Getting the shovels out
By Richard Harman (author)
Infrastructure Minister Shane Jones is ready to step up infrastructure building in the light of the Reserve Bank's dramatic drop of the Official Cash Rate yesterday to one per cent.
As far as Jones is concerned, cheaper money will mean more projects.
"It is fair to say my zest to place more pressure on the system has grown considerably in the light of the Reserve Bank decision," he told POLITIK.
Reserve Bank Governor Adrian Orr said on Wednesday that another advantage of the low-interest rate would be that because it would allow lower rates of return on projects more would become viable.
"And so it's a fantastic global opportunity to be putting in a lot of that long term infrastructure activity," he said.
Jones is certainly up for the job, and already he is talking about the long-delayed Penlink project on the Whangaparoa finally going ahead.
China Tiesiju Civil Engineering Group Co Ltd, a subsidiary of China Railway Group Ltd, which in turn is a subsidiary of China Railway Engineering Corp, a company listed in Hong Kong & Shanghai and controlled by the Chinese Government is proposing to build, own and operate the 4-lane tolled road.
Jones says Treasury has told him the project is now "shovel ready".
"Recently several Ministers met with NZTA Chair Brian Roche to encourage him to pave the way forward so that project could be expedited," said Jones.
"Phil Twyford and I have got a body of work to explore whether there are better funding arrangements to give certainty to NZTA infrastructure ambitions.
"Currently these things are funded out of a three-year funding cycle, and we are waiting for for some reports back from Infrastructure and Transport officials as to whether we can replicate a debt model where the debt is serviced from a variety of sources including the cash flow from NZTA.
Ministers haven't made a call about that, but we are keen to see the options of this for Kiwirail.
"Decisions pertaining to Kiwrail are imminent, and they will be made by the senior Minister, Winston Peters and that will certainly bring money into the economy."
Opposition Finance spokesperson, Paul Goldsmith, also favours stepping up infrastructure building at a time when the economy is slowing, and interest rates are so low.
But he says the Government has actually pulled back on infrastructure spending.
"If you look at the latest budget you will see that it has come back $3.3 billion since the half-yearly update only six months before," he told POLITIK.
"And in practical terms, you can't ignore the fact that the Government have cancelled a whole lot of road projects, a number of which were ready to go.
"But they stopped them, and the replacements are years away."
The need for urgency on some projects was vividly demonstrated this week in a report from the Auckland Council on a proposal to develop sections for housing at Drury at the southern end of the southern motorway.
About forty-five per cent of Auckland's future urban land is around Drury and Pukekohe, and an estimated 35,000 dwellings will be built over the next 30 years.
But Penny Pirrit, Auckland Council's Director of Urban Growth and Housing says the Council has paused Unitary Plan changes to bring forward zoning of land near Drury for development until there has been progress to fix existing transport problems.
"A number of major projects including rail electrification to Pukekohe, rail stations and improvements to Mill Road and State Highway 1 are necessary to alleviate the current problems before further growth happens," said Pirrit.
"Currently, there is a significant funding gap for these projects in excess of $2 billion."
Jones told POLITIK that the Government was very keen to see what prospects there were for Mill Road between Manukau, Papakura and Drury.
Jones says the work going on at NZTA which is supported by Finance Minister Grant Robertson will look at ways of bringing private sector finance in to help build projects like these.
But he warns that money is not the only obstacle to quicker infrastructure building.
"It's one thing to press the fiscal button, but it's another to wade through the treacle that of the consent processes," he said.
"This is something that all politicians have allowed to calcify."
But Goldsmith says there is more to it than that; that the current Government is biased against roads and cars.
"Aucklanders are desperate for growth in the south where there is massive population growth but because of what I believe is an ideological approach which is against anything to do with roads they have put them all off into the never-never," he said.
Like Orr, Jones believes that the interest rate decision will encourage more private sector money to be offered up for infrastructure projects.
And Goldsmith also believes the time is right.
"The fact that money is cheap at present gives the opportunity to do more work sooner," he said.
"We'll be coming up with plans on how to deal with that as we get closer to the election."
It's been a long time there has been political debate over the pace of infrastructure building. But obviously, the time has now come.