The heavy transport sector in New Zealand is under financial pressure, with softness in global markets and a subdued domestic economy. Yet, there are some positives for our sector, and the country.
Comparing July 2023 to the same period in 2024, exports rose by 14% in value to $6.1 billion. Meanwhile, the challenge of finding drivers has eased, but this may only be a temporary reprieve.
Infrastructure Funding – A Complex Challenge
If anything showed up on the radar this year it was how improving New Zealand’s infrastructure hinges on funding it. For nearly 50 years, the country has operated on a “user pays” model. Petrol vehicle owners pay Petrol Excise Duty (PED) per litre, while diesel vehicles pre-purchase Road User Charges (RUC) based on distance and axle configuration.
This revenue used to be ring-fenced for road construction, maintenance, and upgrades. Over time, it has also come to be used on public transport, cycling, walking, rail, and coastal shipping.
New Zealand has about 4.4 million vehicles, of which trucks account for about 3.5 percent (around 150,000). Together, PED and RUC generate about $4 billion annually, with most PED revenue coming from petrol vehicles and the bulk of RUC revenue from trucks. Local road authorities contribute another $2 billion annually from ratepayers to maintain local road networks.
The government’s three-year roading investment package, announced this year, totals $33 billion—a 35 percent increase from previous funding cycles. However, with annual income from PED, RUC, and rates at about $6 billion, the Crown currently bridges the gap with $5 billion annually. The government has signalled this reliance is unsustainable.
So it looks like things are about to change. Declining PED revenue, driven by fuel efficiency and the electrification of vehicles, has prompted the government to plan for universal RUC. This shift will require nearly 3.5 million petrol vehicles to adopt a tax model similar to diesel and electric vehicles. While this approach could stabilise revenue, it presents risks in implementation and compliance.
Exploring Alternative Revenue Streams
Other funding methods are being considered. Public-private partnerships (PPPs), like the one used for the 27 km Transmission Gully highway north of Wellington, are gaining traction. These partnerships involve private consortia financing, constructing, and maintaining roads.
Toll roads are also on the cards. While the tolling of new roads, which are a new and better alternative, appears to be reasonably well accepted, there is much less appetite for the tolling of replacement roads.
Congestion pricing is another possibility, but progress is slow. For instance, a proposed congestion charge for a major port has been shelved for now.
In my opinion one thing that is common to all this is that the cost of road transport will increase and as the revenue generating channels increase, providers of heavy transport services will play an increasing role as tax collectors.
Hopefully the administrative costs associated with this will be manageable and customers will accept these charges being passed on. But in reality this is nothing new – it will be more about a shift in the respective proportionality of how the costs components of transport services are made up.
Zero-Emission Vehicles and Policy Gaps
Across the Tasman, Australian road agencies are granting zero-emission heavy vehicles exemptions for higher tare weights, reflecting their environmental goals.
New Zealand, in contrast, is still deliberating on a similar policy, despite the sector’s calls for action. Given New Zealand’s reliance on international manufacturers, delays in aligning with global trends risks compromising future vehicle supplies.
We may be much better at rugby than Australia, but to be honest I’d give that advantage away if it meant we could be better than them at making all our transport policy decisions faster!
The Fleet Saver Debate
Lastly, the government’s cost-cutting measures have raised concerns about plans to end the successful Fleet Saver truck safety programme.
ACC says the industry could build a similar system but stopping a successful programme on the basis that there is potential to build and replace it with something similar seems an unnecessary waste of time and money.
We need to be smart, we need to use common sense. I think less dogma and much more pragmatism would make life easier, and better, for a lot of New Zealanders.
