Norman Russel William: Questions for Oral Answer — Questions to Ministers Questions to Members 
Norman Russel William: Questions for Oral Answer — Questions to Ministers Questions to Members 
[Volume:667;Page:14713] 
1. 
Dr RUSSEL NORMAN (Co-Leader—Green) 
 to the  
Minister of Finance 
: Does he stand by his statement that “it’s essential that we reduce New Zealand’s vulnerability to future shocks because as we’ve seen with the current recession economic conditions can change extremely quickly”; and if so is he confident that all his infrastructure investments reduce our vulnerability to future shocks? 
Hon BILL ENGLISH (Minister of Finance) 
: 
 Yes. The Government is investing billions of dollars into strengthening the national electricity grid setting out to roll broadband out across the country plus putting very heavy investments into roading and rail. These will both increase the resilience of our economy and underpin stronger growth in the future. 
Dr Russel Norman 
: How will the $11 billion that his Government is spending on new high-cost motorways do anything to reduce the vulnerability of our economy to oil price shocks? 
Hon BILL ENGLISH 
: The investment in roads is freeing up congestion and lifting our export productivity. If oil prices rise then I am sure that people will make their choices about whether to travel more or less or whether to change their mode of transport. It is our guess that even if oil prices rise most people still will want to travel by private car. 
Jo Goodhew 
: What are some of the economic benefits of the Government’s programme of infrastructure investment? 
Hon BILL ENGLISH 
: In the long run it will improve the quality of our infrastructure consistent with a growing economy and help to lift New Zealand’s productivity. In the short term our infrastructure investment is supporting the economy. Eighty percent of the major construction jobs—that is jobs worth over $5 million—are being funded by the Government according to Pacifecon’s recent survey of activity and over half of all non-residential building consents are for Government-related work which is the highest percentage in 20 years. So the infrastructure investment is also underpinning thousands of jobs. 
Dr Russel Norman 
: When he says it is his “guess” that people will change their behaviour in certain ways during an oil price shock has the Government done any studies or conducted any research into what the actual impact of an oil price shock would be on transport decision-making? 
Hon BILL ENGLISH 
: I could go and check whether the Government has done that—perhaps the previous Government may well have done because there was an oil price spike a few years ago. But we can see that the whole transport industry has been thinking that through. For instance one effect might be an even faster move towards much more fuel-efficient cars or a switch to electricity. Those cars would still require roads to be driven on. 
Te Ururoa Flavell 
: Tena koe Mr Speaker. Kia ora tatou. Does he agree that the country’s current measurement of economic progress GDP is highly susceptible to these economic shocks and what will he do to progress the implementation of the genuine progress index which as a more holistic measure of economic progress would be less susceptible to economic shocks? 
Hon BILL ENGLISH 
: The Government accepts that GDP is not a total measure of welfare or even of those things that are desirable for the Government to achieve. That is one reason why for instance the Government is now publishing immunisation rates in the newspaper every quarter to demonstrate to the public the progress that we are making on immunising children. It is also a reason why the Government is introducing national standards as a measure of literacy and numeracy. They are the basic requirements for competent citizenship. 
Dr Russel Norman 
: In reference to the work that the Government may or may not have done on the impact of oil price shocks can he confirm that oil price shocks have not been considered in any of the business cases for the roads of national significance? 
Hon BILL ENGLISH 
: I simply cannot answer that question but I would be willing to go and find out. 
Dr Russel Norman 
: In light of the fact that oil price shocks have not been considered in any of the business cases does he accept that an oil price shock would reduce the benefits in the business cases for building those motorways and would also increase the construction costs—so an oil price shock would change the benefit to cost ratio by reducing the benefits and increasing the costs? 
Hon BILL ENGLISH 
: In some respects it is fairly obvious that if the prices were different the business case would look a bit different. But the lesson from past surges in oil prices is that although people may change to more efficient cars or different types of fuel the private car is likely to remain a vastly dominant form of transport no matter how much we spend on railways. If the dominant form is not cars then it is buses and they still need roads. 
Dr Russel Norman 
: Does he agree that there are opportunity costs in spending $11 billion on new motorway projects in that he will have less money available to invest in projects that would give New Zealanders real options such as better buses and trains walking and cycling? 
Hon BILL ENGLISH 
: Well there are always opportunity costs in making a particular investment but the investment in roads assists with what is actually a more efficient mode of public transport than rail and that is buses. They need basically the same system as cars. The member may be interested to look in detail at some of the cost-benefit analysis on rail because although he thinks that roads are vulnerable to oil shocks most rail investment cases do not stack up without a very large public-good element to cover the big difference between the costs and the benefits. 
Dr Russel Norman 
: In the light of an oil price shock does he think that the benefit-cost ratio would look better for a new motorway project or a new rail project and hence that if he included oil price shocks in the studies of the benefit to cost for these two projects actually rail would look much better in the case of an oil price shock than new motorways? 
Hon BILL ENGLISH 
: I have not personally done those calculations but my guess is that we would need to have a very high oil price to make the cost-benefit ratio on rail look better. If the oil price was high we would have to presume most people would shift to rail but even if the volumes on rail doubled or trebled the economics of it are still very marginal.