Research 350 - NZ Transport Agency

4. APPROACHES TO ASSESSING REGIONAL ECONOMIC AND OTHER DISTRIBUTIONAL EFFECTS
growth. Banister and Berechman note that the ambiguous results of the case studies explored
above may be partially explained by the fact that the impacts of transport investment tends
to lessen rapidly as more capacity is added. Thus even major infrastructure projects may have
only negligible impacts on national growth as they represent relatively small improvements in
terms of the national economy. Further, they suggest that even if transport improvements are
implemented in ‘open dynamic’ economies, with the right political, economic and investment
pre-conditions, they may have little impact (Banister and Berechman, 2000a, pp. 231, 325).
This last point bears further consideration on a regional basis. One would expect a more
sizable impact from infrastructure projects on regional growth than on national growth, given
the smaller scope in question. However, as Banister and Berechman suggest, even if the
economic, financial and political conditions allow it, projects may have little impact on
regional growth in developed countries such as New Zealand and Australia for much the same
reasons as is the case on a national scale. These have been noted by both BTE (1999, pp.
145-149) and O’Fallon (2004, pp. 13-16). In particular, BTE notes that:
• The Australian regional transport network is already well developed meaning that, for
many projects, the reduction in transport cost will be small. Likewise O’Fallon (2004,
p. 16) concludes that New Zealand’s transport infrastructure is also already well
developed and that improvements will only impact at the margin.
• Transport costs are generally not a large component of total production costs or
revenues, hence reduced transport costs are of minor consequence. For example,
‘beyond the farm gate’ freight costs account for only 8% of the price paid for domestic
agricultural products and 12%-13% for manufacturing and mining products. Given
shorter haulage distances, in many cases, it might be expected that these proportions
would be the same, or even lower, in New Zealand.
• Producers often view differing modes of transport as poor substitutes. For example,
road haulage may be favoured in many cases for the transport of some goods such as
horticultural produce. Thus even if a rail alternative is constructed it may not be fully
utilized.
• Increased rural production in Australia may be limited due to natural resource
constraints, e.g. water. While New Zealand faces different resource constraints, this is
no less true, along with the issue of the constraints posed by concerns over
environmental impacts.
While the BTE focuses on case studies relating to the improved transport of bulk commodities
from rural areas, the basic theme that increases in accessibility engendered by transport
developments are unlikely to be dramatic in many cases is true for both urban and rural
regions. This is likely to be equally true in the case of New Zealand.
4.2.6 Economic displacement
The problems associated with the two way road problem and the need for supporting
measures have been noted above. However, even assuming that a targeted region does
‘benefit’ from improved transport links (whether the measure is economic efficiency (i.e.
using SCBA), or macro-economic variables such as employment/GRP/GSP) this says nothing
about the impacts on other regions. Leaving aside the complex issues associated with the
‘two way road problem’ (i.e. assuming no movement of resources away from the target
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