Credit Squeeze Tipped To Hit Big Projects
September 9th, 2008
As was predicted in last week’s Transport and Logistics, leading economist Alex Sundakov says it will be much harder for NZ to bankroll big infrastructure projects such as roads and rail infrastructure through borrowing because of the international credit crunch. Sundakov says the $1.05trn bailout of US investment banks will have little impact in terms of making raising loans easier as the move is more about injecting confidence than cash.
Focus On Project Viability. While short-term market instability is likely to subside, he warns in the longer-term, more serious issues will remain: NZ needs to borrow heavily in coming years to build roads and other infrastructure. He says this will become harder and more expensive because of the global credit crisis, with tougher international competition for increasingly tight funds. Big private sector groups, the likes of which National want to work with to build projects, will face higher interest rates and have to borrow for shorter terms.
Govts A Safer Bet. On a more positive note, he believes big Govt agencies will not fail to get the money, indicating borrowing is far more likely to be carried out by the public sector than the private. If will be interesting to see if Sundakov’s warning will be taken seriously by senior National Party politicians. National may just have to admit the Govt is in the best position to borrow money for major projects. Look for them to quietly forget Public Private Partnerships all together if the financial turmoil continues.
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