NZPA report parts of Len Brown’s inauguration speech at the Auckland town hall this evening:

In his first address at the first Auckland Council meeting, Mr Brown said it was time to stop imagining how to improve Auckland’s transport system and other infrastructure and time to start acting.

Mr Brown’s three key rail visions – an inner city loop, a line to Auckland International Airport and rail to the North Shore – will all come with high price tags, which the Government has said indicated it may not be able to be fund for some years.

But Mr Brown said such lines were vital if the Government wanted to meet its commitment to having New Zealand incomes catch up to Australia in 25 years.

“For New Zealand to catch and pass Australia economically, Auckland’s infrastructure needs to match and surpass the likes of Brisbane, Melbourne, and Sydney,” Mr Brown said.

“It will not be easy. These are expensive projects. But we have had reports, discussions, and debates for long enough.

“There will be a cost. But we will do it.”

He said the projects were vital if people from the North Shore wanted to work in south Auckland, and vice versa, without requiring three hours a day getting to and from work.

“It’s about ensuring businesses can move their freight around and through our city quickly and efficiently, rather than having to factor time spent stuck on motorways and congested local roads into their costings.

“And it’s also about ensuring that investors – local and foreign – see Auckland as a great place to establish a business, creating jobs and prosperity not just for Auckland, but for all of New Zealand.”

Mr Brown noted that Auckland in the 1970s nearly had a light rail project, conceived by former Auckland City Mayor Sir Dove-Meyer Robinson, only for it to be derailed.

“Imagine the economic and social potential that that rapid rail project would have unlocked over the past 30 years. Imagine the prosperity that Auckland would have created for all of New Zealand.”

Mr Brown also said technological and other infrastructure, along with an improved environment for entrepreneurship, was vital.

“Auckland could be like San Francisco – a hub of innovation and entrepreneurial activity,” he said.

“The connections and collaborations between our universities and businesses are already producing first-class results and promise more to come.

“We must nurture them and give them, literally, room to move, so they can develop new products and services we can export to the world.”

I think it’s good that the link between clever transport investment and economic development is being grasped by Len Brown. While the railway lines themselves won’t magically solve all of Auckland’s problems, if they’re coupled with policies that promote a concentration of economic activity in areas like the CBD then I think the benefits are potentially significant.

Looking at this link between transport and economic development, there was an interesting article in the NZ Herald a week or so ago that I was reminded of. The article tries to answer the question of “why, if New Zealand has such business friendly policies, do we struggle so much in terms of our economic development?” The answers to this question are quite interesting:

Last year economist Phillip McCann wrote a paper about our productivity paradox: the mystery of “why a country that seems so close to best practice in most of the policies that are regarded as the key drivers of growth is nevertheless just an average performer”.

How can it be that we’re the second best country in the world for doing business but in terms of GDP per capita we are falling behind countries like Slovenia, Korea and Taiwan?

McCann said existing New Zealand debates tend to focus too much on internal explanations like regulation, taxation and institutions – more lint picking – but his theory is that “economic geography” is to blame. Yes, New Zealand has always been in the wopwops of the world, but the world has changed.

Now we are being squeezed out by growth in super-regions we aren’t part of, global cities we don’t have and the influence of multinationals who can’t even be arsed having an office here. Face it, we’re not part of the “in” clique. Incidentally, could someone please invite the New York Times’ rockstar economics writer Tom Friedman down here to explain why if “The World is Flat” as he claims, we are falling off the bottom?

I wonder whether the same theory applies, at a lesser scale of course, to analysing the constraints on Auckland’s economic development. Poor public transport investment over the past 60 years has reduced the comparative attractiveness of locating your business in the CBD and therefore encouraged a highly dispersed pattern of employment. But with businesses all relatively isolated from each other around Auckland, the connections and interaction between them has been reduced, compared to say what might be going on in Midtown Manhattan (obviously an extreme example).

It’s entirely likely, in my opinion, that this has had a negative effect on Auckland’s economic potential over a very long time. Perhaps the biggest actual long term benefits of projects like the CBD Rail Tunnel will be increasing the attractiveness of the CBD for businesses to locate – and the longer-term agglomeration benefits that will result from that. Certainly, analysis of large rail projects in places like London indicates that the biggest benefits are these “agglomeration benefits”.

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  1. Imagine how different the speech would’ve sounded had Banks got in. No challenges to the Minister of Roads to step up and do something material to help grow the national economy, instead of National’s continued tinkering around the edges as exampled in the McCann piece you quote above. No inclusive examples of South and North (well, maybe North), etc. No vision, no spine, just Joyce’s hand firmly up the proverbial, making Banks’ lips move to National’s tune.

    Now all we need is for Joyce and B’linglish to be replaced by ministers who come from urban Auckland electorates and whose constituents make use of rail on a daily basis.

  2. Size is a also a key in the economic stakes… There seems to be an innovation threshold at about 3 million in a city, Melbourne and Sydney are likely to have far more innovation than us because they have already passed this threshold, therefore Auckland’s growth is to be welcomed as large cities (developed well) can be sustainable cities with an economic edge…

  3. “It’s entirely likely, in my opinion, that this has had a negative effect on Auckland’s economic potential over a very long time.”

    One of Auckland’s issues is that it isn’t export oriented. With the exception of niche markets like film production and yacht building, NZ’s exports are still largely generated by rural NZ… butter, wool, wine etc. Instead of being an international city, Auckland is really just a large national city that is the back office to the rest of NZ. If NZ is to succeed economically then it has to move away from being a supplier of commodity agricultural products to a supplier of added value products and services and Auckland needs to step up if this is to be achieved. But I have a hard time seeing where Auckland can be competitive in international markets.

    None of which is particularly transport relevant… London is an international export-oriented city with great public transport, while Los Angeles is the same with hardly a bus or a train in sight.

    As for Brown’s speech… There are plenty of ideas but I don’t think he has the ability to deliver. He’s probably talking $8billion worth of rail projects there, or about $30k per household in Auckland. Over 10 years that’s a hefty $3k per household per annum. Over more than 10 years, then it isn’t his to promise. I presume that he is going to promise the earth then blame the government for not paying for his promises. If so, it’ll be interesting to find out where the public allocates blame.

    1. I do wonder sometimes if some correspondents actually read this blog… no one here is proposing building the rail network on rates alone, Obi. If there is one thread here it is the need for Auckland to get a portion of the NATIONAL transport spend redirected from endless motorway building to PT investment. And not by some kind of grab but rather to simply implement a system where cost/benefit analyses are conducted equally across all modes. Also not by beggaring the rest of the country just by spending an appropriate proportion of the national take.

      1. I never mentioned rates (although I did mention “households” which might have been confusing). Apart from Waterview and the Upper Harbour motorway, both of which are supported by Brown, the only motorway construction involves national routes or regional routes elsewhere in the country. The government isn’t going to cancel the Kapiti Expressway (benefiting Wellington and Kapiti) and spend the money in Auckland. The government isn’t going to cancel Puhoi to Wellsford (benefiting mainly Northland, even if you think the benefits are weak) and spend the money in Auckland. The government isn’t going to cancel Waterview or North Harbour since the new mayor supports them.

        There isn’t a clear case that Aucklanders subsidise transport in the rest of the country and receive little infrastructure spending in return. And we don’t actually have a federal system, so it is mostly irrelevant. Or do you want the provinces arguing that social or law enforcement spending is higher per capita in Auckland and should be cut back? Or that the large number of Police allocated to Auckland means that Auckland shouldn’t be entitled to any transport spending to compensate?

        So the money has to come from somewhere. It isn’t going to be coming from the rest of the country. So whether Auckland-specific fuel taxes, or rates, or debt, Aucklanders are going to be the ones paying for Auckland superprojects.

    2. “He’s probably talking $8billion worth of rail projects there, or about $30k per household in Auckland. Over 10 years that’s a hefty $3k per household per annum. Over more than 10 years, then it isn’t his to promise.”

      That is a big load of rubbish and you know it, going by your argument you would only be able to buy a house if you had saved up the money to pay for it in cash. The reality is we don’t just build infrastructure for now but for the future as well and Future generations will get exceptional benefit from the fact it is built just like we get benefit from the infrastructure that already exists. The costs should not just fall on the people who are living in the city now but over a longer time to those who will also benefit from it, the same principle happens with toll roads. Further to this rates and taxes are not just charged to households but to businesses, increased economic activity that results and benefits from building the infrastructure should also help pay towards it.

      1. You’d normally take on debt to finance projects that returned an income or at least resulted in a saving in expenditure. Unfortunately rail almost certainly isn’t going to return an income but require an ongoing subsidy. The more passengers, the more subsidies required. So a multi-billion dollar debt-financed rail system is going to require interest, depreciation, and subsidies. That might make sense if there were multi-billion dollar benefits to the economy. But I suspect that is only true for the CBD tunnel… the airport line doesn’t stack up as far as I can see, and even Admin thinks a harbour tunnel and rail link to Albany is a waste of money.

        1. The more passengers, the more subsidies required.

          huh? That’s bass-ackwards maths. The more passengers the less subsidies required, as there are more passengers contributing to the fare-box side of cost recovery.
          Using purely hypothetical numbers, let’s say it costs $250 to run a train for an hour. That’s paying for the driver, the staff, the maintenance, the depreciation on capital equipment, and interest on the loan that National so generously gave us with which to buy the new rolling stock. That train can carry no passengers, one passenger, or 500 (or more) passengers. If it’s got no passengers, the subsidy per hour must be the full $250. If it has 250 passengers, each paying $1 and each travelling for a full hour, the subsidy required is zero. If it has 500 passengers, each travelling for an hour and paying $1, that’s another hour of operation that doesn’t require subsidisation, even if the train is empty, on top of paying the full cost of that one-hour journey. The more passengers there are, the more hours of operation there are that get funded from the fare-box before it’s necessary to get subsidies. It’s more efficient to run a heavily-used public transport network than one that’s barely used at all, not less.

        2. > The more passengers, the more subsidies required.

          In obi’s defense, he was probably referring (despite his phrasing) more to the increased costs of running a larger system (more trains running overall, more track and stations and structures to maintain) that would be a logical increase if we built new lines.

          However, his argument fails to a) include the fact that a larger system could (if planned and operated well) be “more than the sum of its parts” – i.e. more passengers because it is more useful, thus lower per-passenger-kilometer subsidies) and b) he ignores the fact that the subsidy argument also applies for the alternatives: build more roads (see my other post below).

        3. “The more passengers the less subsidies required, as there are more passengers contributing to the fare-box side of cost recovery.”

          I forget what the existing subsidy per passenger is and I’m too lazy to look. Say it is 40%. Therefore if by some miracle you quadruple patronage then to maintain the total subsidy amount then you’d need to reduce the subsidy to 10%. Chances of that happening?… Probably more chance of aliens arriving and giving us transporter beams to get from place to place.

        4. *sigh*
          If you quadruple patronage you’ll probably need less subsidy overall because the passengers on crowded services will be paying so much more than the cost of operation and that surplus gets applied to loss-making services. If the increase occurs on off-peak services, the subsidy required for those services decreases on top of the surplus generated by peak-time services.

          Unless you believe that adding passengers requires adding rolling stock, which will not be the case for a lot of years, it doesn’t hold that more passengers means more subsidies.

          This is the real problem with privatised (or even SOE) operation of public transport. The need to make a profit ensures that someone, somewhere, has to pay more than the cost of operation, be it through subsidy or through profit-maximising pricing.

        5. Matt… The proposal isn’t to increase patronage on the existing system of tracks and carriages, but to dramatically increase the size of the system. That means more capital spending on track, more purchases of trains, more electricity, and more staff. That will require an increasing in funding and we’ve already determined it isn’t all coming from ticket sales.

        6. obi, still not seeing why you object so strenuously to subsidisation of public transport but are happy to swallow the invisible subsidisation of roads. Expansion of the rail network will be expensive, sure, but it’s a capital expense with a very, very long life. The new trains will be much cheaper to run, especially as oil prices increase, and will carry more passengers which improves their economic operating costs even further.

        7. “Unfortunately rail almost certainly isn’t going to return an income but require an ongoing subsidy. The more passengers, the more subsidies required.”
          Increasing patronage with the same number of trains running decreases the subsidies required, with new lines it will also benefit the existing ones as new destinations are opened up so it isn’t only the new line that needs to be counted. Also the more passengers on trains the less money is needed to build and upgrade roads.

    3. Here’s one export market where Auckland competes: software. We could’ve had an engineering centre from Motorola, too, were it not for prolonged under-investment in appropriate technical education.
      Here’s another, and one where infrastructure such as public transport matters a lot: education. We’re competing with Australia for the export education market, and poor transport options don’t help our attractiveness. If the cost of study is about the same, students and their families will look at other criteria.

      Auckland is NZ’s air transport centre. More people work at and around Auckland Airport than study at the Universities of Canterbury or Waikato. Good transport options for employees make it easier for people who live in other parts of Auckland to work in the area. Likewise, getting people out of their cars makes it easier for goods passing through the airport to be transported by road.

      A big, big problem is that so few of our politicians can see NZ as anything other than a farming nation. With so many of the National Party’s MPs coming from and/or representing rural electorates, the unwillingness to push agendas that really further the lot of non-primary producers is understandable, but no less acceptable or helpful to the nation’s future economic well-being. Labour wasn’t stellar in this area, but at least they tried to get some R&D going. National considered it more important to cut taxes than fund R&D.

  4. One of the saddest things I’ve ever read was the Lonely Planet characterisation of Auckland as OK, but “New Zealanders don’t really do cities”. Yet most New Zealanders are not engaged in bungy jumping, jet boating, sheep shearing, guiding in the national parks or even working on stupid films about Hobbits. They live in urban areas, and live an urban lifestyle of largely mundane urban jobs doing largely mundane urban social activities like travelling to and from work and going to bars, clubs, pubs and restaurants. A full third of us live in the city of Auckland, God knows the percentage if you include the Tron in the catchment.

    In our obsession to “catch up with Australia” the exclusive focus is on the wage gap, without pausing to consider that Melbourne, Sydney and Brisbane may also just be really attractive places for young and/or ambitious people to live. The constant provincial fear & loathing of Auckland, the constant desire of Wellington and the rest to control the northern behemouth have real world economic and social consequences, one of which is the constant drain of our people who seek a more vibrant urban experience in Australia and beyond.

    Auckland is unique; it is the only New Zealand city in the known universe. It is the only place New Zealanders can express themselves in their own, unique urban environment. We need to grasp the importance of that fact and treasure it far, far more than we do.

  5. Contrary to perception, New Zealand is a VERY urbanised country (urbanised meaning people living in settlements larger than 5,000 people). This is due to the fact that it was settled so late in terms of Western civilization, so the “little farms & hamlets everywhere” was, in terms of actual POPULATION, always more a myth here than a reality.

    Some very interesting stats I read in the “New Zealand Historical Atlas” (David Bateman).

  6. > You’d normally take on debt to finance projects that returned an income or at least resulted in a saving in
    > expenditure. Unfortunately rail almost certainly isn’t going to return an income but require an ongoing subsidy.

    Obi, do you think the Waterview tunnel, the SH20 motorway, Puhoi, all the others – do you think those create money for our government? These are massive subsidies, in fincancing their construction and in their ongoing maintenance. Since our government is already overspending on their budget, ALL motorway projects could be argued to be debt too. Don’t single out rail like the road lobby does.

    > the airport line doesn’t stack up as far as I can see

    I’d challenge that, especially when you realise it also serves as a suburban line to Onehunga, Mangere, and a large industrial agglomeration.

    > and even Admin thinks a harbour tunnel and rail link to Albany is a waste of money.

    But only because the Northern Busway is already a sunk cost and an asset that will be doing good service for the next decade or two – doesn’t mean we should discount rail to the shore, ESPECIALLY if the powers that be are set on a second harbour crossing. To not include rail provision on that would be another of those lost opportunities we seem to be way too good at.

    1. “do you think the Waterview tunnel, the SH20 motorway, Puhoi, all the others – do you think those create money for our government”

      In general it is accepted that it is fair that roading is paid for out of petrol taxes. There is an expectation that there will continue to be a revenue stream from those petrol taxes. The rail analogy would be the government building a motorway and then subsidising petrol for all the motorists driving on it, including the new motorists you’ve just induced. If that was the case then you’d hope the government would budget for the continued cost of petrol subsidies as well as the capital cost of the road.

      “ESPECIALLY if the powers that be are set on a second harbour crossing”

      I think people assume that a road and rail harbour tunnel are connected, and that if you build one then you automatically tack on the other. They’re not connected. You can build two tunnels at different times taking different routes. So if the powers that be are set on a rail tunnel then they’re pretty well committed to Albany since there isn’t really anywhere else it can go. And if they’re set on a road tunnel then there is no reason to think that has any impact on rail.

      1. “In general it is accepted that it is fair that roading is paid for out of petrol taxes.”

        Is it? Even if it is, what about the secondary costs that are ignored in the petrol tax, from crash costs (the crash and social costs of rail accidents are puny compared to road) to the ecological costs?

        Also, are the capital investment costs for projects like Puhoi or Waterview is being paid out of petrol taxes?

        Further, rail users also pay (ticket prices). You then again create a new straw man argument – if the government paid motorists a direct fuel subsidy as you suggest, then increased driving would increase costs. With rail, finances are DOUBLY improved with more passengers, because as has been explained above, the running costs more or less stay the same with more passengers (i.e. your per-person subsidies reduce) AND you get more fare income.

        In the end, comparing rail and road subsidies will always stay a massive guessing and ideology game – but please don’t insult us with the old “rail needs subsidies, roads don’t” trope which you exemplified with your throwaway sentence of saying that rail will need ongoing subsidies.

      2. Yeah, but obi, road taxes don’t cover the full costs of roads. There’s transfer from the Consolidated Fund. So if road doesn’t pay its way in full, and we accept that rail use has benefits for road users, why is it so unacceptable for rail to be treated in the same manner as roads when it comes to funding?
        Unlike road users, rail users pay directly for the service they receive. RUC purchasers also pay directly, but RUC doesn’t capture the full costs. Car drivers are propping up trucking companies, as are taxpayers generally, and ratepayers too in the case of local roads.

      3. Ingolfson… I’m not interested in comparing road and rail subsidies, any more than I’m interested in comparing road and pharmaceutical subsidies or rail and tertiary education subsidies. The only reason I mentioned roads was because you asked me to comment: “Obi, do you think the Waterview tunnel, the SH20 motorway, Puhoi, all the others – do you think those create money for our government?”

        But the fact remains that an expansion in Auckland’s rail system will require initial capital spending AND ongoing subsidy and that should be budgeted for. You don’t get around this need by pointing out that other things also need subsidy.

        1. You don’t get around this need by pointing out that other things also need subsidy.

          No, you don’t, but you do justify treating funding and the cases for expansion in an equitable manner. Road users pay road taxes. Public transport users pay fares. The difference between income and expenditure is a subsidy. The subsidies for private road users are higher nominally than the subsidies for public transport users, even if the per-user subsidy for road is lower than for rail due to the much higher numbers of users (doesn’t that just poo all over your assertions about increasing users meaning increasing subsidies?).

          You keep on, and on, and on, about subsidies for public transport, and how awful it is that they exist, without ever acknowledging that there are subsidies paid for road users in terms of the transfer from the Consolidated Fund. If we priced in the externalities of congestion (Hi, Scott), pollution, equipping and remunerating the Fire Service for its rescue function, etc, public transport would win and private transport would lose. In a huge way. Look at the massive benefits to accrue to private road users from the use of trains and buses. They’re enormous.

          The objection people have to continually hearing about how there are subsidies on public transport is that it’s rarely accompanied by a discussion of the invisible subsidisation that occurs for road use. Joyce gets away, in part, with his nonsense about the cost of rail because nobody ever challenges him on the cost of road. It’s accepted that money comes out of the Consolidated Fund (at least by anyone who knows the truth about income vs expenditure on roading) to pay for roads. And that the ROSN projects simply increase that transfer by a large amount.

        2. But Obi, and I struggle to see how you so stubbornly ignore this, what we are saying is that the money is there at the NZTA when and if the political decision is made to not blow it all on motorway building and maintaining. SO, to return to your first point, there is no need to hit households with your fanciful 30K or whatever it was….. To argue that this is only road money is A. already not true, and B. only reflecting a policy bias, that can and should be changed.

          So the real question is not ‘can we afford to invest in other modes’ but rather ‘is it a good idea to invest in other modes’. Which surely this whole blog is entirely about, and clearly yes, and for lots of reasons; environment, social, and economic. Not the least of which is THAT IT IS CLEARLY THE BEST WAY TO KEEP THE EXTENSIVE ROAD SYSTEM WE ALREADY HAVE FUNCTIONING WELL.

          Sorry for the shouting, but to put it bluntly; as a driver I’m really keen that all those people that would really rather have a real alternative to the costs and responsibilities of constant car use could get out of my way and on a train, and where I can I’ll join them. It is also clear that seen holistically this is a cheaper way to run a successful city, economy, and society…

  7. The more I hear Len pushing North Shore rail, the more it starts to sound like pandering to the Northern electorate.

    The busway has much more capacity in it before we start talking rail (heavy or light) conversion. Far better to look at transport options to the east.

    But then they probably didn’t vote for Len?

    1. “The more I hear Len pushing North Shore rail, the more it starts to sound like pandering to the Northern electorate”

      One of the reasons the Thatcher government pulled the plug on the old GLC was because they were increasing Underground subsidies and one of the Kent-side constituent councils was in open revolt since the Tube didn’t run out there. Brown wants people to vote for him next time, and realises that North Shore people aren’t going to want to help pay for rail if they don’t have rail to the Shore.

  8. Unfortunately the line “but we just built you a brand new busway which is doing swimmingly and has plenty of room left for growth” probably won’t win any votes. I hope he has a 20+ year timeframe on the Shore line.

    I agree with Brown 90%, subject to one addition and putting a timeframe on things, i.e:

    Short term (start building in next 5 years):
    -CBD rail tunnel
    -ARTA’s SW expansion (i.e. full airport loop plus Avondale to Onehunga)

    Medium term (5 years after that):
    -Outer eastern line (new entry)

    Long term (5 years after that):
    -North Shore RTN upgrade to rail

  9. That seems like the right priorities Nick.

    The thing is, you don’t hear talking (from the beaurecrats or the constituants) about rapid transport to the SW like you do other areas of the city, including North. Its mentioned, but nowhere near as loud.

    So if (relatively speaking) few are pushing for it, it isn’t going to be high on the priority list.

    1. Rail to the SW is the airport line and that is getting quite a bit of coverage, the problem is it is perceived as just a line to the airport and not one that covers a large region of the city.

  10. Sorry – I meant East (and SE).

    People aren’t as vocal about that, when it would seem far more of a priority (at this point in time) than rail to the North.

    1. Yes, I agree with you about priority, and would probably rate it as a higher priority than extension toward the airport, truth be told. But nobody’s really suggesting it in public, never mind talking about it, so there’s no public awareness. People just don’t realise that the transport situation out to the SE is so thoroughly dire (I didn’t until a few months ago, mostly because I just didn’t consider it, even though I’ve biked out through Pakuranga/Botany a lot and been to the Travel Doctor on T.I. Drive), and in the absence of that awareness there’s no interest in talking about improving things.

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