Money · Credit · New Zealand · Part 12
What tests should a major national investment have to pass?
If New Zealand is going to commit billions of dollars of public capital, the test cannot simply be whether we can raise the money.
By this point in the series, we have separated money from credit, finance from real resources, borrowing from productive investment, and public purpose from political lending.
So now we can turn the argument into a practical decision framework.
This is not intended to replace Treasury's Better Business Cases framework or the investment-assurance system.
It is a proposed public-facing test that asks the questions I think any major national investment should be able to answer clearly before the country commits capital.
A project should not receive public capital because it is exciting, urgent or politically popular. It should receive capital because it survives scrutiny.
The existing New Zealand framework already points in this direction
Treasury's refreshed Better Business Cases framework uses five cases:
Strategic: is there a need for investment?
Economic: does the investment offer value for money?
Commercial: is the proposed deal viable?
Financial: is it affordable?
Management: can it actually be delivered?
Treasury — Better Business Cases ↗
Treasury refreshed the framework in March 2026 to make business cases more proportionate and useful for decision-makers.
Te Waihanga has used a similarly disciplined approach in infrastructure assessment: strategic alignment, value for money and deliverability.
Te Waihanga — Infrastructure assessment criteria ↗
The framework below builds on those principles, but adds some questions that have emerged from the earlier parts of this series — especially additionality, Crown exposure, credit allocation, inflation and real-resource capacity.
Test 1: What problem are we actually solving?
Before discussing a bridge, hospital, rail line, fund, power station or investment bank, define the problem.
Not the preferred solution.
The problem.
What is failing now?
Who is affected?
How large is the cost of doing nothing?
Is the problem getting worse?
What evidence supports that conclusion?
Treasury's Indicative Business Case guidance deliberately starts with clear and material problem statements before a preferred option is chosen.
Treasury — Indicative Business Cases ↗
If we cannot state the problem without naming the project, we may have fallen in love with the solution too early.
Test 2: Have we genuinely considered alternatives?
A major capital project should not automatically be the answer.
Could the problem be solved through:
maintenance,
better pricing,
regulation,
technology,
demand management,
smaller staged investments,
better use of existing assets,
or a different location or design?
Te Waihanga has warned that some projects converge too early on a preferred solution and that subsequent analysis can become an exercise in defending it rather than testing it.
Te Waihanga — Checks and balances for investment ↗
The correct comparison is not:
project versus nothing.
It is:
the best credible option versus the other credible options.
Test 3: Does it create more public value than it costs?
This is the economic test.
Some benefits can be expressed financially.
Others are broader:
travel-time savings,
reduced deaths and injuries,
better health,
lower emissions,
resilience,
productivity,
employment,
access to services,
or avoided future costs.
Treasury's CBAx tool exists to help agencies take a consistent long-term approach to cost-benefit analysis and make the assumptions behind those assessments visible.
Not every public benefit can be monetised perfectly.
But inability to price something exactly is not an excuse to avoid estimating it, describing it or comparing it.
Test 4: Is public involvement actually additional?
This test matters especially if the project is seeking public finance rather than a normal Budget appropriation.
What would happen without Crown involvement?
Would the project proceed anyway?
Would private finance fund it on reasonable terms?
Would it proceed later, smaller or differently?
Is there a genuine market failure, coordination problem, public-good benefit or financing gap?
If the private market is already willing to finance a viable project, public capital may simply replace private capital.
That is not automatically value creation.
Public capital should change the outcome, not merely change the name on the cheque.
Test 5: Who ultimately pays?
This is the funding test.
Taxpayers?
Ratepayers?
Users?
Landowners benefiting from development?
Commercial customers?
Future taxpayers through debt?
A mixture?
The answer should be explicit before the financing structure is chosen.
As we established in Part 7, funding and financing are different.
The bond, loan, PPP or SPV raises capital now.
The funding source ultimately repays it.
Test 6: What does the financing do to the Crown balance sheet?
A project can have a strong public case and still create too much fiscal risk.
We should ask:
How much Crown equity is required?
How much debt?
Is there an explicit guarantee?
Is there an implicit expectation of rescue?
What contingent liabilities are created?
What happens if the project fails?
What happens if interest rates rise?
What happens if refinancing is unavailable?
And what other investments become harder because Crown headroom has been used here?
The test should use the consolidated economic exposure — not simply where the liability appears legally.
Test 7: What is the financing return — and what is the public return?
These are not always the same.
A commercial infrastructure asset may generate cash revenue and a financial return.
A hospital may produce relatively little direct financial return but enormous health and social value.
A technology co-investment may produce both.
So the business case should state clearly:
financial return
economic return
public or social return
and which of those is carrying the case.
If a project requires a subsidy because the public return exceeds the private return, show the subsidy openly.
Test 8: Can the economy physically deliver it?
This is where national investment analysis often stops being purely financial.
How many engineers are required?
How many nurses?
How many electricians?
How much concrete and steel?
How much electricity?
What specialist equipment?
What land?
What imports?
What consenting capacity?
What contractors?
Te Waihanga's National Infrastructure Plan says New Zealand cannot build everything in the infrastructure pipeline and that robust prioritisation is necessary to focus limited resources on the highest-value and most deliverable projects.
Te Waihanga — Prioritising the right projects ↗
A fully funded project with no workforce is not shovel-ready. It is financially approved and physically impossible.
Test 9: What is the inflation risk?
This overlaps with deliverability but deserves its own test.
Will the project add demand into a sector that is already capacity constrained?
Can it be staged?
Can imports relieve the pressure?
Will the asset itself increase productive capacity and reduce future inflation pressure?
Is the timing sensible relative to the wider investment pipeline?
The test is not whether a single project will “cause inflation”.
The question is whether its demand is likely to add materially to economy-wide or sector-specific pressure when combined with other activity.
Test 10: Is the commercial structure viable?
Who builds it?
Who operates it?
Who owns it?
Who maintains it?
Who takes demand risk?
Who takes construction risk?
Who takes cost-overrun risk?
Who takes technology risk?
Who takes foreign-exchange risk?
The party best able to control a risk should generally be the party expected to manage it.
Dumping every risk onto a contractor does not make the risk disappear.
It may simply increase the contract price or make the project unbankable.
Test 11: Is governance strong enough for the size of the risk?
A billion-dollar investment should not depend on trust in a handful of people.
Governance should include:
clear decision rights,
conflict-of-interest rules,
independent board or committee oversight,
risk functions separate from deal origination,
audit,
transparent procurement,
and independent assurance at critical gates.
New Zealand is currently strengthening its investment-assurance system. Te Waihanga says a new Investment Decision Assurance process is being developed for infrastructure, intended to replace the current Gateway and Infrastructure Priorities Programme arrangements, with the new programme planned to become available from 1 November 2026 subject to final decisions.
Te Waihanga — Investment Decision Assurance ↗
Test 12: Can the sponsor actually deliver it?
A good idea and a strong spreadsheet are not enough.
Does the sponsoring organisation have:
experienced project leadership?
procurement capability?
technical capability?
commercial capability?
financial controls?
programme management?
stakeholder management?
and the authority required to make decisions quickly?
Treasury's Better Business Cases framework calls this the Management Case: is the organisation set up to successfully deliver, monitor and evaluate the investment?
That question should be treated as seriously as the economic case.
Test 13: What would make us stop?
This is the test that deserves far more attention.
Before approving a project, define the conditions under which it should be paused, redesigned or cancelled.
For example:
construction cost rises more than 25%,
demand falls below a defined threshold,
key technology fails testing,
financing costs exceed the business case,
a critical consent cannot be obtained,
or the benefit-cost ratio deteriorates materially.
Treasury's current Detailed Business Case guidance allows decision-makers to require a project to return for approval if final scope or costs move materially from the approved case.
Treasury — Detailed Business Case ↗
The courage to stop a bad project is part of good investment management.
Test 14: How will we know whether it worked?
Success metrics should be agreed before construction begins.
Not after.
Depending on the investment, they might include:
travel time reduced,
new generation capacity,
houses enabled,
hospital waiting times reduced,
exports increased,
private capital mobilised,
productivity improved,
asset availability,
cost per user,
or operating savings.
And the project should be evaluated after delivery against the assumptions used to justify it.
That creates institutional memory.
Without post-investment evaluation, governments can repeat the same forecasting errors indefinitely.
The National Investment Test
If I reduced the framework to one page, I would ask every major national investment to answer these questions:
1. Problem: what precisely are we trying to solve?
2. Alternatives: have we genuinely tested lower-cost and non-build options?
3. Public value: do the expected benefits exceed the full lifecycle costs?
4. Additionality: what does public capital make possible that would not otherwise happen?
5. Funding: who ultimately pays?
6. Financing: what capital structure is being used, and why?
7. Crown exposure: what debt, guarantees and contingent liabilities are created?
8. Real resources: do the labour, materials, energy, land and supply chains exist?
9. Inflation: can the economy absorb the investment at this time?
10. Commercial structure: are risk and reward allocated to the parties best able to manage them?
11. Governance: can conflicts, political interference and bad decisions be detected and stopped?
12. Delivery: does the sponsor have the capability to execute?
13. Stop rules: what conditions trigger redesign, reapproval or cancellation?
14. Outcomes: what measurable result will prove the investment was worth it?
Not every test should be scored the same way
I would divide them into three categories.
Hard-stop tests. If the problem is not real, the project is illegal, governance is fundamentally compromised, or the project is physically undeliverable, stop.
Value tests. Public value, additionality and alternatives determine whether the investment is worth pursuing.
Risk tests. Financing, inflation, delivery and commercial risks determine how — and when — it should proceed.
This matters because a project should not be able to compensate for a fatal governance problem simply by scoring highly somewhere else.
Some weaknesses can be priced. Some can be mitigated. Some should kill the project.
A practical decision rule
At the end of the test, there should be only four outcomes:
Proceed. The case is strong and the investment is ready.
Proceed with conditions. The case is strong, but specific risks must be resolved before full commitment.
Redesign. The problem is valid but the current solution, timing or financing is not.
Reject. The investment does not create enough value, cannot be delivered or carries unacceptable risk.
That is more useful than reducing every decision to “funded” or “not funded”.
Why this matters
Te Waihanga's 2026 National Infrastructure Plan says New Zealand has nearly 12,000 projects in the national infrastructure pipeline, including dozens expected to cost more than $1 billion.
It also says we cannot afford to build everything in that pipeline.
Te Waihanga — Prioritising the right projects ↗
The answer is not simply finding more money.
It is becoming much better at distinguishing:
what must be built,
what should be built,
what can wait,
what should be redesigned,
and what should never be built at all.
My conclusion
The best national investment framework would not make it easier to spend public money.
It would make it harder to spend badly.
It would force advocates to prove the problem, compare alternatives, expose the financing, identify the physical bottlenecks, quantify the risk and define what success looks like before the first major commitment is made.
The question should never be “Can we finance it?” on its own. The question should be “Is this the best use of New Zealand's financial and real resources?”
Next
We now have a complete decision framework.
The next question is broader:
What would a national investment strategy for New Zealand actually prioritise?
Part 13 will move from individual projects to portfolio strategy — infrastructure renewal, energy, housing-enabling infrastructure, water, health, technology, productive business investment, skills and resilience — and ask how a country chooses between them when everything cannot be first.
Primary sources
Treasury — Better Business Cases ↗
Te Waihanga — Prioritising the right projects ↗