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Excellent Returns From Investment In Roads

Media statement
August 25th, 2005

Excellent financial and indirect returns from investment in roads

The econometric modelling work in the Allen Report - Benefits from Investment in New Zealand's Road Infrastructure - finds the degree of connectedness provided by our major urban road networks is lower than in comparable countries, yet the potential net benefits from investing far more in them are highly attractive.

The study authored by Dr Vince FitzGerald* in association with New Zealand consultancy Infometrics was commissioned by the AA with backing from the Employers & Manufacturers Association (Northern), and the Auckland Chamber of Commerce.

"The benefits to everybody from investing far more in our roads amounts to a long list," said Alasdair Thompson, chief executive of EMA.

"The gains would be like those achieved in Australia including lower vehicle operating costs, less time spent in travel, better safety with fewer accidents and less accident damage, better environmental outcomes, and higher work productivity.

"The benefits flowing on indirectly would be evident not only in lower costs for moving freight such as groceries, and less costs for passenger transport, but also as they translate into higher incomes and better public health.

"The report notes the value of our roads declined as a proportion of GDP by over 19 per cent in the six years between 1993 and 1999, and has since increased by around nine per cent.

"At the same time over the past decade the total kilometres travelled by both passenger vehicles increased by 113 per cent with distances travelled by commercial vehicles increasing 122 per cent.

"So we have a lot of catch up to attend to.

"One of the many important conclusions in the study is that despite recent increases in our road funding levels, our annual spend on roads is still below the OECD average of 1.3 per cent of GDP.

"This indicates if we don't accelerate our commitment to road construction, our standards of education and health will continue to slip backwards compared to other OECD countries.

"The Allen Report is especially valuable as it focuses on four diverse roading packages and finds excellent cost/benefit gains available for each of them. They are: Auckland's western ring road network; Tauranga's strategic roading network package; an aggregated group of 402 rural passing lane projects; and the Wellington regional land transport package.

"The study will provide an excellent reference resource for many years. We're pleased to have assisted with it."


*Vince FitzGerald, B.Econ. PhD (Harvard), chairman of the Allen Consulting Group, has previously headed up two of Australia's Government departments (Trade in 1986-87, and Employment, Education and Training in 1987-89). He is author of several studies on the Australian economy including on saving, finance, and business and industry. He was an advisor to the Royal Thai Government in 2002-03, and has directed numerous studies in the financial sector, competition policy, banking and finance, and access to, and the pricing of utilities.

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