Editorial: On right track, but don't rush into it

Sir Roger Douglas has called the Prime Minister's proposed national cycleway a low-productivity, make-work scheme that represents a recipe for poverty, not prosperity.

That could be true if the scheme was put forward as a serious economic investment.

The Act Party's elder statesman was using the suggested cycleway to illustrate wider risks in the steps being contemplated to cushion the country from the global recession.

Poorly conceived projects might only delay inevitable economic adjustments and do so at a cost in public borrowing that would be more painful in the long run.

That warning should be kept in mind if the cycleway proceeds. It has been proposed purely as a make-work scheme and that is what it should remain.

There is no economic harm in using public works to occupy the unemployed so long as certain conditions are met. The first is that the level of unemployment in the district must be so high that there is little prospect of many finding real jobs in the foreseeable future.

Happily, there is no evidence yet that New Zealand is approaching that level. The latest available measures, the household survey in December and the dole figures for February, show no significant increase in unemployment from the domestic recession through last year or the global crisis since September.

The next set of figures may be very much worse but it would be foolish to act in advance of them. Make-work schemes should not be started until the worst predictions have been confirmed.

Even then, and this is the second condition, the work provided must be of a kind that the private sector would never invest in, and it would not displace real jobs. A national cycleway would fulfil those conditions easily. Whether built as a long cycle path from North Cape to Bluff or a network of local projects, no private business is likely to do it.

But even that does not exhaust the necessary conditions. The cost of the project must be reasonably low and bear some relation to estimated benefits. Public works, no matter how non-commercial they may be, draw on financial resources that would otherwise flow to other, possibly profitable, uses.

The cost of the cycleway remains a guess. John Key's initial figure, $50 million, looked wildly optimistic, though he stuck to it on Monday. "It depends on how you do it and what you do." He is open to the possibility of a network of tracks rather than a main trunk, and a variety of surfaces rather than a ribbon of concrete.

He might not see much of it done for $50 million but as unemployment relief the labour cost should be minimal and Mr Key may have it in mind to drive some hard bargains with engineers and other contractors.

He has already shown, in the refurbishment of Government House, an inclination to look hard at the sort of quoted prices the public sector has usually been too willing to pay.

The economic benefits of a cycleway are less easy to assess. Just 2 per cent of tourists currently have much interest in cycling though there is no telling how many more might be attracted to a dedicated national network, particularly if it offers the challenge of cycling the length of the country in a fortnight.

Many New Zealanders might take up the challenge too, much as they do tramps such as the Tongariro Crossing and the Milford Track.

A national cycleway was one of three "big ideas" endorsed by the Job Summit last month and though it received some predictable derision it begins to look more durable than its companions, the nine-day fortnight that only two known firms are seriously considering, and an equity fund to help banks carry struggling companies.

If the recession creates severe unemployment, and other conditions are met, the cycleway could yet be its best legacy.