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Swain: "The Outlook for Transport in NZ"


Paul Swain: "The Outlook for Transport in NZ" Speech to NZ Freight Transport Summit Stamford Plaza Hotel Auckland, 4.40pm Introduction

Thank you for inviting me to speak to you today about the outlook for transport in New Zealand.

We all share a keen interest in transport infrastructure.

Building world-class infrastructure is a key element of the government’s growth and innovation framework. Our growing economy and population requires increased investment.

It is a key part of the government's objective for returning this country's living standards to the top half of the OECD rankings.

Today I want to talk specifically about transport infrastructure, the thinking behind this government's transport strategy and legislation, future funding issues affecting land transport, and specific issues for the rail, maritime and aviation sectors.

Transport Infrastructure Overview

Over the past few decades, in this city particularly, transport infrastructure has suffered from underfunding and a lack of coordination.

In 1999, when this government was elected into office, it moved quickly and established its funding priorities.

It significantly increased funding into land transport, including roading.

A major initiative was announced in February 2002. This was the announcement of the Moving Forward package.

Moving Forward gave a major boost of $227 million in funding for all modes of land transport, including $94 million for roads.

Moving Forward also set out the government’s proposals for future change:

A land transport funding and management system with a broader focus, and with a long-term view.

Empowering regional councils to fund, own and operate public transport infrastructure and services.

Exploring electronic means to collect road user charges.

Allowing public private partnerships.

Allowing more tolling on new roads.

Encouraging alternatives to roads.

Pressure on transport infrastructure

The flooding of the past week has highlighted the strategic importance of our transport infrastructure.

At least $35 million damage has been done to the local roading network, State Highways have about another $2 million of damage on top of that. These may turn out to be conservative estimates.

A team of Ministers is involved in the response. The Ministers of Civil Defence, Economic Development, Social Services and Housing, Agriculture, Transport, Defence, and of course the Prime Minister are all playing a role.

The Government has offered to reimburse local bodies immediately for the cost of their immediate response to the storm.

We will also pay to repair state highways, as well as the "lion's share" of district roads and 60 per cent of the cost of reconnecting sewerage and water systems.

There will be more announcements about extra government assistance in due course.

Meanwhile other pressures on the transport infrastructure involve issues of longer-term planning.

For example: -

Road traffic is growing at 3.5 per cent a year, reflecting not just economic growth; but also a rate of car ownership second only to the United States; and steadily increasing personal mobility.

In regional and provincial areas such as the East Coast of the North Island, and the dairy farms of Southland, there is major concern about the volume of the “wall of wood” needing harvesting and processing after 2010, and milk products needing transportation now. Both industries threaten to overwhelm the existing infrastructure without major transport investment.

In urban areas, traffic congestion is a serious issue, imposing additional costs on the economy; putting pressure on growing high value “just in time” freight flows; and significantly impeding personal access and mobility.

Health issues from carbon dioxide emissions – about half of which come from the transport sector - touch on climate change policy and air pollution concerns, particularly in Auckland and Christchurch.

Until recently NZ was the only developed country not to regulate vehicle emissions. Our policy has three approaches – a new rule that puts in place standards for vehicles entering the country; screening of used imported vehicles and the inservice fleet; public education on the importance of regular vehicle maintenance.

A pilot programme on emissions screening is expected to begin in July.

Rail traffic has grown steadily in the last decade, and services have been restructured around a network of scheduled container shuttles and bulk trains.

Port and airport security in the post September 11 climate mean New Zealand must be a secure link in the chain of global transport networks.

We also need to understand how trends such as logistics will change the way we look at how transport systems will work together in future.

Road safety remains an issue – while the road toll has already been reduced by 40 per cent since the late 1980’s, much remains to be done, especially to improve the safety and security of pedestrians and cyclists.

New Zealanders increasingly feel that the future transport system must be one that has a lower impact on the environment and society - at the same time that it maximises their accessibility to employment and recreation.

I now want to talk in detail about how some of these pressures affect the freight transport industry.

Freight Sector Overview – Rail, Road, Maritime and Aviation

For the most efficient and effective movement of freight, across road, sea, air and rail, transport policy should aim for an efficient and integrated mix of modes, utilising both existing and new public infrastructure and investment.

However, I recognise that land transport will continue to be the main delivery mode for freight, within NZ.

Some very rough estimates I have seen indicate trucks account for about 48% of surface freight, with heavy trucks taking the bulk of that, or around 40% of total freight.

Rail is estimated to carry 32% of surface freight, while shipping takes the remaining 20%.

These figures are based on tonne per km calculations.

Given the trucking industry dominates freight transport for most of New Zealand, it highlights the pressures on our roading network.

This pressure can be relieved through government investment and coordination of other modes.

This brings in the maritime and aviation sectors as well.

NZ Transport Strategy

The NZ Transport Strategy was released in December 2002, it established five main objectives: -

To assist economic development

To assist safety and personal security

To improve access and mobility

To protect and promote public health; and

To ensure environmental sustainability.

The NZ Transport Strategy also defines our vision for the future along these lines: “By 2010, New Zealand will have an affordable, integrated, safe, responsive and sustainable transport system”.

The "integrated" part of that vision can't be emphasised enough, because of the need to recognise the multi-modal nature of our transport infrastructure.

Passenger and freight movements take place across land, sea, air and rail.

It is for this reason the Government has taken a stake in Air New Zealand, is regaining control of the rail infrastructure, and will soon be announcing decisions on the Shipping Review.

In the maritime sector future port investment and development in New Zealand must take account of changes in international shipping patterns and technology.

For both the maritime and aviation sectors, the lessons have been learned from the September 11 terrorist attacks, and I will talk about these in more detail later.

The legislation that articulates the NZTS is the new Land Transport Management Act, which is an important milestone in the evolution of transport policy in New Zealand.

It represents a new era for the planning, funding, and operation of New Zealand’s land transport infrastructure and services

Land Transport Management Act

This legislation was passed by Parliament just over 3 months ago.

The legislation establishes a new framework for the funding of land transport, by removing much of the inflexibility and prescription of the previous Transit New Zealand Act.

By incorporating the New Zealand Transport Strategy vision into the purpose and objectives of the government's transport funding and operational agencies, Transfund New Zealand and Transit New Zealand, the legislation broadens the focus of the land transport system beyond just roads.

Roads are important, and take about 80% of the transport budget, but we cannot motorway our way out of our problems.

This often only shifts the congestion a few kilometres further down the road. Congestion will only be cleared with a balanced approach involving all transport modes.

Encouraging more people into passenger transport will help reduce traffic volumes. For example, visitors to Wellington will be aware that if commuter train services were to end, the result would be roading chaos.

Most Aucklanders know it's easier to get around the region during the school holidays. So, encouraging more Auckland students to walk, cycle or take public transport to school would reduce traffic volumes in peak periods. Traffic demand management is about using the existing roads we have more sensibly.

Measures to make better use of our roads, public transport, rail, are all part of the solution.

We are taking a true multi-modal, integrated, approach to land transport.

The theme of integration is continued with the ability of Transfund to fund approved public organisations and the removal of the prohibition on regional councils owning public transport infrastructure and services.

Other key aspects of the legislation include: -

Simplified and clarified consultation requirements.

Efficiency and effectiveness now appear in the Purpose clause of the Act. They must be considered when Transfund assesses funding applications or activities.

Tolling is permitted on new roads or bridges provided there is community support for a project.

The Act contains a more flexible funding option around lease arrangements, with a Build Lease Operate and Toll arrangement similar to the Melbourne City Link project for Public Private Partnerships, where the private sector and public agencies work together to bring forward projects that are difficult to fund under existing funding arrangements.

The Act allows for early conditional approval from the Transport Minister, who must be satisfied any conditions are met before the concession agreement is entered into.
Regional transport planning has been improved by emphasising the strategic focus of Regional Land Transport Strategies, and by clarifying the relationship between various planning organisations.
Regional Councils are able to own and operate public transport services and infrastructure. This is a manifesto commitment by Labour.

Freight Sector Further Investment in Land Transport

Ever since the extra funding in the Moving Forward Package in February 2002 congestion has been an ongoing priority, not just for Auckland, but the rest of the country.

The latest announcements in this area were made in December last year, as part of the Investing for Growth Package

This seeks to address under-funding of transport infrastructure, and streamline the decision-making processes.

The additional funding announced in this package will contribute to more efficient transport networks, which are an essential prerequisite for New Zealand’s competitiveness.

Last week Auckland local government leaders travelled to Wellington to formally accept the package.

The package recognises the strategic importance of further transport investment to New Zealand.

It strikes a balance between the need for a “catch-up” for Auckland and the need for the rest of the country to further develop its own regional infrastructure.

While New Zealand as a whole will benefit from the momentum created by Auckland’s growth, New Zealand’s regional transport networks must also be upgraded because of the demands of a growing economy.

Auckland is the country’s major economic gateway.

Its port and airport handle almost three-quarters of New Zealand’s imports and forty percent of exports.

Extra funding for transport is needed, particularly in Auckland.

The package includes:

New funding amounting to approximately $1.62 billion extra for Auckland, and approximately $1.35 billion for the rest of New Zealand, over 10 years.

The funding has been split 35% to Auckland and 65% regionally, based on population estimates over 10 years.

The Auckland funding is made up of a government contribution of $900 million, and $720 million from petrol excise and RUC for diesel vehicles.

The Crown contribution will be made available by reducing the amount of petrol excise diverted into the Crown Account. This will be effective from July 2005.

Fuel excise will be increased by 5 cents per litre (excl GST) from April 2005, and there will be an equivalent increase in road user charges for light diesel vehicles.

It is estimated that these excise and RUC changes will raise approximately $207 million per annum ($165 million from petrol, $42 million from RUC).

All of this will go to transport, none into general government coffers.

Tolling will be introduced on new roads where practicable, with the roads potentially financed by some borrowing and the toll revenue used to service the debt.

The Land Transport Management Act will be used as the basis for assessing projects for funding.

The additional funding for Auckland will be focused on an accelerated programme of key strategic roads, within identified constraints on their buildability, as well as public transport, especially rail, and transport demand management.

As part of these funding announcements, the Government announced the creation of a new transport authority (ARTA), which will have the responsibility for achieving an integrated, safe, responsive and sustainable land transport system for Auckland.

Given Auckland’s current transport planning shambles everyone was calling for a more streamlined decision making process with a focus on delivery. For this reason the government has proposed a new transport entity, the Auckland Regional Transport Authority.

ARTA Board members will be appointed by the TLAs and the ARC and be responsible to the ARC, an organisation accountable directly to Auckland voters.

Further work is being done on the issue of infrastructure bonds

Further work will also be done on the feasibility and desirability of pricing existing roads, taking into account the social, economic and environmental impacts, and on other issues such as parking levies.

The extra spending is on top of existing spending throughout the regions and Auckland. Auckland's transport spending amounts to an estimated $356 million for the 2003/04 year.

Spending to date has progressed Auckland roading projects like Spaghetti Junction, Grafton Gully, the Greenhithe deviation, and the Puhinui Interchange.

In regions like the East Coast and Northland, it is resulting in a better road network to develop the forestry industry.

Officials will be reporting to Ministers on outstanding funding, governance and regulatory issues in March 2004.

In April, it is envisaged that legislation will be introduced to give effect to the governance changes, and there will of course be the opportunity for the public to make submissions.

Freight - Road

Many of you will be familiar with the work going on around the issue of ERUC, or electronic road user charges. The government is considering whether it would be worthwhile to introduce ERUC.

ERUC has the potential to reduce compliance costs, improve efficiency for operators, reduce enforcement costs (and reduce RUC evasion) and reduce administration costs for collecting funds from heavy vehicles.

It could also provide the option for a more flexible range of charging options over the longer term.

The options, both technically and from a policy perspective, for introducing eRUC are being examined now as part of the business case and I am yet to receive a report on the outcome of the business case.

Other important work going on involves the investigation of the relative costs of road vs. rail transport, known as the Surface Transport Costs and Charges study.

This covers all costs and charges, such as the cost of capital, infrastructure, congestion, accidents, environmental issues, road user charges, vehicle registration, freight tariffs, and passenger transport fares.

Analysis and review of this data is ongoing, I expect to receive a report within the next couple of months.

It will help the government further shape its transport policy, for the freight industry, and private vehicles and passenger transport.

Freight - Rail

Road congestion can have a negative impact on attempts to optimise transport flows between suppliers and consumers.

By promoting alternatives such as rail and coastal shipping, we can relieve some of the pressure on the roading network.

We do not want to impose unnecessary compliance costs on the transport sector or distort efficient choices for freight industry customers.

The government recognises that significant efficiency gains have been made in the transport of freight by road.

Information technology, logistics and technical innovations have all played a major role in achieving productivity gains. Competition has contributed to the increased efficiency of the transport sector.

Addressing infrastructure constraints is a key element of the government’s Growth and Innovation Framework. Effective transport infrastructure, which meets the needs of industry helps attract investment into areas with potential for growth.

Globally, the rail sector has not improved its productivity and has instead concentrated on long distance and large volume freight only. This has led to an overall reduction in rail traffic growth in many countries.

In this country, the deal with Toll Holdings to acquire the national rail network is part of our commitment to ensuring rail continues to play a vital part in our land transport infrastructure for freight.

Investment in the rail network in the next few years will help rail play its part. The country is now on track for a better, safer rail system.

The government is buying the rail track and associated infrastructure for $1 and both partners will engage in an extensive capital investment programme.

The government will invest $200 million to upgrade the rail network, $100 million up front and $25 million a year over four years. The specific work projects will be decided in consultation with Toll and will focus on improving safety and efficiency.

Toll will invest $100 million in rolling stock.

The agreement with Toll will allow the government to achieve a number of important public policy objectives, including implementation of the New Zealand Transport Strategy.

One of the aims of the Strategy is to encourage greater use of rail as a way to ease traffic congestion and as an economic and environmentally friendly alternative to roads.

The deal with Toll has also allowed the government to remedy the worst effects of what was a very soft privatisation deal when the then National government sold rail in 1993.

Unlike with the Air New Zealand and Telecom sales, the government did not insist upon a Kiwi Share and failed to put in place any alternative mechanisms to enforce performance obligations on Tranz Rail.

The result has been a steady deterioration in the rail infrastructure. The government is now in a position, with Toll, the new owners of Tranz Rail to undo that legacy.

Toll/Tranz Rail will have exclusive access to the network for freight services but will have to meet Key Performance Indicators. The government will have “step-in” rights if volumes on a line slip below a certain proportion of current usage.

The government is aware that further efficiency gains can be made on all networks through optimisation and/or maximisation of those networks by improving the efficiency of either the vehicles or the infrastructure.

Freight - Maritime and Aviation

Coastal shipping is very much at the forefront of my agenda at the moment.

I regard coastal shipping as a vital part of our system, and want to see a robust and competitive industry.

The government is still consulting the industry on options, and a paper will go to Cabinet once that process is finished.

Post-September 11 security issues touch on both ports and cargo.

The Maritime Security Bill currently before Parliament, in the name of my Associate Minister Harry Duynhoven.

It affects vessels, facilities, people such as passengers and crew, their personal effects, and ships stores.

We have a deadline of July 1st this year for it to come into effect in order to meet our obligations under International Maritime Organisation requirements.

Port and shipping companies, and maritime unions, have already done a lot of hard work to identify security risks and help develop individual security plans.

I want to thank the maritime sector for its cooperation during the consultation process.

Like maritime security, airfreight security is an issue that is internationally-driven, through multilateral forums in which New Zealand is an active member.

Legislation currently before Parliament – the Border Security Bill, covers the actual cargo going through the strengthened port facilities mentioned above.

This legislation is the subject of public hearings this week at the Select committee.

It will enable security clearances prior to export.

New Zealand has committed to the APEC Leaders' Statement on Fighting Terrorism and Promoting Growth, in particular the STAR initiative (Secure Trade in the APEC Region).

APEC Leaders, including our own Prime Minister, have stressed the need for legitimate travel and trade to be supported. This means that interventions at the border need to be smart, fast and efficient.

The International Civil Aviation Organisation has outlined security measures that are to be taken relating to cargo, mail and other goods carried on passenger flights.

New Zealand's Civil Aviation Authority will shortly release a Notice of Proposed Rule Making to address this obligation and to invite industry comment.

Another example is New Zealand's active participation in the work of the World Customs Organisation, such as: -

standardising information for identifying high risk cargo; developing guidelines for electronic submission of customs data; and identifying measures to support increased supply chain security

Airlines and airports are right at the forefront of the post-September 11 measures.

There is already increased passenger screening, and in the next few years there will be a move to more comprehensive screening of hold stow baggage.

The Government came up with funding for screening equipment last year, but there will be further operating costs to be met.

Who pays, and how much, is still to be determined. A discussion document will be issued soon,

Government agencies that are concerned with security at the border, including Transport, Customs and the Ministry of Agriculture and Forestry, are working together to ensure that the measures that are implemented for airfreight are efficient, effective and avoid duplication for industry.

Conclusion

Companies and organisations such as yours, whether involved in freight by road, rail or sea are vital components to the New Zealand economy.

By working with you, and increasing government investment in transport infrastructure, we will help return this country’s living standards to the top half of the OECD rankings.

Increased investment in land transport in both road and rail and coastal shipping in coming years will enhance the infrastructure so vital to your businesses.

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