First, a quick note about Labour’s Future Fund versus NZ First’s one.
The media, writ large, have not seemed to pick this up yet, but there is a significant difference in structure and outlook.
NZ First’s model is based on courting foreign investment and giving them taxpayer funded tax cuts/incentives to “invest in NZ”.
Labour’s is about leveraging NZ assets and resources to build for a sustainable future, where the returns go back to investing in NZ, for Kiwis - and we are not held to ransom in perpetuity to provide an “ROI”1 to foreigners (think of our big banks and supermarkets as an example).
As Chris Hipkins said yesterday, “not speculators, not foreigners” - Kiwis.
Perhaps I haven’t read all the coverage yet, but media appear far more invested in repeating Winston Peter’s “Temu Chris” attack ads than delving into the details.
Chris Bishop admits to a $62 billion funding gap on road plans, and there is no credible business case
Yesterday Chris Luxon and Bishop announced their commitment to spend $1.2 billion to commence major works on “roads of national significance”. Their overall plans are much larger than that - equating to about $62 billion of roading plans without any funding sources under them.
On one road alone, the Northern Expressway, independent advice suggests the cost could easily double from $10 billion to $20 billion.
Yet this hasn’t stopped National, who have gone all in on the commencement -
Over $515 million is expected be spent on acquiring local properties to allow the construction, as part of a $1,200 million commitment to start the roading projects.
Bishop also touted the benefits of tolling, but refused to admit his preference for tolls in yesterday’s press conference, saying that we would have to wait and see, despite NZTA’s business cases suggesting “a higher cost benefit ratio if the roads remain untolled.”
In fact last year, Bishop had stated unequivocally that all roads of national significance were going to be tolled under National, and NZ would hereon become a “user pays” nation -
“Our expectation is that every significant infrastructure project that seeks support from the Crown will consider opportunities for user-pays funding and private financing”
And talking of business cases, Bishop proved he had none for the roads they had selected, in a sit down with Jack Tame a few months ago.
Asked about the Northern Expressway, a project that will consume 1 in every $10 of capital spending over the next 20 years, Bishop answered with his finger in the sky, explaining it ‘just made sense’.
And Newsroom’s analysis by Sam Sachdeva shows considerable issues around National’s current numbers, commissioned to the NZ Institute of Economic Research.
An independent analysis carried out for Parliament’s transport and infrastructure committee by Motu Research affiliate Dr Simon Chapple has questioned some of the conclusions regarding the expressway’s benefits.
“The NZIER report is advocacy research, paid for by people with monetary skin in the game to commercial providers of consultancy services, meaning its conclusions need to be regarded with caution by the public,” Chapple said, with its estimated benefits not readily verifiable.
The NZIER analysis estimated average speeds along the current route to be 67km/h, but Chapple’s own estimates were “considerably higher”, which would affect the purported improvements in travel time.
This isn’t a surprise given Chris Bishop and National’s modus operandi, but one has to laugh at the nation’s forgiveness of National shuttling the i-Rex project, that would have only cost another $1.4b to finish, while throwing away an effective $1b, and in the same breath committing to projects of this mega-nature without credible analysis.
Greater Auckland today goes further, cautioning that National’s RoNS (Roads of National Significance) could potentially bankrupt NZ in future.
It highlights the dubiousness of NZTA’s business cases:
A striking thing about the RoNS investment cases is that all six of the projects now have Benefit Cost Ratios greater than one. In other words, the assertion is that (at least in theory) every dollar they cost will generate slightly more than that in benefits.
But this is only due to a significant change in the way NZTA calculates the BCR…. [they changed the formula to derive a more favourable result]
This means projects that previously barely qualified as economical now suddenly generate more benefits than costs – and all now magically clear the (very low) hurdle of a BCR of 1.0.
There was a time when a BCR of 3.0 was the minimum for spending public funds on this scale.
Which raises the question: what should the bar be for funding these mega-projects, given that even with some creative accounting, so many examples are still only just scraping over it?
Nelson/Tasman project comment
RNZ’s report just copied from the government’s press release.
Their headlines about Labour’s Future Fund were also starkly negative, with Craig McCulloch offering a front page caption positioning it as a “fizzer”.
Interestingly, National produced simplistic, light weight policies a few weeks before the election and most of those have proven to be deceptive (no borrowing for tax breaks - they borrowed $12b), a failure (signature Family Boost), ignored (EV chargers promise) or simply broken ($5 prescription fees to fund cancer drugs was ignored until the public backlash)
On objective measures, the right’s approach is careless, deceptive, driven by large scale corporate and uber wealth agendas.
And yet in NZ, most of the allegations of incompetency and recklessness are leveled at the left - and borne by a left that is fundamentally divided on approach and ideology.
Anyway, I like the Future Fund - it’s a good start, and a new start is what we want.
Let the good times roll, Aotearoa New Zealand.
Return on investment
