Motu Economic and Public Policy Research

The Motu infrastructure research programme

Motu was awarded a four year, $1.6 million grant from the Foundation for Research, Science and Technology for research into net benefits provided by New Zealand’s infrastructure. The grant is titled Physical, Technological and Social Infrastructure: Maximising Contributions of Infrastructure Investments to New Zealand’s Economic Development. The research covers a range of infrastructure investments including roads, rail, irrigation, telecommunications, social services such as health, and processing plants. Motu and researchers from the University of Waikato and Victoria University of Wellington have conducted several detailed infrastructure assessments to measure net benefits for productivity and New Zealanders’ wellbeing. The research also examines who benefits from the investments. The research programme started in July 2006 and runs to June 2010.

Related workshop: Read about the IPS/Motu Infrastructure Workshop held in July 2010.

Key issues and questions for infrastructure investment

Infrastructure provision is a key government role. It is one of the few ways through which increased government expenditure may materially raise economic productivity. Julius Vogel’s infrastructure investments of the 1870s transformed the New Zealand economy. Factories and mines mushroomed around the railways; whole provinces and industries opened up for production. More recently, the Auckland and Tauranga harbour bridges transformed those cities. Telecommunications infrastructure has transformed the way we do business and the way we communicate. Social infrastructure (e.g. hospitals and tertiary institutions) has transformed our society.

Do we have too much, just enough, or too little such investment? How large are the costs to productivity and to broader wellbeing of having the wrong amount, or the wrong type, of infrastructure? Is inadequate infrastructure placing a material constraint on New Zealand’s economic and social development? What would be the payoffs to relieving those constraints? These are the questions that we address in this research programme. We address them because prima facie evidence suggests New Zealand has significant infrastructure deficiencies. The OECD questions whether our land transport, electricity and telecommunications infrastructure is adequate. The World Economic Forum Global Competitiveness Report ranks New Zealand 20th of 29 developed countries for overall infrastructure quality. Korea is 18th, Australia 10th; small, innovative countries top the list: Finland, Switzerland, Denmark.

A programme assessing the impacts of major infrastructure investments is central to understanding New Zealand’s prospective economic and social development. Our programme’s first objective is to provide rigorous information determining net benefits of a range of New Zealand’s physical, technological and social infrastructure. Our second objective is to support key decision-making agencies in devising structures and processes that fund an appropriate level of infrastructure and that direct infrastructure investments to areas that have the highest potential payoffs for New Zealanders. We will conduct at least eight detailed infrastructure assessments that measure net benefits of infrastructure for New Zealand’s productivity and wellbeing. We will also examine the distribution of those benefits to understand who benefits from the investments. Using advanced techniques measuring infrastructure’s value to local regions, we will examine the impacts on productivity and broader wellbeing of:

• Transport Infrastructure;
• Water & Waste-Water Infrastructure;
• Telecommunications Infrastructure;
• Social Infrastructure;
• Primary Processing Infrastructure.

These assessments will be used to assess systemic issues surrounding funding and choice of infrastructure investment. Key government ministries and infrastructure organisations support this programme and will participate in analysis of systemic issues relating to infrastructure provision. The process will result in recommendations for setting appropriate methods for funding and allocating infrastructure. This, in turn, has the potential to transform New Zealand’s productivity and development path.