Nats’ motorways going on the credit card

Written By: James Henderson - Date published: 7:20 am, August 15th, 2012 - 44 comments
Categories: debt / deficit, transport - Tags:

Transport spending has always been paid for out of road taxes. But National’s roads to nowhere cost too much and road user tax revenue is stagnant because traffic volumes are responding to high petrol prices.

They’ve added huge top ups from general tax but it’s still not enough to meet the rising costs of the motorways. They’ve cut every other area of transport spending to the bone. Still not enough.

Now, National’s going to start borrowing for their motorways. They’re going to chuck it on the credit card, rather than re-examining whether they should be building these projects at all.

With petrol prices nudging the all-time record and traffic volumes falling, you have to wonder why we would take on debt to fund $12 billion of uneconomic roads on routes that only 4% of drivers use.

[just listening to Morning Report. They’ve got a infrastructure building company shill on for a soft interview saying that borrowing for building these projects is great. He’s already lied about the total cost of the RoNS and their benefit:cost ratio. Later, they’re having Gerry Brownlee on for a soft interview. Phil Twyford and Julie Anne Genter each got a single line in the reported piece. Nice balance guys.]

44 comments on “Nats’ motorways going on the credit card ”

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mickysavage 1

15 August 2012 at 7:40 am

The benefit cost ratio is the essence of why this is such a dumb idea. Why borrow money to invest in something where the return is less than the cost of borrowing?

And these guys are meant to be economic geniuses?
- Bored 1.1
  
  15 August 2012 at 9:05 am
  
  Mickey , are you being deliberately obtuse about the “economic geniuses”? Its political, they don’t give a fekk about returns. Are we not allowed to say out loud that this represents deliberate corruption, giving money to their mates in the roading construction and transport sectors?
  - mickysavage 1.1.1
    
    15 August 2012 at 9:14 am
    
    I was being as generous to them as was possible in the circumstances 🙂
    - Draco T Bastard 1.1.1.1
      
      15 August 2012 at 11:37 am
      
      Stop it, saying that their actions are from incompetence hides the corruption.
- KJT 1.2
  
  15 August 2012 at 9:21 am
  
  Not so stupid when you see the extent of support NACT gets from the trucking lobby.
- Polish Pride 1.3
  
  15 August 2012 at 9:52 am
  
  Interesting that under a ‘Resource Based Economy’ rather than the current monetary one. Building the roads wouldn’t be a problem and wouldn’t require borrowing.
  - Draco T Bastard 1.3.1
    
    15 August 2012 at 11:43 am
    
    Even under Positive Money system there would be no need of borrowing. The government prints the money at 0% interest to pay for the roads to be built and then raises taxes slightly to offset the increased spending.
    - Colonial Viper 1.3.1.1
      
      15 August 2012 at 2:04 pm
      
      Yep. Either taxes or savings rates could be raised in order to withdraw excess money from circulation.
      - mike e 1.3.1.1.1
        
        15 August 2012 at 5:42 pm
        
        not if that sector is isolated like the CHCH rebuild.
        
        Draco T Bastard 1.3.1.1.1.1
        
        15 August 2012 at 5:47 pm
        
        Um, what?
        
        Government prints money to rebuild Christchurch essential services and homes, bills the insurance companies.
Hilary 2

15 August 2012 at 7:46 am

There was an earlier comment (before 7) by Julie Ann Genter that this had been tried and failed in Queensland and many big projects are now in receivership. That, of course, wasn’t repeated in the main bulletin..
- Jim Nald 2.1
  
  15 August 2012 at 8:41 am
  
  Re the Morning Report piece: http://podcast.radionz.co.nz/mnr/mnr-20120815-0709-govt_wants_law_change_to_allow_borrowing_for_transport_projects-048.mp3
  
  It is lovely how Julie’s comments have been truncated and more oxygen is given to former ACT politician, now ressurected as CEO of Road Transport Forum (read trucking lobby). Ken should be quickly returned to more open politicking by getting him to hijack the Banks “I can’t recall” Party and reclaim it from Natz.
  
  /sarc
Tom Gould 3

15 August 2012 at 8:22 am

So these Tories are borrowing to build roads that lose money while selling highly profitable assets? What kind of fiscal fool does that? Of course, Business NZ and the Chambers of Commerce say it makes perfect economic sense. If there was ever an example of craven Tory quislings suspending orthodox business judgement to suck up to their Tory mates, this must be it.
mickysavage 4

15 August 2012 at 8:24 am

Ken Shirley just told a porkie on National Radio by saying that the Waterview Extension has a benefit cost ratio of 4. The figures I have seen for this project are 1.1 to 1.5. There is a treasury paper from 2009 that assesses the BCR at 1.15 admittedly including financing costs.

The main benefits are travel times and reductions in congestion. As has been said many times when oil prices peak again and fewer people can afford to drive the benefits will not be there.
- Tom Gould 4.1
  
  15 August 2012 at 11:12 am
  
  Radio New Zealand News is running the ‘one to four’ number as fact, no mention of Shirley but they did mention Waterview. Their earlier bulletin today noted Waterview was outside the borrowing scheme. So they don’t even read their own news copy. What a bunch of lazy useless dickheads.
Lanthanide 5

15 August 2012 at 8:56 am

I thought Phil Tyford did pretty well on the National Radio interview.
captain hook 6

15 August 2012 at 9:09 am

It is becoming more and more obvious that this is a government of arrivistes who are now completely drunk with power.
AmaKiwi 7

15 August 2012 at 9:14 am

Tom Gould: “borrowing to build roads that lose money while selling highly profitable assets.”

This government is led by some very intelligent people, which means this is not a business error, it is corruption. Admit it happy, honest Kiwis. Some of our politicians are thieves.

Does anyone doubt the need for referendums to veto laws passed by parliament?

If your Tory friends object to veto referendums, remind them of how many times Dictator Helen passed bad laws, how many times they would have liked to have the people overturn one of her laws.
- Draco T Bastard 7.1
  
  15 August 2012 at 11:47 am
  
  This government is led by some very intelligent people, which means this is not a business error, it is corruption. Admit it happy, honest Kiwis. Some of our politicians are thieves.
  
  QFT
  
  And most of those thieves are in NACT.
ad 8

15 August 2012 at 9:22 am

I can’t understand what the security is for these proposed loans.

Can you really take a mortgage out on a road? Would be a pretty odd kind of receivership if the loan was nupaid.

Anyone enlighten me?
- mickysavage 8.1
  
  15 August 2012 at 9:38 am
  
  Crown guarantee.
  
  Although National did a lot of work in the 1990s on the privatisation of roads. Apparently Williamson thought he was close to perfecting a model but they could not work out what to do with intersections between different TLAs …
- mickysavage 8.2
  
  15 August 2012 at 9:38 am
  
  Crown guarantee.
  
  Although National did a lot of work in the 1990s on the privatisation of roads. Apparently Williamson thought he was close to perfecting a model but they could not work out what to do with intersections between different TLAs …
Tracey 9

15 August 2012 at 9:28 am

Selling infrastruture to borrow for infrastructure?

Will we be in the same net position PLUS INTEREST REPAYMENTS
- Draco T Bastard 9.1
  
  15 August 2012 at 11:48 am
  
  Nope, we’ll be worse off + interest payments.
AmaKiwi 10

15 August 2012 at 10:51 am

Depreciating versus appreciating infrastructure.

Over time a power company holds its value and may increase in value. (It owns all the best hydro and geothermal locations. The demand for power keeps increasing.)

Roads are a steadily depreciating asset. Like a house, they are deteriorating from Day 1.

So it’s selling appreciating infrastructure to buy depreciating infrastructure.

“Something is rotten in the state of Denmark.”
- Lanthanide 10.1
  
  15 August 2012 at 10:57 am
  
  I think that’s a very blanket generalisation that isn’t really true.
  
  A road needs maintenance, just like a house. A power plant also needs maintenance. It’s easier to maintain an existing road than it is to build an entirely new one from scratch – so a road still maintains value in the form of the opportunity cost it would entail to replace it or not have the road to begin with.
  
  Also, an earthquake in the southern alps could easily render all of those hydro dams worthless, or changing rainfall patterns could significantly reduce inflows. Geothermal plants also rely on a nearby water source (usually a river), which can again be impacted by changing rainfall patterns. And it’s even possible (although unlikely) for a geothermal hot-spot to rapidly cool due to below-ground changes.
  
  All we’re really talking about here is the timelines and useful life. A nice tagline from Six Feet Under seems appropriate: Everything. Everyone. Everywhere. Ends.
  - Colonial Viper 10.1.1
    
    15 August 2012 at 11:10 am
    
    Well lets not just pick on the power companies. A massive Southern fault earthquake is likely to render a lot of assets pretty worthless. Similar to what happened in Christchurch.
    
    Also, the fact that real economy assets need maintenance is not new, right? Financialised assets don’t need similar maintenance…but financialised assets have been shown to be able to “vapourise”…
- Bored 10.2
  
  15 August 2012 at 11:36 am
  
  A little considered reality is that hydro power stations have a finite life span unless dredged etc. NZ rivers carry not only a vast amount of water but also vast quantities of sediment. Our rivers are high gradient causing high velocities and high turbulence (means they carry material really well)…they drain fast eroding mountain uplift areas, plus massive glacial sediment deposits….(means there is lots to move..imagine rivers of gravel).
  
  The Waitaki dams will outlast all of us by a considerable time, but they will fill in without intervention. Have a look at the west end of Benmore next time you pass, its getting very shallow compared to what it was 30 years ago.
  - Polish Pride 10.2.1
    
    15 August 2012 at 11:45 am
    
    Ahhh Home sweet home 🙂
    - Bored 10.2.1.1
      
      15 August 2012 at 12:41 pm
      
      Trout seem to like it….got to be some upside.
Draco T Bastard 11

15 August 2012 at 11:55 am

With petrol prices nudging the all-time record and traffic volumes falling,

And what most people don’t understand is that as demand falls fuel prices will go up as the fixed costs of supplying that fuel aren’t going away which means that each litre of fuel sold carries more of the fixed costs. Fuel prices are at near record but the price of oil is actually quite a bit less now than when those prices did hit that record.
- paul andersen 11.1
  
  15 August 2012 at 5:47 pm
  
  think you should forget about the cost of oil as an argument against road spending. cars may not be oil powered that much longer, but humans wont give up personal mobility and security( in your own locked 4wd versus standing in someones vomit while being sneezed on with public transport), so roads will be with us for the forseeable future. the car will be a computer guided blob powered by compressed chookshit, but there will still be roads. the romans pretty much got them right 2000 years ago, even invented the overpass.
  - Draco T Bastard 11.1.1
    
    15 August 2012 at 7:54 pm
    
    cars may not be oil powered that much longer, but humans wont give up personal mobility and security
    
    If they ain’t oil powered then they ain’t going to exist.
    - Colonial Viper 11.1.1.1
      
      15 August 2012 at 8:00 pm
      
      Everyone into a $50,000 Prius please.
      
      Oh shit, they just happen to be oil powered too, Mr Andersen. BTW peak US passenger vehicle miles was 2002. Its been falling ever since.
brybry 12

15 August 2012 at 12:12 pm

I wonder. Was the Nats about-turn on the Wellington War Memorial project due to the fact that they suddenly realised that it too is actually a road project?
t gilmour 13

15 August 2012 at 2:00 pm

Read “Confessions of an Economic Hit Man”
by John Perkins – then it all makes sense
- Colonial Viper 13.1
  
  15 August 2012 at 2:55 pm
  - Polish Pride 13.1.1
    
    15 August 2012 at 3:59 pm
    
    +1
jack 14

15 August 2012 at 5:13 pm

Hey Viper, you believe that hype? Obviously someone who wants to sell his book.
- Draco T Bastard 14.1
  
  15 August 2012 at 5:49 pm
  
  Have you got an actual rebuttal or are you just talking out your arse?
- Colonial Viper 14.2
  
  15 August 2012 at 8:03 pm
  
  Hey Viper, you believe that hype? Obviously someone who wants to sell his book.
  
  The “hype” that the Saudi Royal Family agreed to US requests that Saudi oil would only ever be sold in USD? And in exchange, the US would guarantee the security and power of the Saudi Royal Family, providing it with the most modern arms and other assistance?
  
  That’s not hype buddy, that’s the last 50 years history.
  - Tracey 14.2.1
    
    16 August 2012 at 8:07 am
    
    Ah Saudi Arabia. Despite the USA launching military crusades in the name of freedom and democracy in other middle east countries this one remains untainted by such quaint notions. And barely a murmur from the US.
    
    However recently the King decided to let women vote. In 2015. Isn’t that lovely of him?
    
    “Saudi Arabia’s King Abdullah has granted women the right to vote and run in 2015 local elections and to be appointed to his advisory Shura Council, but some women’s rights advocates are not satisfied.
    
    The decree, announced Sunday, is part of King Abdullah’s gradual opening of Saudi Arabia to various rights for women, said Qamar-ul Huda, a specialist on Saudi Arabia at the U.S. Institute of Peace.
    
    Huda noted that two years ago, the king opened a fully integrated co-ed King Abdullah University of Science and Technology, or KAUST, in the town of Thuwal. The king also appointed the first female deputy minister — of women’s education.”
    
    Perhaps King Abadullah could be the next GREAT NZer appointed in a foreign country??
jack 15

15 August 2012 at 9:03 pm

Draco, I presume you want facts… I oftened wondered why people like this gentleman who speak about very sensitive issues and is still alive to talk about it. This is why I question his motives. Would you speak knowing someone is in the audience that might pop you off? Are his convictions that strong that he would give up his life?? Or are these corporate people letting him talk for a reason. Maybe someone has an answer.
jack 16

15 August 2012 at 9:23 pm

I might add, I do believe him. Probably 9.5 out of ten wouldn’t. I lived in the states most of my life and have seen the dwindling of the middle class… how the corporations bought elected officials and the news media. He’s right about the 2 political parties making no difference. Key is doing it here. No doubt about it. Soft media and dumbing down the public. Even Key’s “personality” is being sold on tv. That’s how he won. Oh, and the misleading polls… that played a huge part. I do believe this guy but I wonder why is he still alive?