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Brash - Electricity Engineers Association Speech

Don Brash
Leader of the National Party

17 June 2005

Opening Address
to the Electricity Engineers Association
Annual Conference
Auckland

Ladies and Gentlemen, thank you for inviting me here today to open the 76th Electricity Engineers Association Annual Conference. I wish you all the best for the rest of your conference.

Almost exactly a month ago, Michael Cullen delivered his sixth budget as Minister of Finance. In that budget, he failed to deliver a single thing that will improve the long-term expansion of a key component of any future growth, our infrastructure.

National is determined to eliminate the gap between our living standards and those in Australia. The key to achieving this goal is increasing our productivity growth.

But unless we deal with the capacity constraints imposed on our economy by our neglected infrastructure, we will never achieve the growth rates we require.

That's why today I intend to talk not just about the development of the electricity sector, but also about a broader picture of our vision for improving New Zealand's infrastructure generally.

The barriers to the planning and development of, and investment in, infrastructure must be dealt with, and they must be dealt with quickly. We simply cannot afford to continue allowing vital networks to stagnate, developmentally years behind the rest of the economy.

Having goods sitting in traffic on the Southern motorway is simply not acceptable. Industry shut down because of a power blackout is simply not acceptable.

National is therefore committed to the rapid improvement and continued development of New Zealand's infrastructure. We are determined to clear the blockages holding our economy back.

And fundamental to this is an improvement in our electricity infrastructure. A secure supply of electricity is vital for ensuring the sustained growth of the New Zealand economy. Reliability of supply is a crucial factor in many investment decisions, and following the two major winter shortages of the last five years New Zealand currently cannot offer that reliability.

Over the past decade, electricity consumption has grown by more than 20%. Even if there are significant gains made in energy efficiency, we can be certain that demand will continue to grow strongly as our economy expands.

So we cannot depend only on efficiency gains to cover our future electricity needs, whatever the Labour Government may think. We must deal with the barriers that stand in the way of increased investment in our electricity infrastructure.

National believes we need to invest in new generation. We also believe we need to develop our national grid to ensure it can meet our future load growth.

We believe New Zealand needs to clear the way for a multitude of generation options, rather than simply picking one method over the rest. This means a combination of investment in hydro and geothermal generation, a growth in the number of wind generation projects, and new coal and gas generation.

National is serious about this challenge. That's why we have announced several key measures to improve electricity supply.

National intends to allow electricity lines companies to invest in generation, with no restrictions on the amount of generation they may own. The risk is that if the current restrictions continue, lines companies will either look to invest in generation offshore, or will choose to invest in non-core business in New Zealand.

It simply makes good sense to allow lines companies to own generation. It will open up more opportunities for those companies that already have a major investment in the sector to add to the capacity of the New Zealand generation base.

We have also been carefully considering the issue of electricity lines companies being allowed into electricity retailing. It is an area that we are putting a lot of effort into, and we intend to talk closely with the sector and put serious policy work in place once we are in Government.

National has made it clear that on becoming the Government we will reverse Labour's planned carbon tax. New Zealand businesses should not have to face the implications of an unnecessary tax that undermines their international competitiveness. It is clear that Labour's carbon tax will discourage investment in electricity generation.

We will review our obligations under the Kyoto protocol to ensure New Zealand is not disadvantaged. Our CO2 emissions are half those of Australia and the United States on a per capita basis, yet our businesses are to be shackled with restrictions that our partners will not face.

National also intends to restructure the Electricity Commission. We believe the current structure, with a multitude of hats being worn by the Commission, is flawed and could lead to major problems in the future. The Commission should not have been placed in the impossible position of being an owner of generating capacity, a regulator of the industry and an adviser to government. There are simply too many conflicting roles.

New Zealand's electricity sector is not the only constrained core infrastructure in this country. The roading network is both restraining our growth potential and exacting a high human cost.

The impact of the poor state of our roading network is startling. In human terms, New Zealand's road fatalities per 100 million kilometres driven are 20% higher than in Australia, and 50% higher than in the United Kingdom. In economic terms, various estimates of the impact of the state of our roads have been made, but virtually all commentators accept that congestion in the Auckland network alone costs somewhere in the region of $1 billion per year. If we fail to deal with this situation, we will fail to reach our growth potential.

Earlier this year, I announced National's plan to fix New Zealand's roads. That plan includes a commitment to gradually put every cent collected in petrol taxes into the National Land Transport Fund, so that by the end of the second term of a National Government all of the $600 million per annum which has been going into the consolidated fund until now will be moved into road construction.

That is no small commitment. It amounts to an extra $1.8 billion more than Labour has committed over the next six years, and some $3.5 billion extra over nine years.

But extra money from the public purse is only part of the answer. National does not have the ideological hang-ups that the Labour Party and its allies the Greens have towards private investment in public infrastructure. We believe that tolls and private sector involvement are a way to accelerate roading development still further.

For that reason, we intend to amend the Land Transport Management Act to remove the onerous restrictions it places on private sector involvement in the roading network, and to amend the obligations it imposes on Transit New Zealand to consult with iwi.

We also intend to streamline the bloated bureaucracy in the transport sector. Within a year of being elected, we will have a land transport management structure capable of carrying out more sophisticated analysis of costs and benefits, and with wider funding options to move projects from the drawing board to construction in no more than 12 months.

And we intend to start this streamlining of the decision-making process in Auckland. We will establish a stand-alone, single agency, called Transport Auckland, to oversee all parts of the public transport system.

Labour's new Building Act is also creating new problems for the roading sector. It has added to the cost, and the bureaucracy, involved in getting consent for new roads. Where once Transit required one consent to build a road, they now require dozens.

Take for example the extension of State Highway 20 from Hillsborough Rd to Richardson St in Auckland. Transit has had to withdraw its building consent application for this project, and instead apply for 39 separate consents. These building consents are in addition to the 17 resource consents granted under the RMA.

National will amend the Building Act to ensure we can get on and efficiently build much-needed roads in a timely manner.

There is one major, over-arching issue that constrains not just our electricity infrastructure, and not just our roading infrastructure, but the development of virtually all much-needed infrastructure. That blockage is the Resource Management Act 1991.

The Resource Management Act has become a bureaucratic monster that is stifling growth and contributing to an infrastructure crisis. We have seen major power projects, such as Project Aqua, shelved because of the RMA. There have been cases where getting consent for just one road has taken seven to eight years.

Make no mistake, National is committed to the core principles of the RMA. We believe its focus on an integrated approach to resource management and its core principle of sustainability are admirable. National cares about the environment. But the Act needs substantial amendment if the infrastructure and growth needs of the economy are to be met.

National will therefore introduce major amendments to the RMA within three months of becoming the Government, and we intend that bill to be passed into law within nine months of becoming the Government.

The amendments will be substantial. National's main aim will be to speed up the consent process. No fully notified consent should take longer than 60 working days to process. We believe a policy of "a late consent is a free consent" will focus local councils' minds to ensure the vast, vast majority of consents are processed on time.

National also intends to cut the cost of the consent process. Consents can be almost infinitely held up and costs increased through endless requests for more information from councils. Councils often have little appreciation of the cost of getting additional reports, especially from consultants. Therefore, National is proposing that applicants should have the right to refuse requests for further information, and insist that consent decisions be made on the basis of the information available.

A major problem at present is vexatious and frivolous objections. Some groups or individuals are serial objectors, and the current rules allow anybody to object to anything, anywhere.

The RMA as it stands simply allows minority interests to hold the majority to ransom. National intends to reintroduce "standing", where a person or group must display a legitimate interest in order to object.

We will give courts and councils wider powers to reject vexatious and frivolous objections, and to award costs to applicants where such objectors have unreasonably caused expense.

We will also abolish the Labour Government's outrageous $2 million legal aid fund for environmental objectors.

We will allow direct referral of major resource applications to the Environment Court. It is simply a complete waste of time to have major applications go through a council hearing when everyone involved knows the issue will end up in the Environment Court. It is an unnecessary step that simply delays decisions.

National will also introduce national standards for things such as power transmission, forestry harvesting, subdivision, and telecommunications. In a country as small as New Zealand, it is simply ridiculous that we have 72 different sets of standards for major resource management issues.

It is also necessary to reduce the complexity of district and regional plans. It is a major issue that after 14 years, only 23 of the 72 district councils have fully operative plans. Therefore, our amendment will require councils to have fully operational plans within one year of the amended Act being passed.

National is serious about amending the Resource Management Act. It is an impediment to the development of our infrastructure, and it is reducing the ability of the economy to grow.

National is also prepared to rethink the way we look at funding infrastructure investment. As you may be aware, we have made it clear that we would be prepared to borrow for expenditure on capital assets. Borrowing for major infrastructure assets is an entirely prudent thing to do as long as the long-term returns from the asset are higher than the cost of the debt.

Simply put, borrowing to invest in assets where the prospective economic returns outweigh the costs just makes good sense. It's good business.

It's like extending the mortgage to add an extra room.

What is completely wrong is borrowing for consumption. The borrow, spend and hope policies of New Zealand's past were a dismal failure, and I can promise you today that I will never allow New Zealand to return to the failed policies of the 1970s.

Dr Cullen remains afraid to allow the Crown to borrow more to spend on roads and energy. He believes New Zealand's gross debt to GDP ratio would be adversely affected. He is looking at the wrong measure.

The real measure we should be using here is net worth to GDP. And debt-funded infrastructure will have a positive impact on the net worth of the Crown. That's because the benefit exceeds the cost of capital.

If we are serious about faster growth in the future and narrowing the gap between our incomes and those in Australia, we need to focus on the expansion of our infrastructure. It doesn't make any sense to wait, and wait, and wait until we can afford it out of current revenue. No business would do that. That's why we need to accept that debt funding of infrastructure may well be a necessary and desirable thing to do.

We're cautious. We're not going to go crazy. But our infrastructure is in a parlous state because we are continuing to ignore it in favour of continued debt reduction.

It was right and prudent previously to focus heavily on debt reduction because, after decades of mismanagement, we had to get our house in order. National played a big part in getting our fiscal situation under control. But now we are faced with different problems - and Michael Cullen hasn't realised it yet. He is stuck in the nineties! We face massive capacity constraints, and unless we overcome those constraints we cannot move forward and achieve the levels of productivity and economic growth that are necessary to lift the living standards of New Zealanders back to the level enjoyed by Australians and the citizens of other developed countries.

We are committed to doing that, and see the development of our infrastructure as a key part of realising that goal. The package of reforms I have outlined here today is a core part of our economic vision.

And they are changes that need to be made quickly. That is why I have committed to the most important of these changes as quickly as is legislatively possible. There will be new resource management rules in place within nine months of National being elected. There will be increased road funding flowing through within a year of National being elected.

National is serious about the issues that face infrastructure investment and development. That's why we have outlined a serious, coherent response.

Labour may talk about the goal of returning to the top half of the OECD, but only National is serious about raising living standards relative to those in other developed countries. And we see the infrastructure challenge in New Zealand as a key part of realising that goal.

Ends

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