1 Introduction

Delays in decision-making processes have been a major reason for prolonged periods of excess demand for different infrastructure, which has led to overuse, congestion and eventually dampened economic growth. Infrastructure New Zealand commissioned Principal Economics to assess the economic impact of delays in infrastructure investments.

1.1 Scope of this report

This report estimates the cost of delay in infrastructure decisions, by using Waikato Expressway (the Expressway) as its case study. For this analysis we:

  1. Estimate the economic and employment benefits of the efficiency gains and the resulting direct, indirect and induced (flow-on) effects of the Waikato Expressway (the expressway);

  2. Provide a description of the potential efficiency gains from making better early-stage decisions in major infrastructure projects;

  3. Discuss technical and policy values, including separation and staging, centralisation and devolution, and the quality of advice.

1.2 Efficient decision-making

The efficiency of the infrastructure decision-making (IDM) process is reflected in the timeliness of the planning process; that is, the time that it takes from the initiation of the project idea to the execution phase. The recent Infrastructure Strategy report by Te Waihanga – Infrastructure Commission suggests that the New Zealand planning system slows down essential infrastructure projects:

“New Zealand suffers from long delays between project planning and delivery. Many infrastructure projects must go through a resource consent or designation process. Resource consent applications typically require detailed analyses of the environmental, social, cultural and economic impacts of projects. They’re tested through a hearings process that has been described as adversarial, with the right to appeal decisions to the Environment Court or High Court. This process can take a long time and is costly for everyone involved.” (New Zealand Infrastructure Commission, 2022, p. 134)

We investigate the impact of a more efficient infrastructure decision process, which could potentially reduce the 15-year decision-making process to eight years.

1.3 The downstream benefits of efficient infrastructure decisions

Understanding the economic, social and environmental benefits of efficient decision-making requires looking at its downstream impacts across different sectors of the economy, based on productivity improvements to businesses and households.

The recent Te Waihanga – Infrastructure Commission infrastructure strategy emphasised the importance of better decision-making and highlighted that:

“New Zealand is one of the least efficient high-income countries when it comes to turning public investment into quality infrastructure. International evidence shows that good decision-making, supported by robust public investment management and a stable long-term pipeline of investment intentions, is essential for lifting performance.” (New Zealand Infrastructure Commission, 2022, p. 109)

This report provides an estimate of the cost of inefficient decision-making, as reflected in the delays caused from inefficiencies in the decision-making process.

A better decision-making process primarily leads to improved productivity for the users of different infrastructure types, such as the transport and construction sectors. This leads to gains for the businesses and households who directly or indirectly relate to those primary infrastructure users.

For example, if the planning phase of a road improvement project is completed within eight years instead of 15 years, assuming no changes in the other project phases, the freight sector could start benefiting from improved access 7 years earlier.2 This improved access leads to positive downstream effects on all other businesses and households who directly or indirectly use the goods and services transported by the freight companies. The outcome of this is improved consumption and social wellbeing, and potentially reduced transport emissions.

The benefits from improved decision-making are not limited to one town, city, or region. The output of improved decision-making in one area are linked to other area through the supply chain links.

This report captures the direct and indirect (downstream) benefits of efficient infrastructure decisions using our subregional Computational General Equilibrium (CGE) model.

In addition to efficiency gains from improved outcomes for businesses and households, an efficient infrastructure decision-making leads to improved environmental outcomes, lower labour turn-over from improved project sequencing, and improved opportunities for future developments.

1.4 Our approach and the structure of the report

To estimate the economic cost savings from avoiding delay in the infrastructure decision process, we estimated the forgone economic activities from delaying the completion of Waikato Expressway by one year. We acknowledge that the opportunity cost of all infrastructure projects is not equal and suggest that the Expressway provides a gauge of the potential cost of delaying a reasonable infrastructure investment decision.

For our estimation,

  • We update the estimates from the earlier strategic evaluation by Parker et al. (2008) to estimate the direct benefits from the Expressway.

  • We apply the updated direct benefits to our CGE model to estimate the downstream effects across different sectors and regions.

In the next chapter, we provide a description of the infrastructure decision-making process, the reasons for delays and potential solutions for avoiding them. We also provide a description of the economic and policy context, including the recent changes in policy frameworks to accelerate decision-making.

Chapter 3 provides background information about the case study of this report – the Waikato Expressway – and a description of the findings from previous studies and the potential impacts of the Expressway.

Chapter 4 provides our findings from estimating the Wider Economic Impact of the Expressway and present our findings. We then conclude and provide further discussions.

  1. Our reasons for considering a 7-year time saving in the planning phase of IDM are provided in Section 2.1.↩︎