Hon Chris Bishop
Minister of Housing
Minister for Infrastructure

Opening

Good afternoon. I’m excited to be here at the KangaNews Debt Capital Markets Forum.

It’s a pleasure to be here with all of you – investors, financial institutions, and wholesale market participants who play a vital role in unlocking New Zealand’s economic future.

I’d like to thank ANZ for hosting this event and for inviting me to speak.

Debt capital markets are fundamental to the success of the Government’s plan to go for growth.

Capital is like water to a seed – it enables New Zealanders, businesses, government, and NGOs to action and grow their bright-ideas, ambitions, and aspirations.

The deeper our capital markets get, the more opportunities our country will have to thrive.

Today, I want to discuss how the Government is unlocking growth and overcoming funding and financing challenges in housing and infrastructure in a fiscally constrained environment.

I will also be announcing actions Cabinet has recently agreed to that will reduce debt financing barriers for Community Housing Providers.

Unlocking growth

New Zealanders have said that inflation and the economy are in the top three issues facing the country.

The only sustainable way to fix the cost-of-living crisis is to ensure wages grow faster than inflation.

That means growing the economy through more high-paying jobs, increased productivity, greater innovation, and more investment.

The best thing the Government can do to support this is:

• one ensuring systems, regulations, and laws are growth-enabling – like the Resource Management Act, and
• two getting interest rates lower.

Now, the Government doesn’t set the Official Cash Rate (OCR) – that’s the Reserve Bank’s job – but we can help support lower interest rates through responsible fiscal management, getting the government’s books back in order, and investing in productivity-enhancing infrastructure.

That’s what we have been doing, and since we came into Government the OCR has dropped 175 basis points.

In Budget 2024, we found $5.9 billion on average in annual operating savings and revenue, and $3.1 billion in capital savings and revenue over the forecast period. We reprioritised savings to fund tax relief and cost pressures in Health, and to support other growth-enabling initiatives.

For us, it's about ensuring every public dollar goes to its best use. Greater value for money means we can provide more and higher quality services that people need.

Budget 2025 will be no different.

Without swerving too far into the Minister of Finance’s lane – I can say that Budget 2025 will focus on four areas:

1. Lifting economic growth through measures to tackle New Zealand’s long-term productivity challenges,
2. Using a social investment approach to improve life outcomes for people with high needs,
3. Keeping tight control of government spending, while funding high-priority commitments and cost pressures, and
4. Developing a pipeline of long-term infrastructure investments.

In terms of infrastructure, this Government has and will continue to invest a record amount. More than $68 billion in capital is forecast to be spent by central government on infrastructure over the next five years.

For comparison from 2019 to 2023, $50.8 billion in capital was spent on infrastructure.

Infrastructure Investment Summit

However, we know achieving economic growth is not all about government. We can’t unlock New Zealand’s potential without the private sector.

So, we are also focused on attracting long-term private capital, capacity, and capability into our economy.

To do this, earlier this month, the Prime Minister and I hosted the New Zealand Infrastructure Investment Summit in Auckland, which was attended by over 100 world-leading institutional investors, private investment firms, and construction companies.

It was a huge win for our country, and it was good to see some of you there.

During the Summit, we reaffirmed New Zealand’s position as being open for business, and as a safe and strong country to invest in.

Overall, we focused on three areas:

1. First, New Zealand’s infrastructure vision and upcoming public infrastructure opportunities,
2. Second, changes to policy, regulation, and legislation to make it easier to do business here, and
3. Third, other investment opportunities in growth sectors and the Māori economy.

I just want to briefly touch on the first area.

It was great to get investable and developable opportunities in public infrastructure to market, including Christchurch Men’s Prison PPP and the Northland RoNS PPP.

But as Minister for Infrastructure, I think showcasing our long-term infrastructure pipeline made the biggest impression.

This is what will give the private sector confidence to stay here and invest in people and equipment.

Firms just want to know: What’s next.

For example, the Italian tunnelling company Ghella was preparing to leave New Zealand after completing the 16.2-kilometre Central Interceptor tunnel in Auckland. But following presentations on the pipeline and the positivity of the Summit, Ghella have decided to keep their workers, expertise, and tens of millions of dollars of plant, equipment, and associated services here.

Similarly, Plenary, an infrastructure investment firm managing more than $100 billion in assets has also committed to opening an office in New Zealand and to bidding on at least five PPPs over the next five years due to the PPP pipeline.

Many global firms showed an interest in New Zealand.

When Guido Cacciaguerra of Webuild, a multinational construction and civil engineering firm, said “the Italians are coming back”, all I could think was – yes, that’s fantastic.

These guys helped us construct tunnels for the Tongariro hydro scheme in the 1960s.

It’s partnerships like these we need to help us close our infrastructure deficit, and we are committed to keep this momentum going.

Overcoming funding and financing challenges in infrastructure and housing

Now, let’s move onto overcoming funding and financing challenges in infrastructure and housing.

Public infrastructure in New Zealand has historically been primarily funded by taxpayers or ratepayers.

But our heavy reliance on this blunt approach is not serving us well and has led to perverse outcomes including congestion, run-down assets, and the unresponsive provision infrastructure – contributing to unaffordable housing.

The scale of New Zealand’s infrastructure challenge means we cannot continue the status quo – we need to leverage private capital and alternative funding and financing tools.

I want to outline several pieces of work that interact with debt capital markets, including:

• The establishment of the National Infrastructure Funding and Financing Ltd– or NIFFCo,
• Treasury’s new Funding and Financing Framework,
• The refresh of the Government’s PPP policies, and
• New funding and financing tools for infrastructure to support growth.

Establishment of NIFFCo

Let’s start with NIFFCo.

On 1 December 2024, we established NIFFCo to carry out three key functions:

• Its first function is to act as the Crown’s ‘shopfront’ to facilitate private sector investment and interest in infrastructure – this includes receiving and evaluating any Market Led Proposals, or Unsolicited Bids.
• Its second function is to partner with agencies, and in some cases, local government, to provide expertise on projects involving complex procurement, alternative funding mechanisms and private finance – including PPPs and IFF Act transactions.
• Its third function is to administer central government infrastructure funds.

When you decide to join us in transforming New Zealand’s infrastructure, you will likely work with NIFFCo.

Overall, I expect NIFFCo will help unlock access to capital for infrastructure and give the private sector a clear and knowledgeable Government-side partner to work with on projects and transactions.

So, if you want to put forward a project, are looking for an opportunity to invest in New Zealand infrastructure or want to partner with Government – NIFFCo is open for business.

NIFFCo will also lift the government’s commercial capability and help us be a better client of infrastructure. It will do this by deploying expertise into agencies that are working on projects involving private finance and alternative funding mechanisms.

This includes, but is not limited to, projects involving traditional loans, equity investments, PPPs, developer levies, beneficiary levies, concessions, or other value uplift mechanisms.

Funding and Financing Framework

Now, let’s talk about Treasury’s new Funding and Financing Framework.

Last year, Treasury released this Framework to broaden the funding base for Crown investments, and to utilise private capital where efficient.

It provides guidance to agencies that they should, in the first instance, seek user or beneficiary pays to fund new infrastructure projects rather than defaulting to taxpayer money.

I expect proposals from sectors like transport, water, energy, housing, and adaptation to demonstrate how user or beneficiary pays can contribute towards funding.

More utilisation of user- and beneficiary-pays will provide greater opportunities for the private sector, including debt capital markets, to participate in public investments.

We want to use the government’s balance sheet more strategically and apply good commercial disciplines when deciding how to financially support a proposal – essentially providing “just enough support” to make proposals feasible.

This will mean we can deliver more projects, and channel support to sectors where it is appropriate for the Crown to be the primary funder, like in health and education.

PPP Framework and other guidance

To match our more commercial Funding and Financing Framework – we also needed to modernise the Crown’s policies and contracts, particularly in the PPP space.

After extensive engagement, in November last year, we released a Blueprint outlining how the government will approach future PPPs.

There are several key elements in the refreshed Blueprint that will foster a more appealing market for all participants:

• A more practical approach to risk transfer,
• Guidance for agencies on bid cost recognition,
• Enhancing the Interactive Tender Process,
• Allowing reasonable price validation to occur during the procurement process,
• Improving the process for managing claims and dispute resolution, and
• Increasing the capability and resourcing of the Crown so that we can be a better client.

Our approach is to be smart about private capital and use it in a way that unlocks investment, enhances incentives for on-time on-budget delivery, and brings more maturity to the design, build, and maintenance of projects.

The new PPP Blueprint sits alongside new Strategic Leasing Guidance, and Guideline for Market Led Proposals.

New infrastructure funding and financing tools to get more houses built

Let’s move onto new infrastructure funding and financing tools to get more houses built.

As Minister of Housing, I am committed to – well, more accurately obsessed with – fixing our housing crisis.

We are not a small country by land mass, but our restrictive planning system, particularly restrictions on the supply of urban land, has created a scorching hot land and housing market driven by artificial scarcity.

We are changing that by allowing our cities to grow up and out. But this won’t be enough on its own. We also need to enable the timely provision of enabling infrastructure.

Put simply, you can’t have housing without water, transport, and community facilities.

However, under current settings councils, infrastructure providers, and developers face significant challenges to fund and finance enabling infrastructure for housing.

We want to move to a future state where funding and financing tools enable the responsive supply of infrastructure where it is commercially viable to build new houses.

This will shift market expectations of future scarcity, bring down the cost of land for new housing, and improve incentives to develop land sooner instead of land banking.

To achieve this future, our overarching approach is that growth pays for growth.

Last month, I announced five changes to our infrastructure funding and financing toolkit to support urban growth.

I won’t cover all of these. But the most relevant to you are changes to the Infrastructure Funding and Financing Act (IFF) Act.

The IFF Act allows the creation of a Special Purpose Vehicle to raise finance for projects, where the cost is repaid through a levy charged to properties that benefit from a project over a period of about 20 to 30 years.

We are making several remedial amendments to improve the effectiveness of the Act, particularly for developer-led projects, which will make the process simpler and cheaper.

We are also broadening the Act to enable levies to be charged for major transport projects – a gamechanger in New Zealand for funding city-shaping projects.

These changes will lead to the Act being more effective, efficient, and utilised more often.

I expect, private capital will have far more opportunity to support public infrastructure projects.

Reducing debt financing barriers for CHPs

Now, I would like to move onto actions the Government is taking to reduce debt financing barriers for Community Housing Providers, or CHPs.

As I noted earlier, we are fixing the housing crisis by getting the underlying market fundamentals right. This is the single best thing we can do to make housing more affordable.

At the same time, I recognise that these changes will take some time and that there will always be New Zealanders who need housing support.

This Government believes in social housing, and we believe the CHP sector and private capital have a greater role to play in this space.

Currently, CHPs account for 16% of our social homes – or around 13,000 houses.

My ambition for the social housing system is to create a level playing field between CHPs and Kāinga Ora.

I’m obsessed with building houses across the housing continuum for people who need them. But I am agnostic as to whether those houses are delivered by CHPs or by the government.

I call this competitive neutrality. In some areas and for some people, CHPs are the answer. In other areas, Kāinga Ora is the way to go.

However, we don’t have competitive neutrality right now.

As I am sure you are aware, Kāinga Ora can borrow at a small margin above the Crown’s cost of financing, while CHPs effectively get access to finance at commercial rates.

Update on last year’s announcement

In November last year, I outlined three actions we are taking to help CHPs access borrowing to deliver housing:

The first was making $70 million of Operating Supplement available upfront, unlocking equity CHPs need to raise debt.

The second was making changes to IRRS contracts that makes the revenue stream more attractive for financiers.

And the third was to review the use of leasing to provide social housing.

I’ll just give you a quick update on where those are at.

The Ministry of Housing and Urban Development are implementing updated criteria for providing Operating Supplement upfront to support delivery of the 1,500 CHP places committed through Budget 2024.

The updated criteria will focus on the basics – strategic alignment, value for money, deliverability, and whether upfront funding is really needed to unlock financing. We are also removing unhelpful eligibility requirements and allowing larger CHPs and projects in urban areas to access upfront funding, where appropriate.

On updates to the IRRS contracts, HUD are making the following changes that will be in place for the contracting of places from late May onwards:

• Additional compensation where the Termination for Convenience clause is exercised on Build to Lease projects,
• Limiting the ‘step-in’ period to six months, and
• Providing a Financier Direct Deed when requested on all Build to Own projects.

These changes will go some way to reducing real and perceived risk to financiers, although I acknowledge that there is more work to do.

On the use of leasing to provide social housing, HUD has moved to an ownership-agnostic approach.

Leasing could be useful where CHPs want to leverage their local expertise in managing social housing, while partnering with developers who could leverage their larger balance sheets to access finance that a small CHP could not.

CHP credit enhancement

Last year, I also announced that the Government would explore a credit enhancement intervention for CHPs, so that they can access suitable debt.

I am pleased to announce today that Cabinet has agreed to establish Crown lending facilities of up to $150 million for the Community Housing Funding Agency (CHFA) to cover:

• an interim lending facility to be provided in early April to support CHFA’s immediate financing needs, and
• a final liquidity facility.

In addition to this, the Minister of Finance intends to offer a loan guarantee scheme to banks to support their CHP lending.

Both of these interventions align with our market-led approach to fixing our housing crisis, and our transition to more efficient and effective Crown investment.

The liquidity facility and loan guarantee scheme will provide critical support whilst we get the system right.

Let’s start with CHFA –

CHFA was launched by Community Finance in 2024 and aggregates the finance requirements for CHPs around New Zealand, unlocking lower cost finance at scale to support the delivery of social housing.

The CHFA is largest lender to CHPs in New Zealand already indicating they are providing lending solutions highly valued by the sector.

A Crown liquidity facility and credit rating will allow CHFA to lend to more CHPs on a much larger scale.

This will lay the foundation for CHFA to borrow billions of dollars, supporting not just the delivery of social housing, but also CHPs’ broader affordable housing portfolios.

Housing Australia has a similar model – the Affordable Housing Bond Aggregator (AHBA).

Since its inception in 2018, Housing Australia has approved around $4.5 billion in AHBA loans to support the development of more than 18,800 social and affordable homes.

The AHBA loans have helped the sector save an estimated $800 million in interest and fees.

I want this for New Zealand too.

Finally, on the loan guarantee scheme, the Minister of Finance and I have endorsed key design criteria as a starting point for Government’s engagement with banks.

I don’t want to get into too much detail, I will leave that to officials –

But, at a high-level, I expect that this scheme will encourage participation among banks and enable them to pass on meaningfully reduced interest rates and other lending accommodations to CHPs.

Relatedly, last year, the Minister of Finance wrote to the Reserve Bank asking them to look further at the risk weights for lending to CHPs. The Bank intends to consult on potential changes in the middle of 2025. This process may also lead to a meaningful reduction in borrowing costs for CHPs.

Overall, I am really excited about how these changes will support the CHP sector – we heard you, and we hope these changes enable you to grow and do more good work.

Conclusion

Delivering on this Government’s vision for growth and higher living standards will require a strong partnership between government, investors, and the private sector.

Capital markets will play a pivotal role in financing New Zealand’s infrastructure future, and I encourage all of you to explore how your expertise and resources can contribute to this effort.

We are committed to creating a stable, predictable, and investable infrastructure and housing environment – one that supports economic growth, enhances productivity, and improves the quality of life for New Zealanders.

Together, through innovation and partnership, I am confident we can build a more prosperous New Zealand.

I look forward to your insights and collaboration.

Thank you.

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