Brian Fallow: Greens hammer message home

Green Party co-leaders Russel Norman and Jeanette Fitzsimons with Prime Minister John Key. Photo / Mark Mitchell

The Greens have put up their idea of the sort of stimulus package the Budget should contain.

Despite its label, the "Green New Deal", it is not a grandiose plan to save the planet and the economy at the same time.

It addresses a more down to earth question: If you have a limited budget for fiscal stimulus measures, what should you spend it on?

If, that is, your object is not only to support activity and employment in the short term but to leave the economy in better shape to cope with environmental challenges of the future like climate change and peak oil.

The programme could be called a wish list, but hardly a fiscally irresponsible, hang-the-expense one. The price tag is $3.3 billion over three years, plus $1 billion more from the reallocation of spending from motorways to public transport.

The big ticket item is $2 billion to build 6000 state houses, energy-efficient and water-frugal ones of course.

That would be a 9 per cent increase in the state housing stock, but it is less than 2 per cent of the number of new houses the royal commission estimated Auckland alone will need over the next 25 years.

The waiting list for state housing is about 10,000, the Greens say.

The Housing Corporation in its briefing to the incoming minister late last year warned the waiting list would climb as market rents rose in real terms, the supply of new housing fell behind in key markets like Auckland and the recession pushed up unemployment.

As it happens, $2 billion is also the indicative figure the corporation put on the cost of upgrading the existing state housing stock to an acceptable standard.

But if the demand is there so, it would seem, is the capacity to supply.

These are not good times for the building industry. By the end of last year spending on residential construction was down 31 per cent on a year earlier.

Building consents data since then do not suggest much is improving. In March the value of residential consents issued was still 30 per cent lower than a year earlier. And for the whole year to March just over 4000 houses were built, down from 5900 the year before.

The building industry is one of the more jobs-intensive sectors. It normally represents just over 5 per cent of gross domestic product but more than 8 per cent of employment.

In times of labour scarcity that prima facie below-par productivity performance could be seen as a problem. But when it is work that is scarce it suggests the sector can deliver more employment bang for the taxpayer's buck.

In its pitch for the Government to find $2 billion to upgrade the existing state housing stock the Housing Corp argued that to do it during an economic upswing would put it in competition with the private sector and bid up costs.

But now, it says, the greater danger is that the country loses expertise if the building industry runs down.

So far the Government has committed additional spending of $125 million on upgrading work and new state house construction in a stimulus package announced in February. Housing Minister Phil Heatley said last month that that programme had put 935 people to work.

The lion's share of the funding is going to upgrading rather than new construction. From an employment point of view the advantage is that the state does not have to buy the land the house is on; the spending goes into pay packets. But it has less impact from a waiting list and overcrowding point of view.

The Greens' stimulus package also includes $164 million over three years for home insulation. It is a strangely precise number unless they have already, under their memorandum of understanding with the Government, negotiated just such a programme into the Budget.

This is an area where market failure is evident, especially in the rental sector.

Tenants pay the power bills so landlords don't have much incentive to reduce them. Tenants in turn have little reason, even if they have the money, to upgrade someone else's property. There are likely to be health benefits as well.

The Greens would also boost funding for some other energy efficiency programmes.

There is a scheme which provides interest-free loans for local authorities for things like upgrading street lighting.

Hospitals, schools and prisons could benefit from similar measures which provide jobs in the short term and save energy and money in the longer term, they say.

On the transport front, Transport Minister Stephen Joyce confirmed on Tuesday that the Government plans to spend an extra $1 billion on the state highway network over the next three years, of which $420 million is money that had been allocated to public transport.

He is unapologetic about that when "about 70 per cent of freight goes by road and 84 per cent of people go to word by car, truck or motorbike".

In Wellington, however, more than a third of commuters use public transport, including trolley buses made in Canterbury and running on electricity that is largely from renewable sources.

Greens co-leader Jeanette Fitzsimons says it is hard to find anything which produces fewer jobs than building motorways, the work is so mechanised.

They would rather spend the money on upgrading rail stations and bus exchanges so that they are safe and warm and have shops and other attractions for people while they wait.

And on reducing the time people have to wait by having more vehicles and more frequent services.

And on measures which would make it easier for children to bike or walk to school, relieving in the process congestion on the roads.

In addition to the direct employment involved, the Greens cite research which estimates that every $1 million less spent on fuel supports four or five jobs in supplying other good and services instead.

They would devote $200 millon a year to clean up waterways through planting riparian strips. At that rate the task would take nine years, they estimate.

Taskforce Green or Work and Income would cover or subsidise wages, while farmers would bear the cost of materials (and of course the opportunity cost of pasture sacrificed).

Where would the money for the Greens' package come from?

In the case of transport it is replacing what they consider lower-quality spending.

The remaining $3.3 billion would come partly from cancelling tax cuts - something, they point out, the Government seems intent on doing anyway - and the rest borrowed.

"But it leaves us either with assets or a stronger economy with lower costs in the future," Fitzsimons said.