Matthew Hooton: Unity on infrastructure great way to end 2019

Aucklanders and Northlanders can finally celebrate if the four-lane highway from Warkworth to Whangārei gets bilateral go-ahead. Photo / File

COMMENT:

The Prime Minister's promise that 2019 would be her "year of delivery" has become a national joke. No other phrase speaks more clearly to her Government's propensity for big talk about "transformation" but its lack of administrative competence to follow through.

Despite tough competition for the title, almost every end-of-year report card ranks the hapless Economic Development, Transport and former Housing Minister Phil Twyford as the Government's worst performer.

It is one of the great mysteries of our age that Jacinda Ardern not only believes Twyford still warrants a Cabinet seat, but that she continues to rank him fifth in her line up.

Could any other single measure do more to help restore business and public confidence in the Government than an announcement in the New Year that Twyford is returning to the NGO sector?

For all that, business can be content with how 2019 has ended up.

A capital gains tax is now permanently off the agenda, and even its supporters can be pleased the debate is finally over.

The Zero Carbon Act has turned out more toothless than some feared.

Of greatest importance, though, is the multiparty consensus that has emerged this month on infrastructure and transport.

The origins were in Finance Minister Grant Robertson's speech in May to the Craigs Investor Conference when he announced the crude 20 per cent net public debt target would be expanded to a range of 15 to 25 per cent.

No one was fooled by the "range" talk. When a Labour finance minister makes such a pledge he or she really means they intend debt to be higher, in this case by around $15 billion.

Had Robertson planned to spend that extra money on opex he would have rightly been condemned. His announcement this month it will be spent on capex — albeit broadly defined — is a first step towards addressing New Zealand's long-brewing infrastructure crisis.

Roading projects planned by the previous Government that the coalition abandoned for ideological reasons will now belatedly proceed.

Northlanders and Aucklanders, for example, will be able to celebrate if the four-lane highway from Warkworth to Whangārei and perhaps beyond finally proceeds with blue and red support. So too those who can now pitch for the work with confidence it will not be overturned by the electoral cycle. Auckland's urgently needed East-West Link falls into the same category as well as four-laning from Cambridge to Tirau and projects in the Bay of Plenty, Hawkes Bay, Manawatū and Canterbury.

Most of these projects will never pass NZTA's conventional cost-benefit analysis which fails to capture the dynamic effects of connectivity or any benefits beyond about 30 years — hence why it consistently insists proverbial four-lane harbour bridges are sufficient.

At least as important is the Opposition's announcement on Monday that it too accepts the need to invest more in infrastructure.

As both leader Simon Bridges and shadow Finance Minister Paul Goldsmith publicly acknowledged, successive New Zealand Governments — including the previous National regime — have been too conservative on infrastructure.

Goldsmith — the closest of National's top five to the Auckland business community — is a fiscal conservative but has been pivotal in pushing for National's change in tone.

Transport Minister Phil Twyford could undermine Labour's support base if he retains the infrastructure reins. Photo / File

As Transport and Economic Development Minister at the end of the Key-English era, Bridges complained privately that he was constrained from acting more boldly in the portfolios as a result of following Cabinet bigwigs Steven Joyce and Gerry Brownlee in the jobs.

Nevertheless, Bridges secured first John Key's and then the Cabinet's support for Auckland's hopefully transformational City Rail Link.

Unlike some in his party, including Joyce, Brownlee and Judith Collins, he does not appear to have a reflexive aversion to public transport over private vehicles. Despite his bogan persona cultivated for his Hutt South constituency, transport spokesman Chris Bishop is at the liberal end of the party and recognises Auckland needed first-world public transport a generation ago.

The debate now turns to funding and execution. Broadly, Labour seems more comfortable with taxes and public debt and National with user charges and public-private partnerships (PPPs).

There are arguments both ways.

The case for PPPs is that they keep both the debt and the asset off the Government's balance sheet. Politicians focused on debt slogans like this bit.

More importantly, proponents of PPPs argue they de-risk projects from the taxpayers' perspective. The private investor must deliver on time and on budget or wear the consequences. Maintenance is also the responsibility of the investor, incentivising them to get it right the first time and making them pay to fix things if they do not.

The problem is that these contracts are negotiated between Wellington bureaucrats and the top commercial lawyers from Beijing, Tokyo, London, Paris, Washington or Quebec City.

Can we really be confident that risk will in fact be transferred from Kiwi taxpayers to foreign shareholders?

If we are, then the question turns to price. Robertson says he can borrow at 1.3 per cent over 10 years.

In contrast, Canada's CDPQ is being paid 8 to 9 per cent a year to own and operate Montreal's light-rail project and has a target return of 6 to 6.5 per cent annually for its overall portfolio.

Robertson and Goldsmith will have to weigh up whether paying the operator five times as much per year than the debt-servicing cost is worth the de-risking trade off. Given the record of NZTA, Auckland Transport and similar agencies, perhaps it is.

All now turns on competence. With multiparty agreement that new roads and new commuter rail is needed, which of the two main parties do voters trust to negotiate the construction contracts of PPPs and get the essential new projects done quickly and on budget?

At least as long as Twyford remains at the centre of decision-making, the answer is unlikely to be Labour.