Could Infrastructure be the Vaccine for Our Ailing COVID-19 Economy?

Stuart McKinnon

Managing Director

Institutional, ANZ NZ

On March 25^th – when New Zealand first went into level 4 lock-down - COVID-19 was about to test our broadband infrastructure like nothing had ever tested it before.

As our cities and towns emptied out, the internet filled up.

The only safe way of interacting with the world outside our bubbles was online and millions of Kiwis switched to working, learning, running businesses, shopping and communicating online.

ANZ is a really good example.

Banking is an essential service and we had to do our bit to keep the economy going providing secure, reliable services for our customers.

It was crucial our staff were able to do that safely, and in the space of a few days we had more than 5000 of them set up to work from home.

Apart from a handful of branches operating on reduced hours and some essential staff in our corporate sites, we pretty much ran our entire New Zealand business from homes around the country.

This highlights just how important reliable broadband is.

"Our connectivity can help us turn the barrier of geographical distance into an opportunity."

Stuart McKinnon, Managing Director, Institutional, ANZ NZ Ltd.

We could only get the job done because as a nation we began investing in New Zealand’s telecommunications sector decades ago.

It’s a real challenge to look beyond COVID-19 and ensure the decisions we make today not only benefit us, but also generations to come.

But if we get this right, infrastructure could be the vaccine our COVID-19 ailing economy desperately needs right now - while also future-proofing us against further shocks.

While we can’t transport ourselves into the future to see the ultimate outcome of our decisions, we can look to the past for help. And our telecommunications sector is a great example.

We’ve always viewed our investment in broadband infrastructure and connectivity as an essential part of bringing us closer to the rest of world.

As a small trading nation so far from global markets that long-term thinking has been critical.

Collectively it has meant we’ve remained focused on the end goal, not the project.

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Previous investments and interventions by both National and Labour Governments have proved incredibly valuable, as have been the smart private sector investment supporting them.

It was only a couple of decades ago that one company owned all the phone lines and there were only two mobile networks here in New Zealand.

In 2006 Labour made changes and introduced competition by allowing other telcos to sell products and services using Telecom’s New Zealand network.

Then in 2008 National announced it would invest $1.5 billion to roll out the Ultra-Fast Broadband network.

We now have a mature and competitive telecommunications market with three network operators and a nationwide broadband network.

Our connection to the internet, and the rest of the world, is via 35,000 kilometres of fibre optic cables on the ocean floor running between New Zealand, The Pacific, Australia and the US.

This cable network ensures we have good quality, secure, dependable and cost-effective connectivity.

Without it, our telecommunications landscape wouldn’t have been able to develop as it has.

The Southern Cross NEXT project underway now will expand our capacity and connectivity even further.

A significant two-year build spanning multiple jurisdictions, the Southern Cross NEXT project will also connect parts of the Pacific with high speed internet for the first time, opening up numerous benefits and opportunities.

This is a critical factor in future proofing our connection to the world.

Submarine cables like this are very expensive and costly infrastructure builds requiring a significant amount capital up front with returns over a long period.

Without the availability of private sector investment, projects like this are unlikely to go ahead and ANZ is proud to have supported this project through our partnership with Southern Cross.

As we look to recover and re-build in the wake of COVID-19, New Zealand’s telecommunications sector is an example of long term vision and investment paying off.

Our connectivity can help us turn the barrier of geographical distance into an opportunity.

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So what can we learn from this?

COVID-19 has changed everything. The politics of debt and the previous debt to GDP target of 20 percent have changed and there is now broad consensus for Government spending.

Over the past three years the Government has largely focussed on setting the framework and groundwork for how they will deliver infrastructure.

They’ve committed 12 billion dollars to replace critical infrastructure throughout the country in rail, road, housing, schools and hospitals.

On top of this another 3 billion dollars of spending was announced in July from the COVID Response and Recovery Fund.

We now have an Infrastructure Commission developing a 30 year plan and we’re repealing and replacing the Resource Management Act.

All this, alongside a renewed focus and urgency to get ‘shovel ready’ projects underway to create jobs and drive economic growth, is great to see.

The private sector can also play an important role here, and at ANZ we are keen to play our part.

We’ve been a market leader in developing the infrastructure finance market in New Zealand and are keen to support the rebuild of sustainable infrastructure in the coming years.

There is a real opportunity, particularly in areas like our water infrastructure, for the private sector to provide both capital and expertise.

New Zealand has arguably the best basic water supply in the world. However underinvestment in our drinking water, sewerage and waste water infrastructure has put parts of the country close to crisis point already.

It is estimated 3 to 4 billion dollars of investment is required to bring our water services up to international standards.

Our decisions about how we fund and commission these critical long-term assets will have consequences for the well-being of New Zealanders well into the future.

Working together with strategic vision, innovation and discipline the decisions we make today will deliver long term prosperity for generations to come.

We’ve seen how successful this has been in our telecommunications sector. We should take the positives from this model and apply them to how we build for the future in other areas of infrastructure too.

This article first appeared in the New Zealand Herald