2. CRAIG FOSS (National—Tukituki) Link to this
to the Minister of Finance
What steps has the Government taken to boost New Zealand’s productive infrastructure?
Hon BILL ENGLISH (Minister of Finance) Link to this
Budget 2009 outlined the Government’s plan to spend $7.5 billion extra over the next 5 years in improving roads, rolling out broadband, and modernising schools and our housing stock. This included $500 million of accelerated projects, announced in February and now under way, which are supporting New Zealanders in jobs. Another $3 billion will be spent in the next 4 years upgrading the national grid, and this includes $1 billion extra to be spent on State highway construction over the next 3 years. This increased investment shows that the Government is channelling resources to two priorities: the first is supporting jobs through the recession, and the second is a long-term increase in our productivity.
There has been a range of estimates about how many jobs are supported by this spending. In the short term, $500 million worth of accelerated projects announced in February are providing an immediate boost for tradesmen and suppliers across the housing, transport, and education sectors. For instance in housing, the Housing New Zealand Corporation estimates that its expenditure is supporting 1,341 jobs. The New Zealand Institute of Economic Research published an estimate some months ago that said that the Government’s stimulus spending would support around 10,000 jobs. I do not think that there is any doubt that the Government’s decision to keep spending through the bottom of the recession is supporting thousands of jobs, and one of the measures of that is the fact that our unemployment increase is one of the lowest in the developed world.
Hon Sir Roger Douglas Link to this
Does the Minister agree with Thomas Sowell that spending on infrastructure to get out of a recession is like someone mailing a letter to the fire brigade and telling it that his or her house is on fire; if not, why not, given that tax cuts provide an immediate stimulus, whereas infrastructure investment can take years to work its way through the system?
I cannot agree with Thomas Sowell—not because he is not very knowledgable; he is, but I do not understand the analogy he is using. The fact is that the Government’s commitment fulfils both objectives. For instance, roading and the electricity grid are two of the main bottlenecks in our economy; there has to be investment to free up those bottlenecks if we are to have growth. And that will support jobs as we spend the money. It would be great if we could spend it all now, but these projects do take time.
One of the jobs the new Government has had to do has been to clean up the mess left by the last Government in respect of infrastructure spending. Just one example is the fact that the previous Government bought KiwiRail for almost $700 million. The current valuation is about $350 million, and a cash-flow valuation would give it a negative value—that is, the Government could in theory pay someone to take it away, and we would be better off.