Market Economics - Memo

Latest news & views from market economics / December 2019

Previous Newsletters

To view previous M.emo articles click here

Not Subscribed?

Click here to subscribe to M.emo.

New Staff

We would like to take this opportunity to announce two new staff that have joined our team. We welcome Duncan Grimson and Hannah Ashby.

Christmas Office Hours

Our office closes on the 24th December and will reopen with a skeleton staff from the 6th January. 




 

Robust Research and Decision Making

Where is the economic case to move the Ports of Auckland?

This comment was originally published by NZ Herald, 29 Nov.

There has been a flurry of media reports about the case for moving the Ports of Auckland to Whangarei. This is unsurprising as the proposed port move would be New Zealand’s largest ever infrastructure investment and will have long-lasting impacts on New Zealand. 

According to leaked details, the final report from the Working Group that was tasked with assessing the potential options for moving the Port has gone to Cabinet ministers, with a decision likely in the near future. In the absence of official decision from the Cabinet there has been heated exchange of views between parties supporting the move and those opposing it.

A key issue raised is that the economic research presented in support of moving the port does not offer sufficient detail to allow an independent examination. There have been statements by economists that the report is very light on detail, inscrutable and it has been described as cherry-picking. There are also concerns from major industries that use Ports of Auckland (car importers, freight, etc) and industry bodies (Infrastructure New Zealand, Auckland Chamber of Commerce). The report has come under fire from Auckland Council, the owner of the Port, and the Ports of Auckland itself.

Given the considerable resources devoted to the research and Ernst Young’s previous experience studying the alternative options for the Port in 2016, one would expect a robust set of evidence around the rationale for moving the port. Also, one of the Working Group members is an economist who should have provided independent review of the EY report. 

As far as we can tell there has been no support for the economic research from any independent economist. Also, EY and the economist from the Working Group are strangely silent and have yet to publicly defend the report. 

We have reviewed the economic research from EY. We are extremely concerned about the dearth of information in the report. The absence of information means that there is no way to independently verify the findings of the report. It is our view that this report does not meet the standards required for even a Business Case to go to Ministers, and certainly not to justify the extremely large investment that would be required to move the Port. 

The Ports of Auckland handles most of the imports that enter the country and a sizable share of the exports. A robust assessment is required to ensure that decisions on the location of the Port do not harm the New Zealand economy, or the Auckland economy which is so crucial to the whole country’s prosperity. The costs of land transport and port construction are so large that they will crowd out alternative more worthwhile investments, not to mention the environmental implications of another 5 billion or so container-kms across the landscape. Given the significant long-term ramifications, any decisions must be based on robust economic research that is transparent and open to examination.

On Tuesday morning senior Cabinet Minister Chris Hipkins made comments in response to questions about the economic research. He considers that the government’s decision should be based on “what the evidence and facts tell us, rather than who’s supporting it” and that “it's really important that we take our time to make sure that the decisions that we made [were] based on a very, very robust analysis.”. 

We agree with Minister Hipkins. A decision of this magnitude must be based on robust evidence. At the moment, there are serious questions about the EY report. It is our view that Government should at least commission an independent review of the report and that Treasury should be asked to assess the report against the standard policy assessment methods. Also Ministry of Transport should release any peer-reviews that were conducted on the EY report and the feedback that the Working Group had on the report. We have submitted an Official Information Act request to establish whether there has been any review of the EY report. 

Regardless of views on the location of Ports of Auckland, we should all be concerned when decisions could be made on a multi-billion dollar expenditure with inadequate transparency around the rationale. 

There is major risk that the matter just advances along an unquestioning path of political “common wisdom”, and that the main issue becomes how to re-locate the port, without a robust assessment of whether to do it.

 By Rodney Yeoman and Douglas Fairgray

Transitioning Taranaki to a Volcanic Future

Members of M.E Research are part of a team of researchers who have been successful in an application under the government’s Endeavour Research Programme. Transitioning Taranaki to a Volcanic Future is a $13.7 million research project which, over the next 5 years, aims to build the knowledge and tools to support New Zealand to adapt and transform to a new context of potentially ongoing disruption and changes in risk, as might occur from a long-term eruption of Mt Taranaki. Dr Garry McDonald from M.E Research co-leads the project alongside Professor Shane Cronin from Auckland University, while M.E's Dr Nicola McDonald co-leads the work stream directed towards development of dynamic decision support tools. A website for the project will be up and running soon and we will provide updates as the research evolves. In the meantime, for a brief summary of the research background and scope:

Click here >>>

National Science Challenge - Resilience to Nature's Challenges

Market Economics’ M.E Research team are confirmed as continuing participants in the National Science Challenge: Resilience to Nature’s Challenges, Kia manawaroa - Ngā Ākina o Te Ao Tūroa. The National Science Challenges seek to bring together the country’s top scientists to work collaboratively across disciplines to tackle the biggest science-based issues and opportunities facing New Zealand. The ‘Resilience Challenge’ is about enhancing New Zealand’s ability to anticipate, adapt and thrive in the face of ever-changing natural hazards. For the second phase of the Resilience Challenge, which spans the next five years, Garry McDonald will co-lead the Multihazard Risk Model programme along with Mark Bebbington from Massey University. They will be supported by Nicola McDonald, Emily Harvey and other researchers from M.E Research. For further information:

Click here >>>


   
 

Market Economics Ltd
Level 5, 507 Lake Road,
Takapuna 0740, Auckland, NZ
www.me.co.nz

© 2019 Market Economics. This email was sent to {tag_recipientemail} by Market Economics. If you wish to no longer receive M.emo, please click to {tag_unsubscribe}. If you have difficulty viewing this email - please {tag_viewinbrowser}