By Nick Leggett, Chief Executive, Infrastructure New Zealand
The New Zealand coalition government could be forgiven for thinking it has tied a bow around water reform.
After years of political argument, Local Water Done Well has largely settled the question of who will own and deliver Aotearoa New Zealand’s water infrastructure. Councils have made their choices, new entities and arrangements are taking shape, and the country can finally move from debating structures to getting on with delivery. That is an achievement.
However, nobody should mistake the end of the structural debate for the end of the water challenge. In many respects, we are only at the beginning. New Zealand requires an estimated $120 billion to $185 billion of investment in drinking water, wastewater and stormwater infrastructure over the next 30 years. That represents an enormous programme of construction, renewal and improvement.
There is a positive story here: communities will get better infrastructure, ageing networks can finally be renewed, and we can improve the health of our waterways and harbours. Growth can be supported by infrastructure rather than constrained by its absence, and there is an opportunity to create a much more sophisticated, productive and innovative water sector. But the challenge in getting there should not be underestimated.
Across New Zealand, new water organisations will be establishing themselves, building investment plans, raising finance and determining what needs to be delivered first. At the same time, they will need to demonstrate credibility to consumers, councils, regulators and the infrastructure market.
Watercare, in Auckland, provides a useful indication of what is possible. It serves around one third of New Zealand’s population and its new financial model gives it substantially greater capacity to invest for the future of our major growth region.
Even an organisation of Watercare’s scale, however, will need to keep improving. It needs to provide a clear and credible pipeline to the market, lift procurement and delivery performance, encourage innovation and relentlessly pursue efficiencies. The rest of the country will need to do the same.
That matters because the money ultimately comes from consumers. For many households, the most visible consequence of water reform will not be a new wastewater plant or an improved balance sheet; it will be a bigger bill. These increases are arriving during a prolonged cost-of-living squeeze.
While these increases are necessary because New Zealand has spent decades underinvesting in water infrastructure in many parts of the country, somebody eventually has to pay to renew those assets and build the infrastructure required for growing communities. I am not sure that we have done a good job of explaining that to New Zealanders.
There is a political risk here, too. Whatever the institutional arrangements, people will reasonably hold governments accountable if water bills increase significantly. Simply telling households that prices are now determined somewhere else will not wash.
All of these issues are why Infrastructure New Zealand believes the next phase of water reform must focus as much on accountability, capability and consumer protection as it has on institutional structure. Our Election 2026 Manifesto proposes several practical next steps.
First, there should be clear political accountability through a dedicated Minister for Water who is responsible for the ongoing implementation of the reforms. Water cannot become an orphan portfolio once the legislation has passed.
Second, New Zealand should establish a Water Chief Engineer. We are about to spend well over $100 billion on water infrastructure. We need independent technical leadership capable of driving common standards, sharing good practice, coordinating across water entities, and identifying opportunities for greater scale and efficiency. There are still too many water entities that will struggle for capability and scale. Having learnings imparted from across the system will be important for their success. We cannot afford to have every organisation independently reinventing the wheel.
Third, consumers need a strong voice. Infrastructure New Zealand proposes establishing a Water Ombudsman to resolve complaints, advocate for consumers and provide independent dispute resolution. This becomes increasingly important as bills rise.
Fourth, we need to keep a close eye on the regulators themselves. The Commerce Commission’s new economic regulation of water is an important safeguard, but regulation is not automatically effective simply because it exists. The United Kingdom provides a sobering lesson in what can happen when a regulatory regime becomes too comfortable and periodic scrutiny is inadequate. We propose a mandatory independent review of the water regulatory regime every five years, examining whether it is actually delivering investment, affordability and improved services.
The international experience also shows that sustained benchmarking matters. Scotland has used specialist economic regulation and periodic review to drive substantial efficiency improvements while maintaining investment. Denmark demonstrates the value of continually comparing performance and refining regulatory settings. New Zealand should borrow aggressively from those experiences rather than learning every lesson ourselves.
There is another challenge we need to start discussing now: capacity.
Delivering the coming investment programme will require engineers, technicians, operators, project managers, construction workers and commercial specialists. It will require greater investment from our domestic supply chain. We should actively seek technologies, expertise and innovations from overseas. This should become one of New Zealand’s great infrastructure opportunities.
Done well, water reform can give communities healthier environments, more resilient infrastructure, enhanced public health and capacity for growth, while creating a larger, more capable and internationally connected water industry.
Local Water Done Well was not the finish line; it has simply created the platform. The challenge now is ensuring the institutions, regulation, workforce and infrastructure market sitting on that platform are capable of delivering what New Zealanders are about to be asked to pay for.