The global economy starts to recover…

The global economy is recovering from the economic slowdown, and financial conditions have improved, but the pace of the recovery varies throughout the world and is still fragile. Unprecedented government and central bank interventions around the globe have stabilised financial institutions and markets, stimulated demand and restored confidence to businesses and consumers. Across advanced economies, following sharp declines, output has increased slightly in some countries and fallen at a more modest pace elsewhere. Emerging economies, particularly in Asia, are returning to previous growth rates more quickly. As a trading nation with long distances to transport our products to markets, the state of the world economy has a significant impact on New Zealand’s livelihood.

Challenges for the New Zealand economy remain…

While the worst of the global recession seems to have passed, it will still take some time for economic growth to gain pace again, and New Zealand remains exposed to the risk of similar shocks. The challenge for the New Zealand economy is to sustain growth and to increase economic resilience. 

Even though New Zealand’s economy is recovering gradually, growth rates of 0.2 percent* are not yet sufficient to impact positively on the labour market** or the government’s budget, which showed an operating balance of a $10.5 billion deficit for the last financial year***

New Zealand’s freight demand is expected to grow by 75 percent over the next 20 years****. This will increase existing capacity issues in freight transport, such as imbalances between goods that are imported to New Zealand and goods that are exported.

* Real Gross Domestic Product in the June and September quarters of 2009. 
** Unemployment was at 7.3 percent in February 2010 (Statistics New Zealand, 2010).
*** The Treasury, 2010.
**** National Freight Demands Study, 2008.

Key transport challenges…

Transport is vital to supporting economic activity, and plays a core role in assisting the economy to grow, improving safety, connecting our communities and lowering the associated environmental effects. However, it faces a number of challenges.

Removing transport barriers to ecomic growth and productivity

While New Zealand is an economically advanced country it is in the lower half of the OECD prosperity rankings. This is linked primarily to low labour productivity, which has persisted since the mid-1980s. New Zealand’s distance from its markets results in higher transport, and therefore international, trade costs. To overcome the competitive disadvantage of geographic isolation New Zealand will have to lower domestic freight costs, improve the ease of across-border trading and reduce costs per container to the levels of leading OECD countries*. Changes in structural deficiencies in production capacity may have significant implications for changing economic patterns in the future. While other modes will also play a role, cars and trucks are likely to continue to be key in the future transport task. New Zealand’s infrastructure will require continued high levels of investment, domestic freight transport will need to become more efficient, and journey times more reliable. 

Transport has a highly visible role in preserving New Zealand’s reputation as a safe tourism destination and reliable trading partner. The participation, adoption and maintenance of international maritime and aviation safety and security standards is just one prerequisite. Transport must also play its part in preserving and promoting New Zealand’s competitive advantages as an environmentally responsible exporter and tourist destination. Efforts to increase fuel efficiency and reduce carbon emissions from New Zealand’s vehicle fleet aim to make transport more affordable, energy secure and manage greenhouse gas emissions, while also increasing safety standards. Efficient transport in general will help lower the costs of domestic freight transport when exporting goods and accommodate an increasing volume of freight.

* The cost to export per container in New Zealand is US$868 compared to US$495 in Finland. This includes the costs of obtaining all the documents, inland transport, customs clearance and inspections, and port and terminal handling. It does not include overseas shipping costs or tariffs. (World Bank, 2009).

Keeping transport affordable for individuals and the government

Increasing transport demand and new technologies create significant challenges for sustaining transport revenue and, hence, the affordability of transport for individuals, businesses and the government. Current methods of generating revenue are exposed to a number of fluctuations, particularly in economic activity and oil prices. This affects the government’s ability to fund and invest in priority transport infrastructure within the required time frames. Over the longer term, new fuels and technologies will challenge the way transport revenue is currently generated. Ensuring that transport Crown entities operate efficiently is another part of making the transport system affordable.

Keeping Auckland moving

Auckland is New Zealand’s largest urban centre and is increasingly important for national prosperity and economic growth. Auckland is forecast to grow by the size of Wellington over the next 20 years*, and growth in the Bay of Plenty and Waikato is also expected to be significant. Auckland is the gateway into New Zealand for most visitors, and together with Tauranga, handles the majority of international freight. A major challenge for Auckland’s future success is accommodating growth in an affordable way without increasing the associated side effects.

* Statistics New Zealand, 2010.

Ensuring transport meets society’s wider needs

Transport is a vital part of connecting society. Because of this, New Zealanders expect a fully connected, accessible, clean and safe transport system. They expect a system that contributes to an increase in their standard of living as well as their quality of life.

New Zealand’s comparatively older vehicle fleet impacts on vehicle safety, levels of greenhouse gas and harmful emissions, and transport affordability. In addition, transport alternatives to the private vehicle are limited, partly as a result of low population density, and this creates accessibility challenges, particularly for an ageing population.

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