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Research Shows How Ways Of Charging For Infrastructure Impact NZ Households

New research from the New Zealand Infrastructure Commission, Te Waihanga, reveals how different ways for charging for infrastructure affect New Zealanders.

"Whether it’s congested streets or burst pipes, New Zealand faces some significant infrastructure challenges. Overcoming them will mean taking a good look at how best to pay for infrastructure services," says Te Waihanga Acting General Manager - Strategy Judy Kavanagh.

"To meet these challenges, infrastructure providers and decision-makers will face difficult choices about how to pay for the services New Zealanders need. Many factors will go into these decisions, such as making the best use of our current assets and raising enough revenue to pay for new investments," says Kavanagh.

"How we pay for infrastructure currently differs by sector and location. For example, some councils charge for drinking water through rates, while others charge households mainly based on their water usage. As another example, household power bills typically include a mix of fixed charges and charges based on how much you use," says Te Waihanga Principal Advisor Nicholas Green.

"Infrastructure services are often funded via a combination of fixed and variable charges, and both play a part in raising revenue for running infrastructure networks.

"In our ‘Understanding how infrastructure charges affect households’ research we simulated how different mixes of charging policies for electricity, transport and drinking water would affect households on different incomes," says Green.

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"This showed that lower-income households are disproportionately impacted by increasing fixed charges like daily charges for water and electricity or car registration fees. Fixed charges are the same no matter what income you’re on, so for low-income households, a fixed charge will take a larger proportion of the household income.

"The research project also looked at public transport and found that reducing public transport fares currently benefits higher-income households more than lower-income households. This is because the 8% of New Zealand households that pay for public transport tend to have higher incomes. In part, this is because public transport timetables and routes tend to support those commuting to city centres.

"Our research shines a light on the impacts of different payment methods on New Zealand households, so that infrastructure providers and the government can make informed decisions about how to price infrastructure services and assist households in need," says Green.

The research forms the final part of the Te Waihanga research programme ‘What’s fair when it comes to paying for infrastructure’. Other research in this programme revealed how much New Zealanders spend on infrastructure services as well as what they think is fair when it comes to paying for infrastructure.

Read the ‘Understanding the impact of infrastructure charges on households’ report as well as other research from ‘What’s fair when it comes to paying for infrastructure’ on the Te Waihanga website.

Key findings from the ‘What’s fair when it comes to paying for infrastructure’ research programme include:

  • The average New Zealand household spends $13,500 per year on infrastructure. Higher income households pay more in total on infrastructure, but less as a proportion of income.
  • There is more diversity in spending patterns within income groups than between them.
  • New Zealanders hold a range of views about what are fair ways to pay for infrastructure services and these views often differ across sectors. For example, three-quarters of New Zealanders thought it was fair to pay for electricity and water based on usage, but only one-third thought it was a fair way to pay for roads.
  • There is a general expectation in New Zealand that location and cost to supply will not be a barrier to receiving a minimum level of infrastructure service. However, this does not mean that all households enjoy the same level of service quality.

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