Our Infrastructural Needs
The early years of European settlement in New Zealand were about the construction of infrastructure. There were no roads and few tracks, only unremitting forest and scrub. The North Island had much rugged terrain. Politics centred around roads, bridges, railways, then electricity in the 1920s. Rapid progress was made. Governments borrowed at favourable rates on the London market and invested much in infrastructure. Our high prosperity by world standards by the 1950s was because we had the capacity to transport produce to market, and possessed good postal and electricity networks slightly ahead of our competitors.
Last week's electricity blackout in Auckland, and the constant controversies whirling around needed upgrades of arterial routes are reminders about how far New Zealand has slipped. New roads and electricity construction formed a major part of annual budgets until our over-regulated economy caused growth to tail off in the 1970s. Road taxes increased under Robert Muldoon for Think Big projects. When they were sold or paid off, governments kept the extra levies for general purposes. Highways that could have been constructed, weren't. The money has often been poured down a variety of drains for little social, let alone economic benefit. We are still suffering from a thirty-year shortfall in road construction despite modest improvements in government spending. Economic growth, so vital to ordinary people's lives, is held back because of our inadequate infrastructure. Political inertia and ideological confusion explain why seven years after Labour promised to introduce toll roads, none is yet functional. Australia, of course, has several.
The electricity industry suffers different, yet broadly similar problems. By the mid 1980s there was huge under-utilised generational capacity in existence. The new SOE called Electricorp used it. For a time they avoided large new investment in production, thus restraining electricity prices and helping squeeze inflation from the economy. Transmission and on-selling were different matters. They required continuing investment and there was a need for better retailing structures. The latter still hasn't been fully remedied. Last week's Auckland problems revealed how little that state-owned monopoly, Transpower, had invested in backup transmission and new wiring over more than a decade from about 1992. New routes for potential wiring around Auckland were identified 25 years ago; virtually nothing was done. And the Resource Management Act now requires longer lead-in times to implement schemes. Moreover, Labour's confused 2003 construct, the Electricity Commission, is thwarting rather than assisting Transpower's efforts under new leadership to speed up the introduction of greater reliability to Auckland's supply. Auckland businesses are worried about electricity supply, for good reason.
Those knowledgeable about the industry say that to deal with the current urgent need for reliable back-up electricity the Minister of Energy should bypass the Electricity Commission, summon a group of the most talented experts, and get them to produce a National Policy Statement for new electricity reticulation. Its construction could then be fast tracked. Of course there are NIMBYs who want nothing in their backyards. But from early times it has been recognised that the national interest must over-ride them. Compensation should be fair. The only sure way of avoiding crises like those in Auckland and other parts is to build reticulation capacity beyond the bare necessity so there are options when unforeseen events like a loose wire at Otahuhu, or the collapse of poles in Canterbury occur. Everywhere electricity is a utility in such demand that governments will always be blamed, no matter the blackout's cause. With two substantial failures in the Prime Minister's electorate these last two weeks she has angry constituents. If the current unsatisfactory reticulation both into, and around Auckland isn't fixed, inhabitants could go ape next election. Can a Dunedin based Minister of Energy grip this reality? And our winter has barely started.
It's much the same with roads. Our three biggest cities have huge needs, with Auckland's by far the greatest. Had the incoming Labour Government in 1999 acted resolutely on its promise to facilitate toll roads, we could now have several functioning. After thirty years of investment shortfall it is unrealistic to expect to fund the backlog from current revenue. Borrowing for infrastructure is vital; private investment too if we want to lift our economic game rapidly. But we must face the reality that lenders and investors will never open chequebooks if faced with bossy ministers or capricious regulators doubling as planners, like the current Electricity Commission with its 40 bureaucrats. Complex, interfering bureaucracies with conflicting roles always turn off investors.