The Government should seriously consider borrowing money to upgrade New Zealand's roading and infrastructure, a high-profile economist says.
"They're giving money away. Why shouldn't we be borrowing money?" Shamubeel Eaqub asked on The AM Show on Thursday.
On Wednesday, the Prime Minister's Business Advisory Council called on the Government to resume work on 12 major roading projects that have been put on hold, saying the country had an "infrastructure deficit".
There is "no overarching vision or leadership in New Zealand for infrastructure development" or "nation-building narrative upon which to build a strategic direction", the council reportedly said in a letter.
As for the roads, they are "investment-ready, provide the beginnings of a pipeline of investable opportunities and would be an effective use of the roading capability developed in New Zealand over the last 20 years".
Transport Minister Phil Twyford told NZME while he agrees with the need for a long-term strategy for infrastructure development, putting billions into roads was "really bad policy".
"If we were to do what the Business Advisory Council was saying, it would mean spending a great deal of money, more than $12 billion, on projects that have very low economic value."
That money would presumably come from the Land Transport Fund, which is fed by excise taxes on petrol, road user charges, drivers' licence costs and toll roads.
"It's not that we don't have the money - the Land Transport Fund actually has money in it," said Eaqub. "They're going through a big rejig in terms of what to priorities, and do they actually stack up."
Eaqub says while roading has been under-funded historically, public transport has been left ever further behind.
- Infrastructure not keeping up with cycling boom - researcher
- Why is the Infrastructure Commission Bill so important?
If the Government doesn't want to pay for it, there are other options such as public-private partnerships (PPPs) or toll roads. But Eaqub says they're unlikely under this present centre-left coalition.
"The last Government had plenty of opportunities to do way more PPPs and toll roads, and politically they would have been much better-placed - but they didn't push ahead with it because the political appetite within New Zealand is just not high enough."
Eaqub agrees with Twyford that most of the 12 roads wouldn't be able to pay for themselves via tolls.
"On most roads we don't have enough volume to make it work. We would only be able to do it on very, very busy roads - so places like Auckland."
The Government has set itself limits on borrowing, making it unlikely new infrastructure could be funded that way. Eaqub says with interest rates at historic lows, "we shouldn't be" lagging behind in infrastructure construction anymore.
"I appreciate we've got this Government that doesn't want to borrow, but in the next term, they will... I think we need to be far more aggressive. The infrastructure needs in New Zealand are quite intense."
Twyford expressed doubt the roads would generate enough revenue to justify borrowing even at current interest rates.
"Borrowing money is not the problem here. It's never been cheaper to borrow money than at the moment… It's actually having the revenue to be able to service that debt," he told NZME.