Tuesday, January 30, 2024

Robert MacCulloch: If the Coalition Agreement Stands, Wellington Will Cease to Exist as a City and become a Town, maybe a Village.

The Coalition Agreement between National and ACT states as a "principle" of the new government that all decisions will be "based on sound public policy principles, including problem definition, rigorous cost benefit analysis and economic efficiency".

So what is cost-benefit analysis? It is not simply calculating the ratio of the benefits to costs of a decision and choosing to spend money when the benefits exceed costs. No, it involves calculating those ratios for all prospective projects and ranking them from highest to lowest. Given a limited budget, one must select projects with the highest ratios until the budget is spent. On such a basis, Wellington will be left to decay. Why? Because its vast infrastructure needs, ranging from Mount Victoria Tunnel to port facilities to shambolic water leakage problems involve limited benefits & massive costs that make no sense when compared to the urgent needs of the likes of Auckland and Christchurch.

How come? Well, Auckland's population is four to five times Wellington's, so the benefits of sorting Auckland's ailing infrastructure are on a far greater scale. What's more, one of NZ's biggest earthquake fault lines runs down The Terrace in the windy city, through the Treasury, Reserve Bank & Beehive, making the cost of earthquake-proofing infrastructure there huge. Projects like Transmission Gully motorway out of Wellington failed cost-benefit analysis. Not only did its benefits not exceed costs, but those benefits were dwarfed by the benefits of projects in Auckland, which were not done because of the money spent on that Gully.

Consequently, an unshakeable implication of the Coalition Agreement is that Wellington should be left to fail. Most bureaucrats aren't going physically into work regularly there anyhow, which I have on good authority is happening on a scale the public would be shocked should its extent be revealed. Many are no longer based in Wellington, instead "working" remotely. Most Ministries should be cleared out & located elsewhere. When I once lived in Bonn, it was the capital of Germany. Although the capital moved to Berlin, six Federal Ministries kept their headquarters in Bonn. Similarly, NZ ministries like Social Development should not be in Wellington and instead relocated.

It may sound stark, but Wellington no longer adds up. It is a city built on subsidies; built on the backs of others. The costs of running it are no longer justified while infrastructure decays elsewhere. Wellington City fails its own criteria of cost-benefit analysis, a formal requirement of the new government. The only way Wellington can survive is if its bureaucrats refuse to implement the principles in the Coalition Agreement. I expect they will since the bureaucracy, like Mainstream Media, regards the new government as illegitimate.


Professor Robert MacCulloch holds the Matthew S. Abel Chair of Macroeconomics at Auckland University. He has previously worked at the Reserve Bank, Oxford University, and the London School of Economics. He runs the blog Down to Earth Kiwi from where this article was sourced.


Anonymous said...

A timely earthquake ,centrally located ,might make the decision to abandon the place a little easier.
It really is a shit location for a capital city.

Peter said...

The claim all decisions will be "based on sound public policy principles, including problem definition, rigorous cost benefit analysis and economic efficiency" - really?

But before even getting into the big stuff, I'd like to know what of the foregoing was utilised in the recent decision by the PM to request Dame Jacinda to continue on as "Special Envoy" for the "Christchurch Call" at an on-going cost to the taxpayer of around half a million dollars per annum? Purportedly it's produced some useful algorithms - for whose benefit and for what purpose I'm sure many of us would be keen to know? Perhaps maybe for the likes of that highly productive and incredibly useful outfit, 'The Disinformation Project' whose source of funding still remains a mystery.

So, in all, just a bit of political rhetoric - an impressively business-like soundbite that is not backed by actions, which as they say, speak louder.

Andrew Osborn said...

100% agree! I've been saying this for years. Most people have no idea just how disastrous such an event could be.

The alpine fault is a timebomb on a very short fuse and the consequences of a major earthquake include:

>A massive tsunami rolling up the Hutt Valley taking everything with it.

>A large number of residential buildings turned into matchwood at the bottom of steep gullies, along with their occupants.

>Random parts of the city either uplifted or sunk below sea level permanently.

> Wiping out of much of the infrastructure.

I definitely wouldn't move the capital to Auckland either, because we have enough trouble accommodating Aucklanders as it is, plus the fact that we're sitting in a caldera. Instead, the solution is to disperse the functions of government to the provinces. This has several advantages:

It minimizes risk of natural disasters.
It would be great economic stimulus to provincial NZ.
It would force the 'beltway' folk to interact with some real people. :-)