unclear, over the period of the Plan climate change is likely to impact on New Zealand in a number of ways, including:[48]

• higher rainfall in the west and less in the east
• more frequent extreme weather events such as droughts (especially in the east of New Zealand) and floods
• rising sea levels, and
• higher temperatures, but more in the North Island than the South.

Agricultural productivity is expected to increase in some areas, but it is likely that land-use activities will change to suit a new climate. As these changes will occur over time, the impacts on infrastructure will not be immediate.

One of the main economic impacts of climate change is likely to be through commitments that require us to reduce emissions.

As a signatory to the Kyoto protocol, New Zealand is committed to taking responsibility for reducing its greenhouse gas emissions. Just how this impacts on the economy depends on the design of our domestic carbon policy. The Emissions Trading Scheme (ETS) will create a price for carbon in New Zealand. It was designed to produce emissions reductions in the sectors that can achieve these most efficiently.

Implementation of the ETS is expected to encourage a shift from high-emitting activities to lower-emitting ones over time.

Another economic impact of climate change is the cost of measures to adapt to climate change such as protecting or relocating existing assets. If, for example, sea levels were to rise significantly, it could have implications for parts of our railway corridors and roading network.

The effects of climate change are likely to have an adverse impact on the resilience of New Zealand's infrastructure. As a first step towards adapting to climate change, the possible impacts on proposed new infrastructure need to be considered at the planning and development stage. In the future, strategic infrastructure needs to be assessed for its risk and vulnerability to the impacts of climate change.

Growth trends and scenarios

Over the period of the Plan, real GDP is projected to increase by over 60% from approximately $133 billion in 2008/09 to $213 billion in 2028/29.[49] Though this is a significant increase over 20 years, on an annual basis it equates to an increase in the two to three per cent range.

However, the Government has set a goal for New Zealand's wage levels and standard of living to reach those of Australia by 2025. To achieve this, New Zealand's GDP will have to grow at a faster rate than it has over the last decade. Rather than growing at 2-3% per annum (as assumed), it is estimated that GDP will have to grow at around 4.5% a year until 2025 to catch Australia.

On the other hand, as New Zealand comes out of the recession following the global financial crisis, it is possible that GDP growth may (at least initially) be slower than expected as the economy recovers (for example, 1 or 2%).

It would be desirable to understand the implications for infrastructure demands should GDP growth differ from current predictions, along with the geographical distribution of growth, as the pressures on infrastructure will be unequally distributed.

The specific infrastructure needs will depend not just on the level of growth but on how any particular growth and productivity path is realised. For example, if growth is largely driven by expansion in the meat and wool industries, this is likely to require different infrastructure than if it is assumed to come predominantly from the service industry.

There is very limited information on the relationship between growth and the demand for infrastructure in the various sectors. These relationships are generally not stable over time and estimates based on overseas or cross-country data for past periods are at best only indicative of what might occur in the future for New Zealand. The compounding effect over 20 years means that small changes in assumptions can mean large differences in potential outcomes.

Combining higher growth rates with assumptions about the relationship between demand growth and GDP growth on the one hand, and population growth in some areas such as Auckland (assumed to grow by around 50% over 20 years), could produce quite alarming projections of required additional infrastructure. Whether such mechanical projections into the future are valid requires further investigation. An exploration of possible future scenarios would be a valuable addition to a National Infrastructure Plan, and this will be considered for subsequent iterations.