Greens’ rail plan on the wrong track
Big outlays on infrastructure to rebuild the economy are a bad idea because it takes several years for any infrastructure spending to pick up speed. The Greens want to cover the country with electric railways. It will take several years to work out where they might go, what is precisely wanted, let tenders, for contractors to acquire land and then a few years from now there are workers hired to new jobs in the construction industry.
Infrastructure projects have a terrible history of cost overruns and benefit shortfalls. The average cost overrun for rail projects is 45 per cent; costs overrun in nine out of 10 projects. Benefits from rail projects fall short of projections by an average of 50 per cent.
We can’t afford to waste billions of dollars of taxpayers’ money on infrastructure cost overruns after the Government has borrowed far too much already that must be paid back one day.
The industries doing worst because of Covid-19 are in the in-person services sectors: travel, tourism, education exports, entertainment, cafes, pubs and restaurants.
Do the workers hired for an infrastructure project seem to come from the same part of the labour market skill domain as workers in travel, tourism, education and retail?
Those who work in outdoor hard-labour jobs and those who work in indoor personal service jobs are cut from a different cloth.
The Government appears to want to throw money away big time at the opposite end of the economy to where most of the 20 per cent unemployment is right now.
The construction and engineering industries are back to work at alert level 3 pretty much as before Covid-19 but with extra health and safety rules about social distancing. Most workers who were laid off in these industries during alert level 4 will be quickly recalled to their old jobs.
International travel and tourism employment are pretty much dead until next year when the borders reopen. There will be life support from more New Zealanders holidaying at home. One-half of foreign tourists are from Australia so reopening that border soon is another source of hope.
Entertainment, cafes, restaurants, pubs and retailers are cash-strapped after the lockdown. They will not benefit from infrastructure spending in a few years. They need their customers back now.
Many workers who were laid off will not be recalled to their jobs because their employers have failed or have fewer customers. That is where most of the 10 per cent-plus unemployment rate at year’s end will be.
When the hundreds of thousands of unemployed travel, tourism and retail sector workers look for new jobs this winter, infrastructure projects that don’t start hiring until a few years from now are of no use to them.
What the Government can do now is change incentives for businesses. Deregulation and a lower company tax rate are an immediate boost to the ability to stay in business. We could close to halve the company tax rate by abolishing the regional growth fund and corporate welfare.