Over the weekend Bill English was interviewed on “The Nation” about the budget and how it contained very little to respond to Auckland’s housing crisis. The Minister seemed very keen shift housing discussion away from the budget, instead laying the blame on the Council (well one that hasn’t existed for 6 years).
Yes, but we don’t make the decisions, Lisa. Auckland City Council make the decisions. Even the government can’t build a house in Auckland unless Auckland City Council frees up the land, provides the subdivision consent, processes all the consents, provides the building consent and allows the house to be occupied…
…This kind of takes us back to where I started here — the people in the cars, the first-home buyers who are locked out of the Auckland market, Auckland infrastructure. People will look at this and think that you are effectively asking those people to hold tight for at least another year so that you can afford to give tax cuts.
No, that’s not the case. For instance, for the cases that have been in the media around living in the cars, a lot of those are a bit more complex than people might realise. But in any case, we have more money than we can spend on places, on houses for people in serious housing need in Auckland. The problem isn’t money; there’s enough of that. The problem is getting enough houses. Even though Auckland City is actually completing 40 houses every working day, it’s still not enough. And that’s why in the next few months we’ve got to work hard with the Auckland City Council to get more houses, because the government can’t just magic up houses; they have to be built by real people on real land. And that’s controlled by the Auckland City Council…
…Okay, well, just let’s look at some of those figures. I mean, experts can’t agree exactly, but they think that we’re down about between 20,000 and 50,000 houses in Auckland — we’re short of those — and that we need to build about 13,000 a year to play catch-up. We’re not building 13,000 a year, so the supply must be getting worse.
Well, and that’s in the hands of the Auckland City Council, who are the people with the legal and community responsibility to get more land available so that more houses can be built faster. We’ve been through this in Christchurch. You can ramp up the construction workforce. You can change the planning rules. In Christchurch, house prices are flat to slightly falling, despite the fact that two or three years ago there was very substantial demand. And I might say the same kind of stories about it. Now, there was a lot of tension at the time in Christchurch as the system cranked up supply to meet the strong demand.
The thing is you point the finger at the council there, but the council has been very clear about the fact it needs help with infrastructure. it says it needs 3 billion in the next 10 years for infrastructure. Where do you think that money’s coming from? Because the council’s nudging its debt ceiling. It can’t rate people off their properties. So where is the money coming from?
Well, fundamentally, that’s Auckland’s issue to deal with. We are certainly contributing. I mean, right now we’re in intensive negotiation for a contribution of over $1 billion from the taxpayer to an Auckland City Council transport project called the Central Rail Link. Now, in the normal course of events, they would pay for that. We’re negotiating where taxpayers will pay for that. That’s a significant reduction in the burden on the council, and it allows them to pay for other infrastructure.
Minister, isn’t it central government’s responsibility to assist with that infrastructure?
No, fundamentally it isn’t. It is the council’s responsibility. That’s the deal. They get to decide on how their city is planned, and they get to pay for the development. And for a lot of the people living outside Auckland and inside Auckland, there are real benefits from growth. And part of the puzzle here is that as more people turn up in Auckland and as incomes rise, growth is good. The council benefits from that, and so do ratepayers. And so they’ve just got to work out a better alignment between the funding and the growth.
A lot of blame laid on the Council (and also a weird interpretation of what’s happening with the City Rail Link as usually government has paid for 100% of rail infrastructure projects, it’s actually odd that the Council is paying around 50%, but that’s a whole different debate!)
This “blame the Council” game is also popular with a number of supposedly informed commentators:
Agree with English that Auckland Council fundamentally to blame, but they’re responding to incentive. Central Govt can fix that. #NationTV3
But is this a fair criticism? Is the Council holding back land supply and slowing down the construction of desperately needed new housing? This is worth looking at a bit further.
One of the reasons the government amalgamated the eight previous and often bickering councils that governed Auckland and set the newly formed single council the task of coming up with a 30 year vision for Auckland (The Auckland Plan) and bringing together all of various plans and civic functions of Auckland.
Where the Unitary Plan provided the vision, the main tool at the Council’s disposal to enable or restrict land supply is through the Proposed Auckland Unitary Plan. Compared to the old plans that governed development and use of land, the Unitary Plan enables around 11,000 hectares of additional “Future Urban zoned” land to be developed. At a broad 60/40 split between growth inside and outside the old urban limits, and at a high population growth rate, this is enough land for around 30 years of greenfield land. As I explained in this recent post, it is a really really big amount of land. This is not the plans of the previous councils and addressing issues like land supply was exactly why the government amalgamated the council in the first place.
So the Council has certainly outlined its intention to enable a lot more greenfield development to occur in the future. In a basic sense, the amount of “land supply” has gone up a lot. Let’s leave aside the question of whether this is enough “Future Urban” land and focus for now on the criticism that the Council has been far too slow to increase land supply. There’s actually a decent amount of evidence to show huge hurdles have been cleared to speed this process up. For example:
Government made changes to the RMA to allow the Unitary Plan hearings to be fast-tracked in at least half the time the process would normally take – although it’s worth noting that the Council originally requested that the plan would be granted immediate effect upon notification and which the government rejected.
Special Housing Areas were established that essentially brought forward the Unitary Plan (in its proposed version) and created a fast-tracked consenting process
In some cases Special Housing Areas were rejected by the Council, which could be seen as a way of slowing down land supply. However, in the main these occurred because of transport problems on the State Highway network, which is owned and operated by the Government through NZTA.
Of course the Council is not blameless when it comes to decisions it has made to increase housing supply and improve affordability. In February this year the Council made a completely stupid decision to withdraw its evidence from rezoning hearings because a majority of the councillors were worried about three storey buildings in suburban areas, areas with existing infrastructure where new development could happen tomorrow if the planning rules allowed it. As expected that proved completely pointless as other submitters such as Housing NZ were still allowed to use the Council’s evidence.
Overall it’s hard to see what more the Council could have done over the past few years to speed up the supply of greenfield land. The fact is that developing this land takes a long time – not just to go through the RMA processes but also to get that land serviced with infrastructure and ready to build. Even with all the money in the world, a major wastewater pipe or new road takes a number of years to build and greenfield growth often can’t occur without it (no point building new houses if the taps don’t work and the toilet doesn’t flush). It’s time that politicians and supposedly informed commentators realised this.
Today is budget and while we wait to see what, if any, goodies Bill English will announce, I thought I would list some of the things I’d like to see and what we may actually see. My gut says we won’t see anything too significant as the government often now announce or at least hint at changes in advance.
What we want to see
City Rail Link
Back in in January the government gave certainty to the City Rail Link when they agreed it should start construction sooner than they had originally anticipated. This was primarily in response to two things:
significant growth the rail network has been experiencing with sustained increases of more than 20% year on year
pressure from private developers like Precinct Properties – the ones behind Commercial Bay (Downtown Shopping Centre) and others – who we understand are keen to get on with their development and which is intrinsically tied in with the CRL.
But at the same event where John Key announced the government would support starting sooner the CRL happening sooner, he also said it would be subject to addressing a number of issues with the council.
We still need to work through a number of important and quite complex issues with the Council.
These include how project costs will be finally shared between the Government and the Council and how the Rail Link will be owned and managed.
Providing these issues are resolved – and I’m confident they can be – we’ll aim to finalise the business plan later this year.
The government announcing that the issues had been resolved and that funding is being forward for the project would be welcome news.
Getting more in to the realms of funding fantasy, it would be great if the government were to announce a number of rapid transit projects to complement the CRL in a bid to keep Auckland moving.
Some specific projects that could do with a boost include:
AMETI is really in need of some funds to get it moving faster because at the current rate just the busway just from Panmure to Pakuranga is not due to start till 2021 and it could be almost a decade from now before it is finished. East Auckland needed this busway built years ago and so anything the government can do to speed that up would be welcome.
With so much growth planned and already happening in the North West it will be critical that we have some good quality PT options. We know the project is bubbling away slowing with Auckland Transport and it could do with a push to get moving faster.
A second batch of trains for Auckland
AT continue to say that they have enough trains and that it will remain that way even after the CRL is finished. My view is that they have severe case of wishful thinking. Given the trains have a two year lead in time it seems imperative that we get them ordered now. AT have also been talking about buying some with batteries attached so they can run to Pukekohe without them having to string up wires. If that’s a viable solution, then they could be ordered at the same time.
Photo by Patrick Reynolds
What we might see
Transport for housing developments
There’s been a lot of talk recently about housing and in particular about greenfield growth. As we pointed out last week, one of the issues is not so much the overall amount of land but the amount of land that is serviced with infrastructure. The problem is that building this infrastructure is very expensive with just the bulk infrastructure to support the proposed growth estimated at around $17 billion. Of course in some places within the existing urban area infrastructure also needs to be upgraded to support growth.
That’s why I think it is quite possible the government may attempt to start addressing the issue by directly funding infrastructure or by introducing other mechanisms to enable it.
In the last budget the government signalled a pre-commitment for this budget of $190 million for Kiwirail. We may see a change to that figure or alternatively another pre-commitment for next year’s budget.
Regional Highway projects
Last year the government announced $97 million a number of regional highway projects. It’s possible that funding could be extended to cover projects in more areas.
What would you like to see in the budget and what do you actually think we will see?
House prices in Auckland are high and rising, which is causing concern in many quarters. But do we know what sort of effects high house prices may have on New Zealand society, now and in the future?
Politicians and commentators from all quarters have argued that they are undermining the equity of New Zealand society by making it harder for young people to buy houses and squeezing household budgets. Here, for example, are some recent comments from Finance Minister Bill English:
The Finance Minister agrees rising house prices in Auckland are making inequality worse by shutting low and middle-income earners out of the property market.
Opposition parties say rising inequality is not only hurting those who cannot afford to buy a home, but is also bad for the economy.
Bill English said house prices were making life tougher for low and middle income earners in Auckland and said inequality was a problem.
“We’ve been concerned about that for some time, that there’s parts of Auckland where there’s been really no new supply of lower value houses that low and middle-income families can afford.”
I’ve seen Minister English making similar comments elsewhere – saying that limited housing supply is worsening poverty and inequality. How true is this?
First, here’s a graph showing indexed house prices, rents, and consumer price levels over the last two decades. While housing prices have been rising faster than the CPI throughout this period, house prices have really only taken off dramatically since 2002. Meanwhile, rents have risen at a more consistent pace:
Keep that timing in mind. Most of the increase in Auckland’s house prices has occurred between 2002 and 2008, and again since 2012.
So now, let’s take a look at what’s been happening to inequality over the same time period. Here’s a useful chart from a Stuff article on the topic. It looks at the 80-20 ratio – i.e. the ratio of incomes for a household near the top of the earning distribution (80th percentile) to one near the bottom (20th percentile). While it’s not a perfect measure, as it misses outcomes at the upper and lower tails, it does seem to track with the Gini coefficient, another common measure.
Essentially, what this measure is telling us is that income inequality rose during the late 1980s and early 1990s, during NZ’s painful economic restructuring, flattened, and then trended down slightly since the mid-2000s. Importantly, the same basic trends hold true even after taking housing costs into account, which suggests that rising Auckland house prices haven’t altered the underlying dynamics of income inequality:
Hon BILL ENGLISH: Well, the facts as laid out in the annual report issued by the Government agency initiated by the previous Labour Government, and now backed up by the OECD, show that income inequality in New Zealand has been flat to falling in recent years, and, on average, it has remained unchanged for the last 15 years.
This does not necessarily mean that we can be sanguine about the impact of housing costs on New Zealand society. For one thing, statistics published in the Ministry of Social Development’s most recent (2014) Household Incomes in New Zealand report suggest that the share of households paying more than 30% of their income for housing has risen since the early 2000s. These changes seem to have affected households across all five quintiles of income, albeit to varying degrees. However, from an equity perspective they’re dwarfed by the impact of early-1990s changes to social welfare and housing policy:
Another issue is that rising house prices may be causing inequality of wealth to increase. The distribution of household wealth has received more attention in recent years, e.g. in Thomas Piketty’s Capital in the 21st Century, which analysed trends in wealth and income distributions over the past two centuries.
There are reasons to believe that higher house prices may increase wealth inequality. For example, 2013 Census data shows that upper-income households are much more likely to own, partly own, or hold in a family trust their primary residence. 80% of households earning over $100,000 per annum own their houses, compared with only 52% of households earning less than $30,000.
However, we simply don’t have enough recent data to form robust conclusions about the impact of rising house prices on wealth inequality. During the 2000s, the Survey of Family, Income, and Employment (SoFIE) did collect some data on household wealth. An analysis of the 2003/2004 data showed that wealth was much more unevenly distributed than income – 51.8% of all net wealth was held by the richest 10% of New Zealanders.
As SoFIE was discontinued in 2010, we have no way of knowing whether or not wealth inequality has increased during the most recent run-up in Auckland house prices. Consequently, I’d say that a hypothesised link between house prices and wealth inequality is potentially concerning, but unproven. If the Finance Minister is concerned about that issue, I’d recommend that he re-start SoFIE so we can get a better idea of whether rising house prices have coincided with rising wealth inequality.
Finally, commentators should note that this post isn’t arguing for or against any particular policy directed at inequality or the housing market. It’s just taking a look at the data (or lack of data) on the topic. With that in mind, what’s your perspective on the link between housing and inequality?
There were a number of interesting comments this week in relation to intensification in Auckland. The first came from the Reserve Bank Governor Graeme Wheeler talking about how Auckland needs to do more to enable intensification in the city and address NIMBYism to address housing shortages.
Wheeler said the Reserve Bank estimated Auckland had a backlog of unbuilt houses of 15,000 to 20,000 and needed to build 10,000 houses a year for the next 30 years to keep up with demand.
“If you look at permits at this point they are running at an annual rate of around 7,500, which is a huge improvement on where they were 2 years ago, but still well short of the 10,000,” Wheeler said.
“I think some very good work has been done on opening up new areas but a major challenge there is getting houses built quickly enough, and a lot of those areas are in the periphery of Auckland where people may decide that the transport costs are less attractive for them, or the infrastructure needs might be considerable,” he said.
“I think work needs to be done in inner Auckland in addressing the height restrictions and the Not-In-My-Backyard syndrome that’s there.”
Wheeler said he welcomed the Government’s commissoning of work by the Productivity Commission on how issues around zoning decisions, regulatory reform and approval processes
“I am very interested to see the outcome of that sort of review. But we see it mainly as a supply side problem,” he said.
We’ve certainly made it easier to develop greenfield land and with the unitary plan it should get even easier with the proposed Rural Urban Boundary (RUB) which is larger and more flexible than the old urban limits. However even that looks set to be watered down to enable more greenfield development.
The independent panel hearing submissions on the Auckland unitary plan has told submitters the council’s proposed provisions for the new rural:urban boundary “may be overly stringent” and that a more flexible boundary would be better.
The panel also said in interim guidance it issued on Monday: “A rural:urban boundary is the most appropriate method to achieve the objective of a quality compact urban city when compared to the principal alternatives of the operative metropolitan urban limit & no boundary.”
The number of dwelling consents issued over the last 12 months is around 7,700 which is up considerably on the low of just over 3,200 in August 2009.
In response to Wheeler’s comments, Bill English – who has in the past spoken about the NIMBYism issue – has said calls for more densification in Auckland’s housing were “about as popular in parts of Auckland as Ebola” would be. Suggesting that putting a few terraced houses or low rise apartments in an area is provides a similar fear to a deadly disease is probably taking things a bit too far but also highlights why the council need to do a better job of explaining the benefits of more people being in an area – such as that it provides more opportunities for local businesses and amenities such as local cafe’s, shops and more/better parks.
Mr English, who spoke today for the seventh year in a row at the annual Auckland Chamber of Commerce and Massey University lunch in Auckland, said the city’s local government had said homeowners couldn’t build up but have now recognised that means there has to be a “build out.”
The government will confirm details in the new few weeks about further decisions on the Tamaki Redevelopment Co, a joint venture between central government and Auckland Council in 2012 to rejuvenate the suburb. The entity is expected to build about 7,500 new houses over the next decade. Once old properties have been removed or demolished, that will increase the area’s housing stock by 5,000, of which 2,800 will be Housing New Zealand-owned.
“We want to accelerate this type of activity, so small and large redevelopments of Housing New Zealand land and properties are completed with more urgency,” English said.
Lastly he had this to say about housing and infrastructure in general:
The minister said the government had learnt a lot over Auckland’s housing issues and that should lead to a more constructive process than previously about the region’s infrastructure needs, including a second harbour crossing.
‘We could do with a common understanding of the strategy. To government, it has looked like a series of projects arriving for political reasons as well as economic ones and we have to have that common view.”
Coming up with a region wide strategy was one of the key reasons behind amalgamating the previous councils into a single region wide council and requiring a 30 year plan (The Auckland Plan). The problem wasn’t the plan but that the government chose to ignore it for ideological reasons and as such kept fighting it. I’d also suggest that unless he’s prepared to fight the NIMBY issue then there’s not much point in even discussing a second harbour crossing as the local board areas on the North Shore have some of the lowest levels of population growth forecast across the region – in part due to much of the area fighting any form of development.
It’s time for a quick round of everyone’s favourite game, Ask An Economist. Today’s question is: What happens when the government decides to spend up large in a growing economy?
If you guessed that the answer is that it will drive up inflation and crowd out private sector spending, congratulations! You win a hug from the invisible hand. You’ve obviously either paid attention to the lessons of history or the words of latter-day popularisers of economic theory such as Bill English, who recently said that:
It was also important for the Government to run a counter-cyclical fiscal policy which, right now, meant running surpluses, paying down debt, and limiting future initiatives in spending and tax cuts to what would not push interest rates higher than they need be.
However, the government is acting as though the normal rules of prudent fiscal management don’t apply to the road budget. Instead of taking a conservative approach to transport spending, and focusing on the projects that offer the best long-term value at a relatively low cost, they’re pushing ahead with plans to build a number of expensive road projects. For example, the 2014 Budget announced another $800m in motorway projects in Auckland, paid for in part by borrowing, along with $212m in regional road projects paid for out asset sale proceeds.
As an economist, I’m nervous that the motorway spend-up will have perverse economic effects, driving up prices and crowding out other activity. When I went to look at the data, I found reasons to worry.
First, I looked at the data on New Zealand’s spending on roads (from OECD.Stat). The following graph shows investment in new or improved roads as a share of GDP. Essentially, New Zealand spent a fairly consistent amount on roads – and much less on public transport! – in the 1990s. In 2004, road spending started to increase rapidly, rising from about 0.3% of GDP to 0.7%. Unfortunately, the OECD’s data doesn’t cover the last few years, but NZTA’s data suggest that road infrastructure spending has risen further.
So the government has boosted spending on roads over the last decade. Has this had any impacts on inflation?
I used Statistics NZ data on inflation to examine the effects. The following graph compares the Capital Goods Price Index for civil construction, a measure of construction cost inflation, with the Consumer Price Index, which measures inflation in the general economy. (NZTA uses a slightly different composite measure of road construction prices, but I’ve chosen to look at civil construction prices as they provide a better indication of potential crowding-out effects on private construction.)
As you can see, the CGPI for civil construction tracked closely with CPI from 1995 to 2003, when road spending made up a relatively constant share of GDP. Between 2004, when the road spend-up started, and the Global Financial Crisis in 2008, civil construction prices rose much more rapidly than the CPI. Construction price inflation briefly cooled off in the aftermath of the GFC, due to falling private-sector demand for construction. But over the past two years it has again started rising faster than CPI, as a result of the economic recovery and spending on major road projects such as Waterview.
In short, spending an increasing amount of money building roads has coincided with a big increase in the cost to build roads. This is exactly what most economists, along with the current Finance Minister, would have predicted to happen.
Moreover, this is likely to have a significant negative effect on private construction. If you want to build an apartment building or a warehouse, you’ll have to compete with NZTA for bulldozers, cranes, and construction labour. Expect to pay higher prices as a result. If civil construction prices had continued to rise in line with CPI over the last decade, rather than being bid up by road spending, big construction projects would be almost 20% cheaper than they are now.
To be fair, other factors may have also played a role, such as the run-up in house prices in the 2000s and increased oil prices. But as Bill English says, government spending shouldn’t exacerbate the inflationary pressures that exist in a growing economy.
This is a tricky dilemma for any government. On the one hand, we do need to invest in a transport network that can accommodate future growth in Auckland. On the other hand, it would be better if the government’s spending didn’t create perverse outcomes for the private sector. If it wants to steer clear of the Scylla of underinvestment and the Charybdis of inflation, it would make sense to look at cheaper alternatives – e.g. the Congestion-Free Network.
Bill English has provided a fairly blunt but accurate explanation of the issues with urban development in Auckland. Interest.co.nz reports
With respect to so-called urban sprawl, I think that’s a nonsense. If you’re against urban sprawl and that means lower to middle income Kiwis can’t buy a house and you can’t build an apartment in the middle of Auckland for less than NZ$600,000, then that’s too high a price to pay. And if it means driving up house prices in a way that wrecks the economy then that’s too high a price to pay,” he said.
“Funnily enough the people who are most worried about urban sprawl live in the middle of the city. They don’t get to see it. How much time to they really spend out the end of the Western motorway or Botany? None actually. They think you should be able to walk to the countryside. Well…welcome to Gore. If you’re really mad, that’s where you should go. But they don’t. They stay in Auckland Central,” he said to laughter from the audience.
“What’s actually happened is that the local authorities were keen for a denser city, but the inhabitants weren’t, so they’ve jettisoned a fair bit of the densification aspect,” he said.
“So if Auckland wants to grow now, it has to grow out because you don’t want it to grow up. Now that’s a fair choice, but please don’t stop it from growing out as well, otherwise we’ll get another few years of 15% house price growth and you get a real mess when it crashes,” he said, adding the special housing areas agreed under the Housing Accord with the Auckland Council “do spread the city because the planning rules don’t let you do anything else.”
“We’re indifferent as a government as to whether you grow up or out. But you said don’t grow up, so we expect to help you grow out.”
I don’t think that all government ministers were indifferent as to whether Auckland develops up or out but from I’ve seen Bill didn’t seem too concerned with either option. As for his other comments though, he is quite correct, if intensification isn’t allowed then the only option would be to sprawl. I think it’s a message that many of those opposing intensification completely ignored.
What I don’t agree with him on is that an apartment can’t be built for less than 600,000. Many of the projects on our development tracker are certainly well under that price.
One of the most frustrating things about the process the CRL has gone through is not that the government is forcing it to go though extremely rigid analysis, but that it doesn’t require other projects to do the same. Bill English was questioned on this today by Julie Anne Genter but never seemed to be able to directly answer the question. I will say one thing though, he at least wasn’t dismissive of the project.
Also in the news about politics and the RoNS. National’s Northland MP, Mike Sabin has come out yesterday extolling the virtues of Puhoi to Wellsford. Yet at the same time he has confirmed some of the voodoo economics that seems to surround this, and many of the RoNS projects. He claims:
“The Greens would scrap this project in favour of Auckland’s rail loop, because they see it has better cost benefits than the Puhoi to Wellsford project, yet NZTA estimates this RoNS will benefit Northland’s economy in order of $35-$45 million a year, giving a cost benefit ratio of 2 to 1.”
Well let’s just look at that a bit closer. $35-$45 million a year seems fairly significant but in the context of this road is nothing. Being generous let’s say that the benefits start coming in as soon as the project starts and we use the normal 30 year assessment period, ‘et’s also ignore any of the benefits being discounted. That would give us benefits in the range of $1.05 billion to $1.35 billion over a 30 year period. Yet the road is expected to cost around $1.6 billion and that was before the recent announcement that the shorter and easier Puhoi to Warkworth section will cost around $1 billion. I don’t know how on earth you can get a BCR of 2 to 1 when the benefits achieved are less than the construction costs but that is why they are called voodoo economics.
Yesterday in Parliament Julie Anne Genter asked Bill English about the PPP that is going to be used for Transmission Gully. I think the thing I am most concerned about from the answers is just how little he appears to know about the deal, something you would think he would have a good understanding of due to being the minister of finance.
In New Zealand, the provision of public transport seems to have really gotten into a chicken or egg debate. This is especially so with the current government who are very reluctant to spend any money on improving public transport using the argument that because most people drive, then we should invest in roads. Of course that ignores the point that so many people use roads because that was all we invested in for almost 60 years. An example of what I am talking about, skip to the 10 minute mark in this video
The reality is people aren’t going to magically use PT if is slow, expensive and not very attractive and the recent improvements in PT use have shown that even with some comparatively moderate investment, we seen patronage take off. Further most signs, especially in Auckland point to people wanting much investment in PT and it consistently seems to rate as one of the key things that people want to see improved. So with that in mind the question really becomes whether we should be using current results as the basis for our investment or something else. The council of course has produced its vision for the future as part of the Auckland Plan however transport is one of the key areas that the government disagrees with so perhaps its time the government started actually expressing their own vision for how they see the future. Developing to a vision, what ever it is, is surely going to provide better outcomes than just building more of something just because that is always what you have done. After all isn’t repeating the same thing over and over again and expecting a different result a definition of insanity?
A lot of discussion in parliament yesterday around the news that NZTA will be able to borrow money to a greater extent than it has been able to previously.
It seems that Brownlee is playing down the impact of the proposed change – saying that it’s not much change from the status quo and perhaps even that the change is only related to changing the mechanism for funding toll roads. I’m not quite sure whether that’s correct.
Reading through comments on the earlier post has been quite educational and I think Stu perhaps put it best by saying the following:
I think we need to split out the issues here. Are the RoNS an appropriate use of public funds? Generally not. Is is in principle a reasonable idea to borrow against future revenue streams so as to fund capital improvements? Probably yes, if the improvements are worthwhile.
If NZTA does have the capacity, through the legislation change, to borrow much much more than it has previously been able to, then I think it puts a greater requirement on ensuring that money gets spent on projects that stack up well. It’s pretty clear that a number of the RoNS projects really don’t fit that criteria. To be fair, until there is a business case for the City Rail Link that finds general agreement on the project’s merit, it probably falls into the same basket. Of course I’m a bit more confident the CRL will meet that grade than projects such as Puhoi-Wellsford and the Wellington Northern Corridor.