Take the Tiwai Point smelter - please! Photo / Supplied
Take the Tiwai Point smelter - please! Photo / Supplied
COMMENT:
Shall we build light rail in Auckland? Shall we move the port to Whangarei? Should we ever have built a fantastic underground power project solely for an aluminium smelter?
These are subjects we can argue about all day long, and we do. They are big, visible public investments, easyto understand and very exciting for those not troubled by economics.
Their advocates are "visionary" and their critics intense, but the truth is, neither side really knows whether projects of this scale will make the country richer or poorer.
New Zealand today has a more efficient economy than it had when boomers like me were growing up, because boomer governments realised too many investment decisions were been made by governments rather than by people whose livelihood depended on recovering the costs from paying customers.
That test is harder to apply to big basic amenities called infrastructure, but not impossible. Infrastructure entities - such as airports, seaports and electricity generation - have been set up as companies precisely so that their decisions will be tested in competitive markets.
Wise governments now realise the limits of their wisdom. It is within their competence to decide for example that a port should not reclaim any more of its harbour, or that harbourside land can be used for something more valuable than a port. But it is not wise for a government to decide what uses a port company should make of its wharves, or which port importers of cars must use.
Decisions like those can cause an economy to carry needless costs and end up not as agile and resilient as it could have been. Take the aluminium smelter. Please.
Artist impression of Light Rail tram on Dominion Road. Photo / Supplied
It is a relic of an era when governments decided how most of the country's resources would be used. They did not just tap Lake Manapouri for electricity, they committed all of its output to aluminium production.
It seemed like a good idea at the time. Now the smelter brings us periodic threats of closure unless its owner gets a better deal.
We are vulnerable to these shakedowns because we do not have another use for so much electricity. The smelter now haunts our entire electricity market, inhibiting innovative developments. Too much infrastructure can be as crippling as too little.
Infrastructure is a dangerous word, especially when the Government has low debt, a healthy budget surplus, borrowing costs are very low and the population has had a growth surge. From right and left the Government is being urged to build something – nobody says what – claiming we have an "infrastructure deficit".
I suppose they're thinking of road congestion, Auckland's favourite conversation. Aucklanders can sound like they have never driven in a city overseas. Cities have traffic. Go to just about any big city in the world, including those with subways and great surface rail networks, and if you get in a car you are likely to be in slow-moving traffic. People's preference for cars keeps roads at their maximum moving capacity.
Roading decisions are not easily checked by user-pays. Not many can be tolled before the right to free independent movement feels threatened. Nevertheless, road users in this country do pay the full cost of building and maintaining main roads through petrol taxes, truck charges and vehicle registration fees.
That money is carefully allocated by the NZ Transport Agency, not only for roads nowadays but for busways, cycleways, pedestrian bridges, rail and ferry terminals and, possibly, light rail on Auckland streets.
The agency is supposed to make these decisions at arm's length from the enthusiasms and electoral interests of governments. That is what it tried to do with light rail last year when it was blind-sided by an unsolicited proposal from the NZ Superannuation Fund in partnership with a Canadian counterpart.
The NZTA had begun the process of inviting expressions of interest from international suppliers for a project that, as Transport Minister Phil Twyford used to explain, would install light rail from the city to Mangere via Dominion Rd, revitalising many parts of the route with affordable housing.
The pension funds' proposal, though vague, was different. They wanted to invest in a rapid transit system on its own track, not roads, from the city to Auckland Airport with few stops. Their financial risk, if any, was unclear.
The NZTA did an assessment of this proposal, using its established criteria, and concluded in November last year it did not fit the Government's stated purpose.
Clearly that purpose has changed. This year Twyford replaced the NZTA board and asked the Ministry of Transport to re-assess the pension fund's proposal.
The Cabinet is due to receive that assessment within a week and intends to announce its decision in February. It might no longer be light rail on streets. For better or worse, this is not the way to do infrastructure.
