“Less work is getting done."

That was chief executive Hamish Riach’s frank overview of the impact of inflation-driven cost escalations at a recent Ashburton District Council meeting.

The problem for the council is that the costs of doing business is rising, and the budgets can remain the same.

Inflation is the key factor, Riach said.

“With costs of many materials continually going up, it is a challenge to get the same amount of work done for the budget available.

“A good example is bitumen – it has dramatically increased in price over the last year or two, we simply can’t get the same amount of sealed roading work done for the same money.”

When Waka Kotahi grants its funding in a three-year cycle, it is not inflation-adjusted over time, he said.

A dollar budgeted in 2019 is still a dollar in 2023, even though inflation means it won't stretch as far and should be more like $1.20.

“With costs increasing and revenue limited, the amount of work able to be achieved for the budgeted money comes under immense pressure.”

That means when 100% of the road maintenance budget has been spent for the 2022-23 year, that will not equate to 100% of the work that was planned.

“Roading is the best example because it is the largest single item of expenditure.

“But fuel increases cause cost pressure for our open spaces team, pipe cost increases put pressure on water renewals, and construction increases have put significant pressure on the library Te Pātaka o kā Tuhituhi and civic centre Te Waharoa a Hine Paaka build.

“Inflation is affecting the budgets across the whole work programme of council.”

With the 2023-24 annual plan now signed off, the council is turning its attention to the 2024-34 long-term plan (LTP) and the council is well aware of taking into account the mounting economic pressure in its planning, Riach said.

“Council is acutely conscious of the pressure that inflation places on households and businesses, and so continues to look for efficiencies in our operation.

“We adjust the work programmes to fit available budgets and use tools such as the market tender process for most of our external work to ensure we are receiving the best price."

The council can only advocate and apply for better funding from central government, he said, and hope it covers the forecast work.

“We have several regular subsidies like roading where we continually advocate for greater support, and we are also active in applying for other financial support across a whole lot of activities – the Tourism Infrastructure Fund is a good example.”

By Jonathan Leask