David Hargreaves assesses the country's missed infrastructure opportunity while conceding that the Coalition has set itself up well for the election campaign next year

David Hargreaves assesses the country's missed infrastructure opportunity while conceding that the Coalition has set itself up well for the election campaign next year

Well, as a piece of early electioneering, it was pretty savvy work.

However, in terms of getting New Zealand’s infrastructure up to speed, Grant Robertson’s announcement this week of a $12 billion infrastructure spend-up fell well short.

To me it looked like the work of a Government wanting to be seen to be doing something rather than tackling the job with real conviction.

It remains the case in my view that this Government had the opportunity to last year, a real opportunity, make a decent statement of intent on infrastructure, maybe borrow $20 billion, and get some plans under way in this term of Government.

That would have been a real statement of intent. Something positive to build on.

But the opportunity was passed up.

What we have seen instead is a package announced a year and a half too late and too late to be implemented before the election.

Also, it’s a package in my view that is designed to find favour with the electorate – rather than truly attacking our infrastructure deficit.

I said earlier I thought that anything less than $10 billion of spending offered up by Robertson would likely lead to public disappointment.

So, the $12 billion announced gets over the ‘disappointment’ threshold. But in the grand world of infrastructure, it’s not really going to touch the sides.

Rates will be higher

Also, because the timeframe is so long it means that the money is going to be borrowed in future years when maybe the interest rates will be at least somewhat higher than they are now.

That is definitely a lost opportunity when looked at where interest rates have been in the past year.

And obviously, like everybody else, I would have preferred to see some detail of specifically what projects are going to be bankrolled.

Again though, this is clever electioneering, since the Government can now, with carefully choreographed announcements, drip feed news of the individual projects through the early months of next year.

It’s the classic Government PR approach of getting maximum bang for the taxpayers’ bucks. Effectively you just keep announcing the same spending again.

The flavour of the infrastructure spending will be important.

It was interesting that the $6.8 billion biggest portion of the announced new spend was designated as road/rail.

Roads or rail?

My best guess is that most people would have a preference for the majority of that money to be spent on roads. Will that be what we see though?  

Personally, I will be interested to see if there’s any progress or otherwise announced next year on what we in the interest.co.nz office have been referring to as the ‘slow tram to the airport’ – the proposed light rail from Auckland City to Auckland Airport.

I don’t necessarily have a problem with that idea as such, but the Government seems to have become extremely addled in its thinking on it. Surely when you are contemplating a project such as that one you have to ask two key questions: What is the problem you are seeking to fix? And does this fix the perceived problem?
To this point I don’t see convincing evidence the Government’s even addressed those two questions.

I do know that as a very regular user of Auckland Airport I currently spend $16 each way on a bus trip that takes around 45 minutes. In terms of the economics versus amount of time used up I think you would struggle to achieve better value. So, what is the problem the Government might be seeking to fix?

Okay, I digress a little. But I guess that’s why it is going to be important to see just what the Government is targeting with this infrastructure spending.

We need long-term assets

Yes, there’s value to be had in terms of the work provided while a project, any project, is under way and the boost this provides to the economy. But the country wants and needs more than that. The infrastructure assets built have to be long-term ones that genuinely add value to the country and its economy over time.

That’s why what the country really needs is a well thought out, one-off, big spend on some key projects that will be of lasting value.

It’s hard to escape the conclusion that what this Government’s planning to serve up is a few little treats here and there in a kind of ad hoc manner that will be enough to get it re-elected.

The fact that we’ve seen this Government lurch in a matter of months from talking about a so-called ‘year of delivery’ (that was this year in case you missed it – and I think we all did) to going into full-on electioneering mode for next year.

I’ve said it before and I will say it again: Our election cycles are too short. We should switch and try a four-year cycle. Too many decisions are made with an eye on what will get a party re-elected rather than what is good for the country.

Anyway, electioneering we now go.

Savvy electioneering

As I said at the top, Robertson’s announcement this week was a bit of savvy electioneering. He has offered up the infrastructure spending (to some extent) that the public was clamouring for. He has kept his powder dry in terms of not announcing what the spending is going on. So, that’s more announcements that can be made next year. And, of course, he’s left some petrol in the tank in terms of next year’s Budget for if more goodies are seen as necessary to put before the electorate.

It does give the National Party something of a dilemma.

The Coalition’s not bumping up borrowing by so much that it can be called reckless.

But it is spending. And by announcing things like new roads it is stepping very clearly on National’s toes in terms of the sorts of favours National might want to offer to the electorate.

It does potentially put National in a bit of a corner. Either it comes out of the corner offering effectively to spend more. Or it puts on a responsible face and says it won’t spend as much.

What does the electorate prefer though? A dry responsible person saving the money? Or a big spender offering trinkets?

Outdoing each other

I hope we don’t get into a situation where the parties are trying to outdo each other with spending.

It would be very easy to fritter away the solid financial position the country is currently in on pet projects and whims to please the voters.

The fear would be that we could then look around in five years’ time and find we’ve spent up but haven’t addressed our infrastructure needs.

Our economy is in pretty good shape. It would be a shame to see that wrecked by over exuberant electioneering.

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14 Comments

One man's savvy electioneering is another man's dirty pool.
The policy media release: Looks like a couple pages from NSW State Labor Party play book.
Have Labour here types been skipping over to Sydney for weekends.

Nothing to do with sound policy or competent delivery thereof.

The tip here pointing to fakeness flakiness is the a cost number is dressed as an being an investment. See the cost is implied to be the value.

This is bollocks.

Projects have costs and benefits.
Here we see no work in what the benefits are. (Has any thought been applied to this).

Funding itself of a group of projects has priorities (ranking), and alternatives (several options/methods to deliver benefits). Comparison comment is needed.

This helps you determine what is a media release (light weight, done the day before), masked as substantially educated, intelligent work delivering governing policy and watchful of spending our tax money.

Draw you own conclusions.
Appologies in advance to arts & media students (and law grads).

“It would be very easy to fritter away the solid financial position the country is currently in on pet projects and whims to please the voters.”
I think it started last election...

want to boost the economy? Write off the student loan scheme, go on I dare you. Be brave do something to be remembered for. close it down and abolish student fees. That way you'll get an enormous boost to the economy through debt relief and have educated people STAYING in the country instead of heading offshore to earn money to pay off student debt and never returning...or paying off the debt. Neolibs...dumb as since forever.

Do you know what happens to your student loan when you go abroad? That was part of the reason it was an easy for me to come back home, I was sick of paying interest just to service it. And of course it wouldn’t be a 4th estate comment without a randomly mentioning something about neolibs, good to see leopards don’t change their spots.

Who would want to be a neolib any how?

Maybe i could have afforded to buy a house and have a family in my 20s, rather than 30s, if I didn't have a huge student loan. The 12% that comes out of my pay (after tax) to service it is a killer! Along with Auckland rents. that woulld be 12% more to spend in the economy (or the property market) if my education was free. My family lives rurally so staying with them was never an option (with a corporate career).

Were there any other paths ways to your uni achievements, other than full time and borrow borrow (assume)..

Knowing now what you know, would your younger self still take the loan?

I worked every school holiday before Uni, and then whenever I could while at Uni. Result is I got through Uni with no Student Loan. I did this because the degree was of benefit to me and is something I can use anywhere in the world, so why should the taxpayer fund it?

I bought a house at 30, after an extended OE.

I don't see why I should pay for someone else to do the same thing I had to work for.

A better way to do it, would be to have the Government gradually write off the student loan at 12% of take home pay p.a.while still living/working in New Zealand. If the person leaves the country long term, stop the write off and add interest. Add a bit more incentive to stay in the country.

That's essentially what NZ First's policy was on student loan balances at one point. But there's no immediate payback to racing or fisheries so it probably was discarded along the way.

No different to any governing party approaching the election.

Voters have short memories; being older may have something to do with it. Stimulus has to be timed around voting.

The government are starting to work out the noddies they employ arent capable of delivering anything other than hot air, with most being washed up lawyers.

With the Ministry of Works long gone, and the Army no longer offering apprenticeships, the training is now left to the private. Speaking from experience, private training wasnt half as good as government; because they have to make money out of you from the word go. Not everyone gets up to speed quick enough to satisfy private businesses.

Yes, given our lack of skilled labour, a new ministry of works type approach could be hugely beneficial. If the market can't supply the new apprenticeships for the economy then surely its the government's role to fill the gap.

I think that if Labour wants to steal National's "roads' roads, roads" mantra they are actually handing the election to National. Who believes Labour will achieve anything in infrastructure after KiwiBuild and the "slow tram to the airport" fiasco?
Why vote for Labour as a "party of roads" when, as Simon Bridges says, National knows how to get things done?
Labour now has a long record of announcing funding without any coherent plan to put it into action ... from a billion trees to $1.9 billion for mental health to KiwiBuild... This latest strip-tease announcement from Robertson only underlines their "sizzle but no sausage" approach.