Infrastructure woes impede economic growth

By JIM EAGLES

New Zealand's top business leaders have identified the state of the country's infrastructure - especially in the transport area - as a huge impediment to economic growth.

But the latest Business Herald business leaders survey, conducted last week, points to mixed feelings about Government plans for tackling the situation.

"They are making a lot of the right noises," said the head of one major company, "but we have yet to see any real commitment in policies or resources to back it up."

In particular, there is doubt about whether sufficient effort is being put into upgrading the roading system, and strong opposition to any idea of the Government's becoming a shareholder in Tranz Rail.

The survey, which goes to 50 of the country's most senior business executives, was underway when the Government formally invited proposals for a stocktake of the country's infrastructure.

Economic Development Minister Jim Anderton said the aim of the stocktake - for which up to $550,000 was allocated in the Budget - was to get an accurate picture of the roading and energy networks in particular.

"Early indications are that transport is the largest constraint to business growth, followed by energy," he said. "However, more accurate information on the current issues and impending infrastructure needs is required before long-term infrastructural planning can begin."

Anderton said the Government was "under no illusions that the neglect in the 1980s and 90s means that New Zealand faces billions of dollars of investment and we are committed to addressing this need to safeguard our economic future."

The business leaders' survey certainly confirmed the accuracy of the minister's diagnosis.

Asked to rate the state of the national infrastructure - on a scale of 0 to 10, where 0 is extremely negative and 10 extremely positive - they gave it a worryingly negative 3.8.

The business leaders acknowledged that the problems are not the fault of the present Government. The level of spending on infrastructure over the past decade was rated an even more negative 2.9.

Encouragingly, the present Government's plans for spending on infrastructure rated a rather less negative 4.1.

The leaders also agree with Anderton about where the real problems lie. The lowest rating, an appalling 1.9, went to the rail system.

But business leaders are not altogether in agreement with the Government over how best to sort out rail. More than 90 per cent agreed with the state buying back the rail network. But only a third liked the idea of the Government also taking shares in Tranz Rail unless, as several put it, "there is no other pragmatic way of getting the track".

The roading system also got a strongly negative rating of 3.8.

In that case the solution was unanimous: the Government has to allocate more money to roading and to focus it where it is most needed.

There were numerous comments on the need to "remove the Auckland bottlenecks". One pointed out that this was essential to "unlock the $1 billion a year lost in freight congestion on Auckland roads".

Another suggested more emphasis be given to the "need to attract business rather than 'fairness' for regions". Several respondents also called for legislation on public-private partnerships "giving private investors a realistic incentive to invest in toll roads".

The electricity system also got a negative rating, but only just, at 4.

Even better, 88 per cent of business leaders felt the recent changes to the industry would definitely help.

Some suggested going further and doing away with the competitive situation between state-owned generators "and thereby get some sensible planned investment in new and replacement generation".

The star performer was the telecommunications system, which got a reasonably positive rating of 6.3.

Nevertheless, two-thirds of business leaders thought the Government should take further steps to accelerate improvements in the telecommunications system.

There were also some strong comments about the need for firmer action to reduce Telecom's dominance, to "ensure it honours the Kiwi Share", to create "a level playing field for all service providers" and to "assist the early development of broadband".

Another business leader felt there should be "encouragement for telecom companies to co-invest in infrastructure and compete on service".

Overall, the survey confirmed that as far as business is concerned infrastructure is, as one chief executive put it, "the key to the country's competitiveness".

The problem, he added, was that "with the political system we have in this country our Governments are only thinking three years ahead, but infrastructure is a long-term issue".

In Forum tomorrow Dean Bracewell, managing director of Freightways, and Mr Anderton discuss the state of the country's infrastructure.

Expansion off priority list

A sharp drop in expansion plans is signalled by the latest Business Herald business leaders survey.

The likelihood of respondents' own businesses expanding is at the lowest level since the survey began 14 months ago.

Expansion prospects are rated a barely positive 6, significantly below the survey average of 7.1.

However, the survey does not point to that being due to any sharp decline in economic confidence.

Business conditions now rate 5.7, right on the survey average, and somewhat better than in the previous two surveys, which recorded 4.8 and 4.2.

Similarly, expectations of conditions in 12 months are a modestly optimistic 5.4, up from 4.8 and 4.

Attitudes to the effect of Government policies remain negative, at 4.7. The Reserve Bank's performance gets a big tick following the decision to cut interest rates. It scores a 5.9 - the second highest recorded.