Potential Economic Stimulus Package

The 2008 Budget included a significant fiscal stimulus aimed at minimising the impact on the New Zealand economy of deteriorating international economic conditions.

Since that time the international financial crisis has erupted and the world economic outlook is significantly worse.

The New Zealand economy is in a strong position to ride this downturn through with minimal disruption. While PREFU projections have real GDP per capita declining slightly in 2009, growth is then projected to pick up again and by 2011 GDP per capita growth is back at 2.3 per cent.

But the downside risk is now in our view much greater, and it is therefore prudent to investigate an additional fiscal stimulus package which can be implemented if the projected impacts on the New Zealand economy deteriorate further.

The package Labour is developing would involve a combination of

Bringing forward planned infrastructure spend

Funding projects in the building and construction sector

Supporting local authorities to bring forward hill country catchment management initiatives

Bringing forward planned infrastructure spend

Rail

There are a number of rail upgrade projects which may be able to be advanced ahead of current planning, for example:

Project Time to start physical work Time to complete work % NZ Labour content NZ Material Content Cost $M
North South Junction which would enable the carriage of 9’6” containers between Palmerston North and Wellington port, (at present they are off-loaded at Palmerston North and trucked).

6 -12 mths

30 months

100

85

$150
Marsden Point Branch line to enable import/export cargos to be transited. At present the line is still located at the old port of Whangarei

12 mths

48 mths

100

80

$100M

Roading

Planned expenditure on new roads and road renewals is currently around $1,200 million per annum, rising to $1,700 million per annum over the next 10 years, covering 600-plus projects. These projects have already been subject to rigorous cost-benefit analysis.

Of these, there will be some that could be accelerated, and urgent advice is being sought from the New Zealand Transport Agency on which individual projects, or what proportion of projects, are capable of being accelerated.

Sewerage Infrastructure

The Sanitary Works Subsidy Scheme was established in 2002 to assist small- to medium-sized communities to build or upgrade their reticulated sewerage facilities and treatment plants.

The origins of this Scheme date back to the 1999 Labour Party Manifesto, which identified improved sanitation for small- to medium-sized communities as a policy priority. A total of $133 million was initially allocated over 10 years and was targeted to those communities with deprivation index ratings of five and above. An additional $40 million was provided in Budget 2008, but there are still a number of worthy outstanding projects.

Unlike some other infrastructure sectors, the water and sewerage infrastructure sector is largely unaffected by capacity constraints and, with the help of this Scheme, has an established workforce of highly specialised wastewater engineers able to continue work on regional projects, should additional funding be made available. Indeed, the provision of funding for the Scheme in 2002 served as a catalyst for skills development in this area, and led to an increase in specialisation in wastewater engineering.

It is estimated that of the unfunded applications received to date, approximately 10 per cent to 20 per cent could be progressed immediately.

These might include:

Community/Council Potential Subsidy $M

Whangarei Heads (Whangarei DC) 8.95
Huapai (Rodney DC) 7.33
Brunswick/Rotokawa (Rotorua DC) 6.22
Okareka (Rotorua DC) 5.18
Muriwai (Rodney DC) 4.09
Eltham (South Taranaki DC) 3.53
Parua Bay (Whangarei DC) 1.09
Dannevirke (Tararua DC) 1.0
Oakura (New Plymouth DC) 4.44

Funding projects in the building and construction sector

Bringing forward school property upgrades

At the last budget $14.072 million was set aside to address space deficiencies in 29 schools. There are many other schools around the country which would benefit from additional or upgraded space. It is estimated that up to $185 million of work could be considered.

In this years budget $20 million was made available to fund replacement buildings in 20 schools. There are still a number of schools in the queue for such buildings and if spare construction capacity is available work could be brought forward. This could provide replacement buildings for schools as below.

Schools funded 2008 Value ($000) Potential extra schools Value ($000)
Avondale College 2,200 Cambridge High School 856
Kaitangata School 205 Sommerfield School 289
Crownthorpe School 479 Pt Chevalier School 1,480
Arthur Miller School 449 Christchurch South School 2,453
Southbrook School 467 Lyttleton Main School 2,300
Fairlie School 465 Manurewa East School 1,539
Putere School 563 Karanui School 2,199
Omokoroa School 456 Taupo-Nui-A-Tia College 2,848
Linwood North School 1,857 Epsom Girls Grammar 3,553
Naenae Intermediate 864 Glen Eden Intermediate 2,433
Kilbirnie School 934 Green Bay Primary School 2,680
Waitoki School 523 Papatoetoe High School 3,984
St Albans School 1,625
Lincoln Primary School 999
Twyford School 508
Kaipara College 3,361
Napier Intermediate 3,280
Westburn School 463

Housing initiatives

Details on additional measures which may be taken in the housing sector will be released with Labour’s Housing policy.

Supporting local authorities to bring forward catchment management initiatives in hill country

Addressing soil erosion

There are many areas of lands significantly affected, or potentially affected, by mass movement erosion especially in the lower North Island. The reintroduction of vegetation to these lands through afforestation or managing natural regeneration can provide much improved stability.

Geographically the most acute land areas are concentrated within the boundaries of Gisborne District Council, the Hawke’s Bay Regional Council, Greater Wellington Regional Council, Horizons Manawatu and the Taranaki Regional Council.

The Northland Regional Council, Auckland Regional Council, Environment Waikato and Bay of Plenty Regional Councils also have significant areas of affected land.

The Government has three programmes in place that already provide direct funding support as an incentive for afforestation activity targeting eroding and erosion prone land:

East Coast Forestry Project – this well established programme targets effected land within the boundaries of the Gisborne District Council.

The Sustainable Land Management (Hill Country Erosion) programme, introduced in 2007, provides $2 million a year to accelerate the activity of the Regional Councils.

The Afforestation Grants Scheme introduced with the Sustainable Land Management and Climate Change Plan of Action is designed to include consideration of hill country erosion.

The Permanent Forest Sinks Initiative, while not providing direct financial support, is also relevant. The ability of land managers to accrue value in sequested carbon through planting or managing natural reversion on hill country land will influence investment decisions.

While there is then a strong programme framework in place that supports the objective of achieving slope stability and reducing erosion, these programmes can potentially be boosted by the provision of further funds.

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