Ex­tra high­way costs ‘in­fla­tion’

Central Leader - - FRONT PAGE - TOM DILLANE

The Green Party has ques­tioned the fi­nan­cial vi­a­bil­ity of Auck­land’s East West link high­way, say­ing the Gov­ern­ment’s own busi­ness case has costs out­weigh­ing ben­e­fits.

Green Party trans­port spokesper­son Julie Anne Gen­ter says a dra­matic jump of $200-800 mil­lion in es­ti­mated cost at the be­gin­ning of 2016 casts doubts over the project’s le­git­i­macy.

‘‘I think the peo­ple of Auck­land would be ap­palled if they re­alised just how lit­tle proper anal­y­sis has gone into this project,’’ Gen­ter said.

‘‘I think they’ve gone for a much more ex­pen­sive op­tion be­cause of po­lit­i­cal pres­sure to be seen to be de­liv­er­ing an ex­press­way and it’s turned out to be far more costly than they ini­tially thought it would be,’’ Gen­ter said.

The New Zealand Trans­port Agency (NZTA) pro­duced a de­tailed busi­ness case for the East West Link on De­cem­ber 23, 2015, es­ti­mat­ing to­tal cap­i­tal costs for the project at $1.05 bil­lion.

One month later, Jan­uary 27, 2016, the Gov­ern­ment re­leased a me­dia state­ment an­nounc­ing it was fast-track­ing the project at a to­tal es­ti­mated cost of $1.25 bil­lion to $1.85 bil­lion.

Both Trans­port Min­is­ter Si­mon Bridges and NZTA Auck­land high­way man­ager Brett Glid­don said the ini­tial cost es­ti­mate of $1.05 bil­lion was an ‘‘un­esca­lated cost’’.

‘‘Ad­just­ing for in­fla­tion, the es­ti­mated project cost equates to an ‘es­ca­lated cost’ range of be­tween $1.25 bil­lion and $1.85 bil­lion, so the cost hasn’t changed,’’ Glid­don said.

How­ever, for­mer chief econ- omist at the Com­merce Com­mis­sion Michael Pick­ford said it was strange that in­fla­tion could have such an ef­fect in such a short time frame.

‘‘A char­ac­ter­is­tic of the cur­rent econ­omy, for some years, is the very, very low rates of in­fla­tion in ev­ery­thing. So, it seems im­plau­si­ble for them to sug­gest such a large cost in­crease based on in­fla­tion when there hasn’t been any,’’ Pick­ford said.

On page 82 of the NZTA busi­ness case, it says ‘‘cap­i­tal costs would need to in­crease by some $800 mil­lion for the BCR [ben­e­fit­cost ra­tio] to re­duce be­low zero’’.

A ben­e­fit-cost ra­tio be­low zero would mean the real-life ben­e­fits of the East West link, such as time-sav­ing for mo­torists and fewer road ac­ci­dents, would not be greater than its cost to build.


Si­mon Bridges, John Key and Len Brown at the sod turn­ing for the East West Link in Septem­ber 2016.

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