The transport system is confronting a number of big challenges over the coming years and decades. The Ministry has, over the last year or so, moved to strengthen its understanding of these issues and how we can support the Government to address them over time. The challenges include the following.

Understanding and responding to changes in future demand

In the past, there has been a clear pattern of growth in personal travel (vehicle kilometres travelled) but this growth has stalled in recent years. There is some debate whether this trend is the result of economic factors or a structural shift in attitudes towards personal transportation. This makes understanding the future demand for transport a major challenge.

As the choices people make about how and when they travel change, there are significant implications for where we choose to invest, and how we keep Auckland and our other urban centres moving. For the transport system to contribute to a thriving New Zealand, we need to recognise that we are trying to improve access, not just mobility. We can achieve this with good transport systems, with good spatial planning or by improving digital access.

How we integrate these approaches is critical.

To reduce the uncertainty we face around future demand for personal travel, we need to better understand the factors affecting the changing patterns of demand. These include social trends, as well as the speed in development, uptake and impact of new technologies.

There is also a need to build flexibility into the system where we can — this will allow us to respond more quickly to changing patterns of demand, and reduce the likelihood that we will make investments that will become unnecessary.

Finally, we need to recognise that the investment decisions we make will shape patterns of demand and not just respond to them. We should move away from the approach of seeking to simply predict future demand and then provide for it. We should instead debate the sort of access we want and decide how to invest to support the future.

How we fund the transport system in the longer term

Understanding how much investment to make in the transport system, and how to fund that investment, is a major ongoing challenge for the Government. It will become more complex over the next 10 or so years, as the model used to collect and distribute revenue from land transport users comes under increasing pressure. These pressures will arise from a number of factors including changes in population (strong growth in Auckland, while other areas face depopulation), the capacity of some regions to meet their ‘share’ of transport investment, the rising cost of transport maintenance, and the need to better manage demand for transport and its externalities.

The Government’s decisions on how much to invest in the transport system and how to raise the revenue to meet that expenditure impact on the future of our cities and regions, the efficiency of firms’ supply chains and the externalities that arise from the operation of the transport system. The current land transport revenue-raising mechanisms should be sufficient to meet New Zealand’s needs for the next 10 to 15 years.

While we have good data on the affordability of transport, we need better data to assist us to understand how much should be invested in the transport system. This includes enhanced data on asset conditions and whole-of-life costs, demand forecasts, system use and performance, and road users’ willingness to pay.

Investing wisely to support economic growth

Understanding the relationship between transport and economic development, and therefore why and when to invest in transport infrastructure, is a key challenge for the Government.

Transport has a critical role in supporting economic growth. As a country, we depend on international aviation and maritime links to connect us to the global marketplace. Alongside that, the Government has a target of growing exports from 30 per cent to 40 per cent of GDP. We need to avoid unnecessary regulatory barriers to international freight and ensure that our policies encourage the smooth operation of our ports.

While investment in transport has historically been a driver for economic growth, that benefit is largely seen when an economy is developing, and as a country puts in place the necessary transport systems to support a modern economy. Once those networks are in place, the focus shifts to reducing the costs of doing business along these routes (addressing bottlenecks) to maintain relative economic competitiveness.

Transport investments that connect regions to other markets can have a two-way effect. New connections can allow the development of economic activity in a region or they can allow existing economic activity to be drawn away from the region. The impact is dependent on the competitiveness of the regions being connected. In regions that are growing, investing in the transport system can reduce costs and increase relative competitiveness. However, in regions that are declining, investment in new transport systems on their own is unlikely to reverse their decline. While local transport investments might help to create jobs in the short term, in the medium term their maintenance costs may become an additional burden for a declining region. To successfully support declining regions, transport investments need to be part of a wider package of measures aimed at creating the local economic ecosystem necessary to support growth.

As part of our work on economic development and transport, we modelled seven different possible futures, and in all but one of them the relative share of economic activity in Auckland increased from 33 per cent today to more than 40 per cent.

Governments across the world have used investment in transport infrastructure as an economic stabiliser. As an economy has gone into decline, governments have increased the amount that they are investing in transport infrastructure as a mechanism to stimulate the economy. The problem with this has been timing. Typically, governments announce major programmes of investment as an economy goes into decline. But, by the time the new investments are through the necessary planning phases, the economy is again growing so the investment as a consequence ends up creating inflationary pressures when they are least needed.

Embracing the technology challenge and opportunity

Intelligent transport systems are revolutionising transport globally, and these technologies offer some of the best prospects for improvements in safety, efficiency and environmental outcomes. The Government, and regulators globally, will be challenged to keep up with the pace of technological change and ensure that transport rules and regulations or other barriers are not preventing a new technology or business model from being adopted, or deterring developers from investing in research and development. For example, we have seen a rapid increase in the use of remotely piloted aircraft (or ‘drones’), which are being used for an increasingly diverse range of civilian applications, including aerial photography, search and rescue, and agricultural crop spraying.

Another example will be the scope for ‘connected vehicles’ of the future to allow better utilisation of roading networks. This might fundamentally alter the nature of future transport solutions to address Auckland’s growing congestion challenge.

The Government will have an important role in helping to realise the benefits of these technologies — as an investor, facilitator and regulator. However, in most cases, the development of new technologies will be led by the private sector. Their success or otherwise will be determined by whether consumers value them, and there may not be any need for the Government to be involved.

Responding to transport’s environmental externalities

Transport faces a major challenge in responding to two environmental externalities: reducing its level of greenhouse gas emissions and meeting the growing cost of extreme weather events.

Transport produces around 18 per cent of New Zealand’s greenhouse gas emissions. Over the past 10 years, transport greenhouse gas emissions have stabilised. However, this is more closely linked to the flat demand for private vehicle usage that has been observed recently, rather than any fundamental improvement in fuel efficiency. We expect per capita road transport emissions will remain steady or drop slightly, but total transport emissions are expected to increase slightly due to population growth. Transport is likely to have an important part to play in the achievement of any new target for the reduction of greenhouse gas emissions that New Zealand may commit to internationally in the future.

Regardless of New Zealand’s greenhouse gas mitigation actions, our transport system will be affected by a changing climate. There is strong evidence to suggest that more frequent extreme weather events are already causing significant cost and disruptions to the transport network. Closures and repairs needed on transport corridors can have enormous flow-on effects for the affected communities through loss of mobility and access to services that enable productivity. Further climate change and related impacts are expected as greenhouse gas emissions continue to rise globally. This will increase expenditure for maintenance and repairs. Over time, this will reduce the amount of funding available for new infrastructure or create pressure for additional funding to be made available, either by increasing taxes on road users or by other means.

The Government will need to carefully consider the appropriate amount of resilience to build into the transport system. For strategically significant and vulnerable routes, it may be appropriate to invest in preventative measures to minimise the impact of extreme weather-related events before they occur. On other routes, it may be more cost effective to repair the infrastructure when required.


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