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Duynhoven: Road Transport Forum conference 2008


Harry Duynhoven

18 September, 2008
Road Transport Forum conference 2008

(Speech delivered on behalf of transport Minister Annette King)

==

The Government’s relationship with the Road Transport Forum struck a pothole or two earlier this year, but I am pleased that the relationship I have built with your chief executive Tony Friedlander has been solid enough for us to continue working together productively.

I am also very pleased to have been asked to officially open this year’s conference. I believe that your theme --- “You can bet on success” --- reflects positive steps your organisation is taking to lead your industry forward, facing challenges and creating opportunities along the way.

I would like to thank Tony and his board for inviting me, and I also want to acknowledge Rotorua mayor Kevin Winters who is also here today.

As I said, this has been a year in which there has been plenty of robust debate between the Government and the road transport industry, but I come to this conference proud of the fact that whatever differences your industry and the Government may have from time to time, the Government has done much to allow your industry to operate more efficiently and effectively.

In saying that, I am referring particularly to roading infrastructure, of course. From 1999/2000 to 2007/08, total investment in State highways through the NLTP has been $6.6 billion, a staggering investment following the inertia of the 1990s when investment slowed to a trickle.

And this year, 2008/09, will see more than another billion dollars ($1.2 billion to be precise!) spent on SH construction and maintenance.

Those are statistics I am proud of, and I am sure that even if they are not on the lips of every truck driver and trucking company around the country, there won’t be many truckies who have not noticed the positive difference in our roads over the past decade. The good news is that the Government is committed to keeping the investment going, and is considering innovative ways of ensuring we get even more value for money in the future.

Before I address a number of subjects I know you are interested in, I will talk briefly about some of the changes taking place in the wider transport sector that will affect all your members. This will give you an overview of where the Government is heading.

The transport sector has certainly seen a frenetic pace of change in the past 12 months with the far reaching implications of the Next Steps review of the land transport sector, the passing of the amended Land Transport Management Act, the establishment of the New Zealand Transport Agency and the release of two key transport documents – the New Zealand Transport Strategy 2008 and the Government Policy Statement on Land Transport Funding.

All of these will affect the road transport industry in what I believe will be positive ways that will aid the efficiency and sustainability of our entire transport system in the future.

With that in mind I would like to outline some of the guiding principles behind this work.

* Firstly, transport is critical to economic progress. A high level of value for money investment is required across different modes of transport to address ongoing infrastructure needs.
* Secondly, transport must be thought about in an integrated way. Each mode – from walking to rail freight, road transport to coastal shipping and air -- must play its part in our long term transport strategy.
* Thirdly, transport must be environmentally sustainable. There is no one solution, but an innovative approach to creating sustainable transport alternatives will mean we will achieve our targets whilst still also meeting our economic and social needs.
* And fourthly, New Zealand’s international transport links cannot be put at risk. We must invest so that our exporters can compete.

These overarching principles are what would be called, in marketing-speak “critical success factors” – in other words, these are the factors that we have to get right.

At an overarching level, I’d like to define the problem we face. The major challenge of the future is to improve the way we travel and move freight, but in ways that do not compromise our health or cost the environment. At the same time our modern economy demands a transport system that remains affordable, is more accessible and will assist economic development.

Two months ago I launched the New Zealand Transport Strategy 2008 -- an update of the first Strategy released in 2002 and the first Government Policy Statement on Land Transport Funding, or GPS. These are two of the most important transport documents in some time.

The principles underlying our vision -- to have an affordable, integrated, safe, responsive and sustainable transport system -- have been articulated through the New Zealand Transport Strategy.

It will provide direction over the next 30 years and will usher in a new era for transport by setting out, for the first time, defined targets for the whole sector, and actions needed to achieve these targets.

One of these targets is to help halve per capita domestic greenhouse gas emissions from transport by 2040.

We will see more hybrid and electric vehicles on our roads; more people walking, cycling and using public transport; and more movement of freight by rail and sea. But be aware that we also anticipate increasing amounts of freight to be carried on our roads too, so ongoing productivity in this area will continue to be very important. There will also be greater use of renewable fuels, more efficient technology and improved operating practices.

The Strategy also covers road safety, public health, and of particular interest to this audience, improving journey times and journey time reliability, with a focus on investing in critical multi-modal infrastructure essential to New Zealand’s economic growth.

This will be achieved by investing in critically important major routes for moving freight, developing rail and port infrastructure and the transport sector workforce that will sustain it, as well as continuing to invest in Auckland as a priority.

While the Strategy has a long-term outlook, the Government Policy Statement sets out shorter-term targets, allocating land transport funding over the next six years. This will be released every three years, guiding the new three-yearly National Land Transport Programmes.

The GPS describes what we want to achieve through funding for the land transport sector, how much funding will be provided to the sector, what areas of transport will be funded, and how funding will be raised.

In developing the GPS, we have aimed to achieve a balance between the need to invest in the land transport sector with the burden that increasing fuel prices are having on New Zealanders. This recognises that we need to invest in transport for the future, but it must remain affordable for everyone at the same time.

The passing of the amended Land Transport Management Act has also enabled a range of regulatory changes in the transport sector.

As well as giving legal status to the GPS, the Act has enabled the establishment of the New Zealand Transport Agency, which on 1 August took over the functions of Land Transport New Zealand and Transit New Zealand.

This move has reduced the number of Crown entities involved in land transport planning and provision and will lead to more consistent and integrated decision making.

Regional land transport committees have been replaced by regional transport committees which now have enhanced functions.

It has enabled full hypothecation (or dedication) of all revenue from road user charges, petrol excise duty and motor vehicle registrations to the National Land Transport Fund for transport purposes.

Finally, the Act enables regions to levy regional fuel taxes in order to bring forward capital projects – high priority transport projects that cannot otherwise reasonably be funded from any other source in the timeframe desired by the region.

A regional fuel tax is not compulsory and will only be introduced when needed and at a level that is appropriate for the region’s requirements.

Auckland Regional Council has already expressed the desire to implement a regional fuel tax to fund the electrification of its urban rail network and a number of other multi modal projects and I expect as more regions consider their future transport needs this funding tool will be a valuable addition to see major projects completed within the timeframes required.

With the growing focus on critical routes, investment in land transport will remain vital and already the Government is undertaking the largest land transport programme ever seen in this country.

The 2008/09 National Land Transport Programme allocated $2.7 billion across 12 activity classes. This is a record level of investment and an increase of 12 percent from the $2.4 billion allocated in 2007/08.

The latest NLTP means total Government investment in transport since 1999 has increased by more than 180 percent from just over $1 billion in 1999/2000 to a forecast $3.1 billion in 2008/09.

The roading share of this pie has more than doubled since 1999 from $850 million to over $1.9 billion in 2008/09.

The addition of full hypothecation to the funding tool kit isn’t a silver bullet for ongoing funding issues, and it certainly won’t make the tough decisions go away, but it will put the sector in a better position than it would otherwise have been without it.

A project which will interest Forum members is the investigation into procuring the Waterview Connection section of Auckland’s Western Ring Route through a Public Private Partnership or PPP.

This section of the Western Ring Route is currently unfunded. The project is estimated to cost almost $2 billion. However, the Government sees Waterview as a good candidate to test the feasibility of a Public Private Partnership in the New Zealand context. Should Waterview be progressed this way, it would be our largest transport project ever.

PPPs as a delivery model offer a number of advantages such as better whole-of-life project evaluation to minimise overall costs and allocating risk to the party best able to manage it. This can significantly improve the proportion of projects which are delivered on time and the opportunity for innovative approaches. Overall, this has the potential to enhance the quality of delivery and reduce the cost to the public sector.

Last month I released the findings of the steering group I appointed to investigate the feasibility of delivering Waterview as a PPP. It found that procuring the Waterview Connection as a PPP could deliver greater value for money than conventional procurement so long as certain critical success factors are met.

Based on the advice of the steering group, work to develop a final business case is now being undertaken so a decision can be made on whether to commit the Government to progressing Waterview as a PPP.

Treasury, the Ministry of Transport and the New Zealand Transport Agency will report back on this work as soon as possible, I hope by late October.

And sticking to the topic of funding, I could not leave here today without updating you on progress on the review of the country’s Road User Charges system.

As you are all aware, RUC was increased in July in line with the implementation of full hypothecation of fuel excise duty to the National Land Transport Fund. The increases were necessary to balance the relative contributions of petrol and diesel vehicle users to develop and maintain the road network.

There are arguments on both sides as to the best way to set and change RUC rates, but I am pleased the Forum has recognised that the Government has listened to its and other road users’ concerns about the current RUC system.

The independent review I have instigated, after discussions with the Forum,will look at the technical process and methodology for reviewing and adjusting charges, including consultation and notice of changes. It will also consider the relative merits of RUC and diesel taxes.

The goals of the review are to ensure that the current charging system is fair, efficient and based on up-to-date information.

The group is chaired by James Hill, with Warren Young and Tony Gibson assisting him. All three have significant expertise and knowledge of economics, business principles as well as the transport and roading sector. Ministry of Transport Acting Chief Executive Wayne Donnelly will act as the review adviser. The report back to the Government is due in March 2009.

What is paramount to me is that we have a system of allocating transport costs that delivers fairness to all road users - whether they are truckies, car drivers or public transport users --- and I am confident the review will answer this question of fairness.

In July I also announced a Funding and Charging Review for the transport sector.

This is a wider, strategic review of the mechanisms by which revenue is generated for land transport investment, and the way this revenue is used for funding.

While a review of charging methods was identified as a specific action in the NZTS, other factors influenced this including questions of:

* whether the current arrangements are capable of providing a sustainable level of funding for transport investment over the medium to long term
* ensuring that investment is best allocated to support the achievement of the Government’s transport objectives and targets and;
* the role that charging systems have in influencing travel behaviour, and the need for behavioural change if the targets set out in the NZTS are to be met.

The RUC review will feed into and inform this larger review, but given the scale of the work to be done, this wider review will take approximately two years to complete.

While we are on the topic of information gathering I am pleased to be able to note the release today of the National Freight Demands Study on freight movement in New Zealand by the Ministries of Transport and Economic Development.

The study was jointly commissioned by the Ministry of Transport, the Ministry of Economic Development, and the former Land Transport New Zealand in order to inform future transport decisions that have the potential to affect our economic development and global market competitiveness.

Not only does it give us a picture of what’s happening at a national level, but data gathered at a regional level is particularly useful in guiding central and local government decision making.

The results of the study can also help to inform the individual decisions of New Zealand businesses as they move their goods throughout the country.

The study identified that total freight moved nationally in 2006/07 was approximately 225 million tonnes. An estimated 70 percent of that freight was found to be moved via roads compared to the previous figure of 67 percent in 2005.

Rail was found to have a slightly lower freight share at 15 percent (compared to 18 percent in 2005) and coastal shipping had about the same freight share of 15 percent.

Projections for future freight movement made in the study estimate that total tonnes moved in New Zealand may increase 75 percent by 2031 (over the 25 year period from 2006).

With this level of increased demand, we are likely to see increased freight on roads, despite our plans to increase the contributions from rail and coastal shipping.

As I said earlier, how we manage this predicted growth will be the challenge over the coming years but I am confident the Government‘s actions, some of which are already in place, will aid us in achieving our economic and environmental and social goals.

As you know, one initiative in response to this increasing freight task is the Ministry of Transport led project trialling a controlled permit system allowing trucks to carry heavier loads.

Road transport companies from across industry are taking part in the project, allowing weights of up to 50 tonnes – an increase on the 44 tonnes currently allowed by law.

I have championed this project, because if New Zealand’s economy is to continue to grow, efficiency in moving goods on our roads needs to improve.

The permit system has the potential to improve this efficiency by consolidating loads and reducing the number of vehicle movements required to distribute the same amount of freight.

The trials are also an important step towards working hand in hand with the Government’s initiatives to support sea and rail freight objectives.

Different freight modes can, of course, work in complementary ways. To illustrate this some trials have a multi-modal component – where part of the transport chain will be provided by rail or coastal shipping.

Four trials are already underway including the transportation of waste from Christchurch, bulk cement to Westport Port, aviation fuel to Christchurch Airport and bulk and bagged cement deliveries in Otago and Southland.

The next round of trials to be rolled out will include liquid nitrogen, forest products and milk tankers with future trials covering a range of products from frozen meat to steel.

During this process the Ministry will be measuring emissions from both heavier and existing trucks to assess if there is any measurable or significant difference in emissions, while noise and vibration impacts will also be assessed for safety and road maintenance implications.

It’s important to emphasise too, that the heavier vehicles will meet all current safety standards.

Another key factor with this controlled permit system is the responsibilities of road controlling authorities and the question of who will fund, and how, any increased maintenance costs that arise as a result of the operation of heavier vehicles.

This important issue continues to be worked through, and it is anticipated this will be able to be discussed in more detail with road controlling authorities as the project progresses.

Because we wanted to know more about people’s perceptions of heavy vehicles, the Ministry has carried out a survey. The results are still preliminary and more work needs to be done, but analysis of the results indicate that 71 percent of motorists surveyed had a positive or neutral attitude to heavy vehicles, with only 28 percent viewing them in a negative light.

In fact, 82 percent agreed that, quote: “most truck drivers are very considerate”. In all 83 percent either agreed or were neutral about being comfortable sharing the roads with trucks. While there were some concerns -- particularly around truck driver fatigue, trucks driving too fast and the impact they have on roads -- on the whole this survey demonstrates your good standing amongst the driving public.

This is due, I’m sure, in no small part to the collective efforts of the industry to instil the importance of best driving practices in all drivers.

In the interests of fairness, the project also carried out a survey of truck drivers’ views of other motorists with equally intriguing results.

Almost half of the truck drivers surveyed, 46 percent, believed the motoring public had a negative view of them – a view you may now have to change!

However, the survey did show that what truck drivers are concerned about is how the general motoring public behave around trucks, particularly when overtaking, given their size and limited ability to manoeuvre to avoid crashes.

I’m sure these findings will be food for thought for you all.

Now I want to turn to the very important issue of workforce capacity and training.

I am aware of a shortage of skilled workers across the transport sector. From aviation to road construction we are finding it harder to recruit and retain the people we need to keep the sector going.

This shortage has many causes from an aging workforce, migration and changing career expectations among school leavers.

Finding and retaining skilled workers will be an ongoing problem, particularly as the workforce gets older and demand for transport infrastructure and services increase.

The New Zealand Transport Strategy responds to this challenge by recognising that a further priority for investment is the development of the transport sector workforce.

While there will be some immediate short term steps we can take to alleviate the problem, ultimately we must take a strategic long term approach to addressing this problem.

To inform this strategic approach, the NZTS sets out the work that needs to be done now to determine current labour shortages, labour market constraints and future skill demands across the transport sector.

This work will be done in partnership with both industry training organisations and private sector transport organisations, with a view to developing a longer-term approach.

I know your organisation will be able to make a valuable contribution to this work and you can expect to receive further information from the Ministry of Transport in the near future.

Finally today I want to talk briefly about the Emissions Trading Scheme which has just passed its third reading and is set to become legislation.

The scheme establishes the framework for pricing greenhouse gas emissions and puts direct responsibility for climate change on the activities that cause emissions.

Over time, the scheme will include all sectors of the economy, but for now it is important to phase it in at a pace which is fair and affordable for households and businesses.

The entry of petrol and diesel to the scheme in 2011 will help us meet the transport related targets of halving per capita transport emissions by 2040 and provides an incentive for the purchase of more fuel efficient vehicles.

While the ETS is not set to affect fuel prices until 2011, the Government recognises the pressure of increasing fuel prices and is already working on other initiatives to reduce our fuel consumption.

The biofuels sales obligation, which comes into effect in October this year, requires biofuel to make up 2.5 percent of fuel sold by oil companies by 2012. This initiative will reduce greenhouse gas emissions by approximately a million tonnes between 2008 and 2012.

We have also been working in partnership with industry to identify a package of initiatives that will enhance fuel-efficient operator commitment, fleet management and driver behaviour in our light and heavy commercial fleets.

Initial feedback, combined with research, suggests there is strong potential for fleet operators to make significant bottom line savings and, at the same time, increase general safety and operational efficiency out of increasing efforts to save fuel and reduce CO2 emissions.

I want to finish today by agreeing that it’s fair to say the transport sector faces a number of challenges in the future, and what is clear is the need to plan strategically –- both in terms of the environmental and economic implications and the sustainability of the workforce that drives projects.

It is also important to continue to engage in open dialogue so the Government and industry can work together to find the best solutions to the challenges we both face.

Thank you again for inviting me to join you today, and I wish you a successful and happy conference. Thank you.


ENDS

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