Thursday, September 23, 2010

How would the Treasury analyse the NBN?

It certainly wouldn't be just about the money.

It would use the same five criteria as it does for everything else.

It has just republished and updated them, below.

We bring a whole-of-economy approach to our analysis and advice; we
recognise that the wellbeing of Australians encompasses much more than is
captured by traditional quantitative measures of economic activity; and we
complement and challenge the advice of other agencies on the effects of
policy proposals.

While the wellbeing framework is not a checklist to be applied in every
circumstance, it reinforces our conviction that trade-offs matter deeply. There are
five dimensions to the wellbeing framework:

The opportunity and freedom that allows individuals to lead lives of real
value to them. We have drawn heavily here on the thesis of economist,
philosopher and Nobel laureate Amartya Sen, that human development is
measured by the extent to which individuals have the capabilities necessary to
choose to lead a life they have reason to value.

The level of consumption possibilities available to the community over time.
This includes both market and non-market goods and services, such as the
character and quality of people’s engagement in the community, the physical
environment, health and leisure.

Distribution looks at the spread of all other aspects of wellbeing across the
Australian population. Distributional outcomes across different social groups,
geographic regions and generations are also considered.

The overall level and allocation of risk borne by individuals and, in aggregate,
by the community. Risk can be particularly harmful to wellbeing when people
who are clearly unable to manage risk are nevertheless required to bear it, or
are exposed to it unknowingly.

The level of complexity confronting Australians in making decisions about
their lives.

The NBN seems to provide some of each. The question would be whether it provided enough of each to be value for money given the amount being spent and the resources that would be moved from other activities.

But listen up. As I have been saying, it's not all about financial outcomes. So relax. Okay?

Treasury Strategic Framework 2010-11

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Ian said...

Why is the PMG spending ten million pounds extending copper wires to every household in Australia ? With telephones in every suburban police and fire station, not to mention most public houses, we have no need for this expense.

There should be some sort of cost-benefit analysis done !

Peter Martin said...

Ian, The PMG didn't spend ten million pounds extending copper wires to every household in Australia - not all at once.

I was there. Houses were wired a few at a time. I remember the first one in our street.

THIS is a proposal to disconnect every house in the nation and reconnect it with something more expensive, in one hit.

What on earth would be wrong with a cost-benefit analysis?

I can't believe people are even arguing about it?

Peter Martin said...

Why are people even arguing about it?

Andos said...

I mentioned this in previous posts; people are arguing about it because the case for doing a cost benefit analysis is being put by making all sorts of arguments about how the promised benefits of the NBN won't be realised, or aren't needed, or could be just as easily realised with other technologies.

I haven't seen many cases to undertake a CBA acknowledge the huge possible benefits of this project. Most people advocating a CBA seem to be doing so simply as a means of opposing the project (althought I don't impute that motive to you, Peter), so people who are in favour of ambitious, nation-building infrastructure feel it necessary to defend the potential of the NBN in response.

Marek said...

How would a treasury analyse, like the one is this post, be different to a CBA?

sien said...

This kind of analysis could be done and you and others are to be applauded for questioning the value of the NBN.

The policy was, after all, driven by a Rudd after the shocking PCs in schools program (which was a worse, although much smaller, waste of money).

But the political analysis is simpler. Without the NBN Tony Abbott may well be PM. The ALP will never forget that. The NBN is just too popular. You only have to look at the suspension of skepticism evident in the pro-NBN cheer squad that erupts whenever you write these sorts of entries.

It's almost like a moon shot, indeed it's less of a waste of money than that really. It will be of less value than advertised and will cost the taxpayer tens of billions but it is probably unstoppable.

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