New Zealand has big decisions to make about how we build our future — our hospitals, our roads, our schools, and our prisons. We know the country needs billions of dollars’ worth of new infrastructure over the coming decades. But one question keeps coming up: how should we pay for it?
For years, governments have turned to Public-Private Partnerships, or PPPs. These deals bring in private companies to finance and often build public projects, with the government paying them back over time. The idea is that private money and management can speed things up and deliver better value.
Another idea, now gaining more attention, is Sovereign Money Funding. This means the government — through the Reserve Bank — directly creates money to pay for things like hospitals and roads, instead of borrowing from banks or investors. It’s based on a simple principle: if a project builds real value for the country, the government should be able to fund it without going into debt.
How PPPs Work
In a PPP, a private consortium designs, builds, and often runs a public facility for 20 to 30 years. The government then pays that consortium an annual fee, sometimes based on performance.
We’ve seen several big PPPs in New Zealand already:
* Transmission Gully motorway near Wellington
* Auckland South Corrections Facility (the Wiri Prison)
* Hobsonville Point Schools in Auckland
While these projects have brought private expertise, many have also drawn criticism for high costs, delays, and rigid contracts. Transmission Gully, for example, ran years behind schedule and hundreds of millions over budget.
The Sovereign Money Alternative
Sovereign Money Funding takes a very different approach. Instead of borrowing from private lenders, the government simply creates money — responsibly and in limited amounts — to fund specific infrastructure that benefits the public.
That might sound radical, but it’s not new. During the COVID-19 pandemic, the Reserve Bank effectively created billions of dollars to buy government bonds and stabilise the economy. The difference is that under a Sovereign Money model, the money would go directly into real-world projects — like hospitals or transport networks — rather than financial markets.
Supporters argue that this approach could deliver infrastructure debt-free, reduce long-term costs, and keep ownership entirely in public hands.
What It Means for Key Sectors
Hospitals:
New Zealand’s hospital rebuilds, like the new Dunedin Hospital, face huge cost pressures. A PPP might deliver the buildings sooner but lock taxpayers into high long-term payments. Sovereign Money could allow the government to fund construction directly and keep costs under control.
Roads:
PPP roads like Transmission Gully show how private finance can over-complicate public projects. With Sovereign Money, the government could invest in maintenance and safety upgrades nationwide, guided by public need rather than profit.
Private prisons, such as Wiri, are controversial. Supporters point to efficiency; critics question whether profit should ever be tied to incarceration. Sovereign Money would ensure prisons remain public institutions focused on rehabilitation, not returns to investors.
The Risks and Rewards
Critics of Sovereign Money warn about inflation — the fear that creating new money could push up prices. But if the funding builds productive assets that improve the economy’s capacity, that risk can be managed.
On the other hand, PPPs can tie up public money for decades. The payments may not show up as government debt right away, but taxpayers still foot the bill — often with interest.
The real challenge is governance. Sovereign Money Funding would need strong, independent oversight to prevent political misuse. But that’s not so different from the checks already in place for monetary policy and public spending.
A Question of Values
At its heart, this debate is about what kind of country we want to live in. Should essential public infrastructure be a source of private profit, or a shared national investment in well-being and productivity?
Public-Private Partnerships bring private money and risk-sharing, but often at a higher long-term cost. Sovereign Money Funding offers a way for New Zealand to invest in itself — to build what we need without burdening future generations with debt.
As the government faces tough choices about hospitals, roads, and prisons, the answer may come down to a simple question: Who should own New Zealand’s future — private investors, or the New Zealand public?
– Brian McCloy, CoOperativeNZ
