Robert MacCulloch
Matthew S. Abel Chair of Macroeconomics
University of Auckland
The Labour Party's announcement that its newly proposed $20 weekly public transport fare cap will cost $65 million is out by a factor of at least three times. The Opposition Leader's Transport Press Conference and Labour's webpage (https://www.labour.org.nz/farecap) state, "On average, people will save around $25 a week" from the cap, some more, some less, and "hundreds of thousands of people would benefit".
Census data from 2023 says 135,000 people use public buses, trains or ferries as their "main means of travel to work" (https://figure.nz/chart/x72mUPCCIJtePP5B). A weekly average saving of $25 per person for 52 weeks would cost the government $175 million. Should prices be slashed, demand for trips rises, increasing the subsidy to nearly $200 million. This estimate is conservative, since many people use public transport not associated with a commute to work.
Declaring that "hundreds of thousands of people" benefit and the saving is "on average $25 a week" does not add up to $65 million. It adds to at least three times that figure.
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.
14 comments:
Ah yes that math thing gets them again.
In some ways the new subsidy is a modest rise on the entire public transport subsidies
And someone has to carry the enormous administration cost. the subsidy will generate enormous resentment among those unable to exploit.
Great stuff! The benefits will outweigh the costs, but who cares about benefits!
Hardly surprising - the usual Labour Party economic and financial buffoons at work.
Not to worry - taxpayers are there for Labour to milk and debts are there to be borrowed.
What’s a few more billion dollars for future generations to carry?
Sounds like dyscalculia is ailment Chloe swarbrick, Barbara Edmonds and Hipkins share in equal measures. And delusions of grandeur.
Numbers adding up? Mere details. For labour.
Not till July 2027, and only if Te Pati Maori and the Greens join Labour in Government.
Many things will change before then.
It’s entirely predictable that certain sectors would carp at any measure that might make a little difference to working people trying cope with a cost of living crisis. And this proposal from Labour is very modest, even if MacCulloch’s figures are right.
For goodness sake, subsidising public transport fares is hardly a radical new policy initiative. Even in Houston, the largest city in capitalist-friendly Texas, and which many New Zealanders will know because Air NZ routes through there, you can ride anywhere by bus or train for a maximum fare of $1.25.
If the "cost" to the NLTF is calculated as a simplistic shortfall on existing fares, what about the added costs to the transport operators in administering rhis highly complex scheme, and the added cost to the NLTF of administering the reimbursements to the operators and policing the system for compliance. Who will pay those costs?
And that's before considering where the cash will be coming from to top-up the already overcommitted NLTF. Are we going to have to borrow to pay folks' bus fares, many of whom are already Labour voters to start with? That's simply junk economics.
Remember how free first-year uni tuition was supposed to bring the masses rushing in for a tertiary education? Didn't happen. Cheap bus tickets will go down the same sad but expensive road as soon as those new travellers ditch their cars only to discover they can't actually get on a rush-hour bus.
Hipkins has already said the voters don't care about the details. And he may be right about the average Labour voter. But it's chilling to remember that half of all Labour voters are below average.
Apparently the greatest effect of hgh subsidies is that many frugal pedestrians and cyclists abandon their sweaty habits. Many motorists will be pleased to see irksome cyclists go.
Presuming 135,000 New Zealanders (NOT Kiwis) use public transport per day – five working days per week equates to 35,100,000 passenger days per annum. That is 135,000 x 52 x 5.
Labour’s average saving number is $25 per week, or $5 per day.
Ergo, multiply up 35,100,000 passenger days by $5 and we arrive at $175,000,000.
Robert’s number is bang on target.
The money (where is it coming from?) would be better spent on upgrading Wellington’s ailing train control system which is said to have been a contributing factor in the recent Johnsonville train smash.
Well done, Labour. Finally a well rounded practical policy that targets the benefit to the kiwis that need it. We’re all for it, keep it coming.
National wastes money on roads.
Yeah right Anon 7.33. What good have roads ever done for us?
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