The government has released the briefings ministers received from their ministries and of course this blog is fairly interested in what the transport ministry has to say. The briefing has been split into two sections, one giving an overview of the portfolio and the other the policy challenges and upcoming decisions.
The first briefing gives a fairly high level description of what the portfolio is about, what the ministry does and what powers the minister has. It also goes through the various law and rule changes that have happened recently and the levels of funding that the ministry/portfolio is involved in. Overall there isn’t really anything new in here but that is what I would expect to see.
The second briefing on the policy challenges and upcoming decisions is much more interesting as it gives a good indication on the ministries thoughts which are what are likely to heavily influence the minister. The first section that really caught my eye was the section on oil prices on page 17. It seems that there is a bit of confusion in the message they want to deliver, first up there is a sort of high level comment about oil prices saying:
Almost all road transport is fuelled by petroleum products. This fuel source will persist over the next 20 years, but electric and plug-in hybrid vehicles will gradually become more widely used, as the real price of oil continues to increase. However, petrol and diesel will probably still fuel around 85-90 percent of vehicles in 2030.
In the short-term, people resist changing transport usage as costs increase. However,over longer time periods, oil price increases are more likely to induce changes in travel, lifestyle, and locational decisions.
but later on the same page they say
New Zealanders have a range of preferences for how they arrange work, shopping, socialising, and participation in education. These lifestyle preferences usually require travel. In the short term, individuals are reluctant to make lifestyle changes when the cost of transport increases. However, sustained oil price increases are more likely to induce change in travel patterns over longer periods:
• In the medium term (say 2–5 years), people can purchase more fuel efficient vehicles and make greater use of public transport, cycling and walking, where those choices are feasible.
• In the longer term (5–20 years), people will be more willing to make substantive and permanent changes to lifestyles in order to reduce their transport demand. For example changing patterns of social interaction, and living closer to places of employment and education.
So in 20 years time with high oil prices most vehicles will still be powered by oil based fuels but at the same time now where near as many will be driving them as most people would have made large changes to their lives to reduce their demand for transport or at least oil fuelled transport (but more on that soon).
The next thing that caught my eye was in the section on Land Transport starting at page 20. In the very first comment they say:
It will be increasingly important to manage the existing land transport network to its full potential.
There are wider economic impacts that cannot easily be estimated and considered in the traditional benefit cost ratio (BCR) evaluation framework. The current BCR assessment is based on a relatively high discount rate (8 percent real) and a 30-year horizon. This rate tends to discount away the benefits of long-life projects, such as motorways.
In the cities, cars remain the dominant means of people transport. Urban transport networks will need to become more effective through better use of infrastructure, urban planning, demand management tools and public transport increasing its role.
They acknowledge that we need to move away from the traditional BCR framework but this is exactly the thing they slammed the CRL business case for, it has also noted here in the past about just how much impact having a high discount rate and relatively short assessment time frame has on the outcomes of projects.
Continuing to work my way through the document I really had to have a chuckle at these two comments:
55. New investment in State highways is evaluated by the NZ Transport Agency (NZTA) using three criteria.
(a) Strategic fit which considers national strategic objectives as specified in the Government Policy Statement on Land Transport (GPS)
(b) Effectiveness which considers how well proposed activity would achieve the GPS impacts identified in strategic fit
(c) Efficiency which measures the BCRs
57. The major highway projects tend to score well on strategic fit. The BCRs for major improvements to the network have declined in recent years.
Basically that means the government tells the NZTA what projects it want and if the NZTA goes to do them then they can tick off two of the three assessment boxes which means that economic considerations get largely pushed out of the way and that is evidenced in the last part of comment 57. In just 5 years we have gone from have over half of all approved projects having high BCR’s to over half of them having low BCR’s. That’s an astounding change in such a short time considering there are a large number of projects out there that haven’t even been approved yet, things like Puhoi to Wellsford or the group of projects in Wellington.
The last thing I will cover in this post is showing just how much our transport expenditure has changed over time, as you can see spending has really ramped up in the last few years and in the space of about 5 years we have more than doubled how much we spend as a percentage of GDP. Of note the transport and storage sector accounts for around 5.2% of all of our GDP
There is quite a bit more to cover, especially the parts that relate to Auckland but I will leave that for the next post