Economics like there’s no tomorrow - NZIER Insight 32

02 December 2011

Do you get the sense that New Zealand doesn’t invest in the major public infrastructure facilities like we used to? Previous generations built entire networks for rail, road, water and energy. Only Muldoon’s Think Big projects and the current ‘Roads of National Significance’ might compare. Major infrastructure investment decisions come down to how much we care about our future, and the future of our children and grandchildren.

The government’s social discount rate policy captures in a single number how much decision makers care about the future relative to today. The default public sector stance is to use an 8% real (i.e. net of inflation) discount rate. This amounts to not worrying too much about the costs or benefits of a project after ten to 15 years. But is 8% right? You can read the full Insight here.

Each year NZIER devotes some of its resources to undertake and make freely available economic research and thinking aimed at promoting a better understanding of New Zealand’s important economic challenges. The preparation of this paper was funded from those resources.

Go Back