One successful infrastructure project, at least in terms of getting things built, was the railway boom of the 1870s under Premier Julius Vogel, which saw New Zealand increase the length of operational train lines from just 74km in 1870 to more than 2000km by the end of the decade.
Vogel was helped in this by an incredibly liberal regulatory environment, which is unlikely to be repeated, given there is little political appetite to return to Victorian levels of light-touch environmental and labour regulation, but he was also assisted by massive levels of migration.
In 1874 alone, New Zealand added a net 38,000 immigrants, setting a record that would not be broken until 2002.
But there were big problems too. A high level of government involvement in planning saw railway lines designated for political, rather than economic, reasons.
Some of these were very sketchy indeed. The report recalls the then-minister of works John D. Ormond was accused of altering the route of a rail line to boost the value of his property.
The immense cost of the projects hurt the Crown.
Between 1870 and 1876, Vogel borrowed £10 million from the UK (about $1.5 billion today). When the global economy headed into depression, New Zealand’s debt position meant it suffered severely.
“The country’s dependence on the PWP [public works projects] left it vulnerable to shocks and fluctuations in the world market. Domestic economic activity contracted sharply, and many of Vogel’s construction projects were postponed or abandoned.
“This led to mass unemployment and social unrest, from which the country took several years to recover,” the report said.
The economics of such an expansive rail network were never as “robust” as the government promised, and plunged the Government into debt.
By the end of the decade, mounting public pressure demanded an inquiry into the railways. The resulting Royal Commission published a damning report into the state of the railways in 1880, finding Government’s involvement in railway infrastructure led to the building of too many lines without corresponding demand.
The report was also critical of the Think Big projects of the Muldoon era.
Robert Muldoon’s government needed to respond to the uncertain energy environment of the 1970s. It did so through a series of massive public works projects that linked domestic electricity generation with manufacturing, hoping that cheap energy would turn these manufacturers into competitive exporters, which would help close New Zealand’s gaping current account deficit.
All did not go to plan. The report described Think Big as an “unmitigated disaster”.
By one estimate five of the eight Thing Big projects cost more than double the approved cost. Once again, excessive borrowing plunged New Zealand into a fiscal crisis.
Part of the problem was political, the report concludes, with Muldoon overriding the reasonable concerns of officials for political gains.
“Treasury and the Prime Minister’s Department had raised serious concerns about the project’s viability. Indeed, almost everyone involved was opposed. But Muldoon’s political preferences were clear,” the report said, of Muldoon’s decision to forge ahead with a project prior to the 1981 election.
The report is not all cautionary tales.
It notes the union of Government and private enterprise was key to the success of the First Labour Government’s state housing ambitions. The same is also true of the last National Government’s successful rollout of Ultra-Fast Broadband - an achievement that stands in stark contrast to the disastrous broadband rollout in Australia.
The Act party welcomed the report. Infrastructure spokesman Simon Court said it “highlights the need for New Zealand to adopt ACT’s policy of using private enterprise and local knowledge to get its infrastructure up to speed.
“The New Zealand Initiative’s report ‘Paving the Way: Learning from New Zealand’s Past to Build a Better Future’ looks at what has worked in New Zealand’s infrastructure history and what hasn’t. Unsurprisingly, it found that central planning doesn’t work,” he said.
