Higher rates of return calculated for transport investment

August 5th, 2013

Higher rates of return calculated for transport investment

New cost/benefit formulae will help boost the big transport infrastructure projects urgently needed in Auckland and elsewhere, the Employers and Manufacturers Association says.

"Extending the time for calculating the return on investment on transport infrastructure is timely, and a welcome move," said Kim Campbell, EMA's chief executive.

"Its great the government has paid attention. But its surprising the NZ Transport Agency did not call attention to the changes when it made them last month. Radio New Zealand news noted the change today.

"We and others have been saying the cost/benefit ratios and the discount rates applied by the government to critical land transport projects failed to reflect their useful life, and were used to delay them.

"Its obvious projects like the AMETI - East West link and the City Rail Loop will keep on delivering excellent benefits far longer than the 30 years life on which they are based.

"The short life spans were giving false readings of the real value of transport infrastructure.

"Likewise the discount rate for the return on investment to be achieved was previously set at eight per cent but its now more competitive and internationally aligned at six per cent.

"Other changes to how benefits are calculated are listed in the NZTA's Economic Evaluation Manual on their website (see below).

"The changes will help greatly with funding both public and private transport options.

"We look forward to Treasury updating its method now too, for calculating value and return on investment."

More on the NZTA's Economic Evaluation Manual is at http://www.nzta.govt.nz/planning/investment/economic.html#stage

ENDS

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