The Government will invest an extra $12b in infrastructure over the next four years, including $6.8b on transport.

Finance Minister Grant Robertson unveiled the spending at the Half-Yearly Economic and Fiscal Update (HYEFU) on Wednesday afternoon, saying it was the right time to take advantage of low interest rates and "future-proof" New Zealand with stimulatory spending

Of the $12b there will be $8b on specific "shovel-ready" projects set to be announced early next year. Most of that will be taken up with a $6.8b spend on transport which itself will mostly be on roads and heavy rail.

Another $300m will be spent on hospital property, $300m on "regional investment opportunities", and $200m on "public estate decarbonisation." Also included is the already-announced $400m boost for state school property improvements.

The extra $4b will be allocated to the multi-year capital allowance, meaning the Government can decide how to spend it over future budgets. It will be a mix of short-term spending over the next two years and medium and long-term projects brought forward.

The spending increase will largely be funded by new borrowing, which will see the Government break its own Budget Responsibility Rules in 2021, when its net debt is forecast to reach 21.5 per cent of GDP, above the 20 per cent target. Net debt will then fall to below 20 per cent the following year however.

"I think it would be ludicrously stubborn to not respond to the fact that there is an infrastructure need," Robertson said, saying he couldn't think of any economist who would be worried about net debt at that level.

"We have the room to do this because we have been fiscally prudent."

GETTY IMAGES Finance Minister Grant Robertson previewed the infrastructure spend at his conference.

A temporary deficit of $900m is forecast in the year ending June 2020, which then bounces back to a $4b surplus by 2023.

The increased spending comes as Treasury forecasts softening economic growth over the next two years, and Robertson hopes it will have a stimulatory effect.

"The new investment is forecast to increase the size of the economy by a further $10 billion over five years, with further positive impacts on GDP beyond that period," Robertson said.

"The cost of borrowing is low, the projects are there to be done, the books are in good shape, and the economy could do with it."

"It will provide further support to boost the New Zealand economy in the face of slowing international growth and stronger global headwinds. It will also give certainty to the construction industry about upcoming infrastructure projects and will create more job opportunities for Kiwis."

"We inherited neglected infrastructure when we took office, including run down hospitals, roads that had been announced but not paid for, overcrowded classrooms and a state housing shortage."

He said it would see the Government spending more on infrastructure than any others had in "more than 20 years."

Robertson said the regional funding would go to infrastructure projects that did not fit within the $3b Provincial Growth Fund. He also indicated housing could be a major benefactor of the new investment, with the Government actively looking into new opportunities there.

The infrastructure boost sees capital spending peak in the year ending June 2021, when $11.7b in forecast to be spent in a single year. That compares to just over $1b in both 2013 and 2014, and $4b in 2010 and 2011.

Several commentators and economists have urged the Government to take advantage of low interest rates and borrow to build infrastructure.

But the Government has had serious trouble getting the money it has already invested out the door, with the New Zealand Transport Agency having to reallocate spending from light rail to state highways after not being able to actually spend the money set aside for it.

Robertson could not rule out funding some of National's "Roads of National Significance" within the package.

"What we inherited is a wish-list of projects. These were not funded, and in many cases they were not consented," Robertson said of the roads.

He was unable to perfectly define "shovel-ready" for the $8b of spending, saying some of the projects were already consented while others were not.

​Infometrics economist Brad Olsen said the investment was a "start" but more could have been invested.

"It's a bit of a sugar-hit, there could have been a lot more investment coming through. You can see that with the rising surpluses over time."

Olsen said capacity constraints remained as an issue and the transport sector would be confused as to why projects not funded earlier could suddenly be funded.

"There could have been a lot more."

"If they weren't going to be funded previously - what's changed. Is it just a political thing?"

He said the transport sector was sick of the uncertainty of being a "political rag-doll."

NATIONAL ATTACK DEFICIT

National's finance spokesman Paul Goldsmith hit out at the projected deficit, saying the Government had inherited "surpluses as far as the eye could see" and squandered it.

"The Government is pulling the economy down with one hand through added costs, uncertainty and incompetence, and trying to pull it up with other through more debt. It's confused, incoherent and chaotic," Goldsmith said.

"The Government has also broken its promise to New Zealanders to reduce debt below 20 per cent of GDP by 2022. This promise was only made because Labour knew New Zealanders didn't trust them to spend wisely."

Goldsmith did not believe the Treasury forecasts of future surpluses in every year after the current one, saying deficits would continue.

SUPPLIED Economist Brad Olsen of Infometrics said transport needed to stop being a political ragdoll.

He said National supported increased investment in infrastructure but he had little confidence the money would actually be spent before the election.

"After spending its first two years deliberately stopping planned transport infrastructure, it's a relief the Government has finally woken up to the need to get on with things. We, however, have little confidence it will deliver anything next year either."

National leader Simon Bridges said Labour had "screwed" the economy in just two years.

The Employers and Manufacturers Association head of Advocacy and Strategy Alan McDonald said the spending was a "welcome boost".

"While details about which projects will receive the new funding are being held back - they are likely to be announced in the New Year - there are a number of public transport, rail and road projects across the upper North Island that are virtually ready to go and if brought forward will bring considerable benefits to businesses in the region," he said.

BusinessNZ head Kirk Hope welcomed the news but said the funding "must" help boost productivity.

"We need to make sure the projects can be executed, and that decisions are worked through Infrastructure Commission to ensure investments are strategic and contribute to New Zealand's growth in productivity," Hope said.

"It will be important that capacity constraints don't restrict execution of essential short- and medium-term projects, and that the projects are strongly aligned with immigration and training policies."

Council of Trade Unions economic Bill Rosenberg also welcomed the news.

"This increase is greatly needed. After a long period of neglect we have fallen well behind and this investment is significant. It makes sense given government debt levels are low and its borrowing is currently very cheap," Rosenberg said.

He said a boost to operational spending would be needed too however.

"Significant public service funding is required to make New Zealand a fairer society and for that to occur the Government will need more revenue. The allowance for new spending in the 2020 Budget is $3b compared to $3.8b in the 2019 Budget. This will need to be increased substantially if we are to make the inroads into providing the public services that New Zealanders need."