Todd Niall 09:54, Nov 21 2019
An economic argument for moving Auckland’s port to Northland has been harshly criticised in two reviews by economic consultancies.
Both reviews say an economic analysis by Ernst and Young for a government-funded working group, failed to provide a credible basis for making a decision on the move.
New Zealand First MP, and Associate Transport Minister Shane Jones, who is championing the relocation case, said he was aware of differing views but considered the criticism “part of the consultancy gossip chain”.
One assessment, by consultants Castalia, said the true extra cost of relocating Auckland’s port, and building the necessary infrastructure, could be nearly four times EY’s estimate.
The other review by the New Zealand Institute of Economic Research (NZIER) said EY had “failed to address the feasibility question with sufficient transparency”.
The Upper North Island Supply Chain working group recommends the best future for the ports of Tauranga, Auckland and Marsden Point, is for Auckland to close, and its business re-locate to Northland.
An economic analysis by EY, accompanying the second of three reports by the group, supported the idea, and said there would be $2 of benefits for each $1 spent.
Cabinet will in December consider the group’s, third, final, and still-confidential report.
EY said the additional cost of the relocation, compared with costs that would still be incurred if the three major upper North Island ports, including Tauranga, continued on their present paths was $1.8 billion.
The analysis of EY’s work by infrastructure consultancy Castalia, put the additional cost far higher, at $6.7 billion.
“The first and the most obvious point to make is that the report entitled ‘Economic Analysis of Upper North Island Supply Chain (UNISC)‘ is nothing of the kind as it provides absolutely no information on how the supposed benefits are estimated, apart from some vague references to multi-factorial analysis,” said Castalia.
The cost of extra roading was undercooked, it found, and the development value to Auckland of clearing the port from the waterfront did not take into account the time and cost of finding new uses for the 77 hectares.
“Given important cost omissions and flawed logic, EY’s cost benefit analysis might fail to provide a credible basis for informing a decision – on the relocation,” the Castalia review concluded.
Consultancy NZIER assessed EY’s work using Treasury criteria, and listed 13 findings which it considered either “surprising” or “concerning”.
NZIER said when EY produced the “Port Future Study” for Auckland Council in 2016, Northland ranked only 12th on the list potential relocation sites.
“The same consultancy three years later moved Northport from the twelfth most preferred option, straight to number one, with no explanation,” said Laurence Kubiak, the chief executive.
Other findings NZIER considered “surprising” included the assumption by EY that 70 per cent of the freight between Northland and Auckland would be by rail, when rail currently had 5.6 per cent of the freight market.
Kubiak said the benefit side of the equation done by EY was “a bit amorphous”.
“The benefits set out in the (EY) report hinge on the potential value uplift in land used by Ports of Auckland – but it doesn’t address the dis-benefits and risks of massively extended logistics and supply chains of moving the port to Northport,” said NZIER’s review.
NZIER said a freight hub proposed in northwest Auckland had not been costed, and EY’s $1 billion estimate to build a rail line from Avondale to Southdown, compared with previously-published costings elsewhere, of $2.5b to $3.5 billion.
Ernst and Young was approached for comment but declined.
New Zealand First had campaigned on moving Auckland’s port prior to the 2017 general election, and under the coalition agreement with Labour, secured the commissioning of a report on the feasibility of the idea.
“I am not going to make commitments beyond receiving the final report because we need to see what evidence has been compiled, and what the report tells us,” the Prime Minister Jacinda Ardern, told Stuff in October.
The trucking industry organisation, The Road Transport Forum said the two reviews “blow the cost-benefit ratio touted by supporters of the port move out of the water,” and that the relocation made little economic or logistic sense.
“With the billions of dollars that will be required to build the appropriate road between Auckland city and Northport, we are concerned no money would be left to spend on the rest of New Zealand’s road network, which is in immediate need of investment,” said Nick Leggett, the chief executive.
“Ports of Auckland is a critical piece of New Zealand’s infrastructure and before any moves are made, it is essential to look at all the evidence and for decisions to be based on facts, not politics and empty promises to the people of Northland,” he said.