Strategic Environment

The global economy has slowed significantly …

The environment in which the Ministry now operates is significantly different than that which existed only 12 months ago. The world economy has changed rapidly with the full impacts of the financial market upheaval of 2007/2008 still to be worked through. Most developed economies entered
into recession during the last year and the global economic slowdown shows little sign of abating. Around the world stock markets have fallen, large financial institutions have collapsed or been bought out, and governments in even the wealthiest nations have had to come up with rescue packages to bail out their financial systems. The financial shock has affected the expectations of businesses, households and governments worldwide. This has led to huge instability in markets including foreign exchange markets.

Demand for international travel is consequently decreasing as disposable incomes reduce worldwide, and freight movements are reducing as international trade shrinks. Domestic transport and supply chain operators are finding it increasingly difficult to fund new technologies and initiatives, while the international decline in commodity prices is placing pressure on them to reduce transport and storage costs. World income per capita
is projected to decline in 20093.

This has impacted acros the New Zealand economy …

The impacts of the global economic turmoil are being felt throughout New Zealand. Unemployment is forecast to rise to 7.1 percent in 20114.The government has a forecast deficit of $7.1 billion for 2008/09 increasing to $13.6 billion in 2012/135.

It has presented particular challenges for the transport sector …

The economic downturn and other issues are also bringing particular pressures on the transport sector. The downturn in passenger arrivals (both air and maritime) impacts on the funding of some of the government transport agencies. The New Zealand dollar has fallen 28 percent6 and, while this assists our exporters, it makes the cost of transport more expensive for families and firms as imports of oil and motor vehicles
become more expensive. The increases in the price of oil that were experienced through much of 2008 appeared to have had a positive impact on the road toll (a forty-nine year low of 366 deaths) as fewer kilometres were driven in cars.

In addition, there was a noticeable increase in the use of public transport (it rose by eight percent in Auckland). However, that increase has come at a time when the total funding for transport is under pressure due to projected falling levels of revenue growth as a consequence of lower revenue growth from petrol excise and road user charges. There is a direct link between broader economic conditions and the level of revenue collected as
economic growth drives the level of transport activity which is taxed through excise and road user charges.

And for the Ministry ...

These factors have come together to create a completely new operating environment for the Ministry and the government. Many of the challenges that we faced prior to the financial crisis still remain, including Auckland’s transport issues, lowering the road toll, climate change, transport funding and
minimising aviation security risks. The Ministry has also taken over primary responsibility for the provision of policy advice to the government on rail issues. This follows the purchase of the rail assets of Toll Holdings in 2008, and the government’s goal for rail to compete on a commercial and transparent basis with other freight and passenger transport modes.

Finally, the Ministry has responded to the government’s call for savings and restraint from the public sector and has committed to manage within its 2009/10 baseline funding level through to 2011/12. This will require the Ministry to absorb the cost of any increases in salary or other costs over the next three years, and to carefully examine how we can more efficiently provide our service to the government.

The government's strategic direction

The government’s overall goal is to grow the New Zealand economy …

The New Zealand economy needs to grow in order to deliver greater prosperity, security and opportunities for all New Zealanders. The government is also committed to reducing greenhouse gas emissions and confronting global climate change and will honour its Kyoto Protocol
obligations. It will pursue a balance between environmental responsibilities and economic opportunities.

The government’s response to the challenges it faces is clear – it wants to prioritise economic growth and lift productivity growth.

The Ministry supports that through its thre outcomes ...

The government recognises the potential for investment in transport infrastructure to support its goals for economic growth and productivity, and has brought forward investment in transport through its February 2009 Stimulus Package.

The Ministry is focused on three outcomes that support the
government’s goals for economic growth and productivity:
• improved performance of the transport system
• improved performance of transport sector agencies
• enhanced value from government investment in transport infrastructure.

Its focus is on the government’s imediate priorities …

These outcomes also support the government’s immediate priorities for transport which are infrastructure/roads and road safety. The government is seeking to advance transport infrastructure projects and is developing a National Infrastructure Plan that will fast track some transport infrastructure. This investment in infrastructure is expected to create short-term economic stimulus through more jobs, while in the medium-term it will improve economic productivity. The 20-year infrastructure plan will set a clear direction for vital national infrastructure investment including the first seven Roads of National Significance that were announced in March 2009. Through the update of the Road Safety 2010 Strategy the government
will review road safety interventions and assess their ongoing effectiveness and value for money. The government will also canvass possible new interventions and make decisions on the preferred interventions for implementation.

The Ministry is committed to delivering value for money throughout the transport system. It will be focussed on ensuring its advice and services, and those provided by the transport agencies, deliver future savings without
compromising on high quality services.

Download the table which shows the key outcomes and outputs for the Ministry (PDF v7.0, 59.6kb [PDF, 60 KB])

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