On Friday transport minister Gerry Brownlee spoke to the Road Transport Forum (RTF) on the government’s key transport priorities. Over the years the RTF have been a generous donor (not just to National) and have certainly received a transport policy very much tailored to their needs. There was nothing new in the speech in terms of project announcements and I guess this was perhaps not the audience to talk about the cancelling the Northern Busway extension, for example.
However, there were a few paragraphs that pick up on traffic trends in recent years – with the Minister making some rather weird connections between these trends and the success of the RoNS programme:
Between 2005 and 2012 total road travel – in terms of kilometres travelled – was almost unchanged.
There are likely to have been a number of contributing factors, including the Global Financial Crisis, population changes, and technology changes affecting the way people meet and communicate.
Heavy vehicle traffic was affected more than light traffic, dropping by over 4 per cent in 2009 – clearly an impact of the GFC.
But now we are seeing that vehicle kilometres travelled are beginning to increase again.
Heavy vehicle traffic on all roads increased 2.1 per cent in 2013, while light vehicle traffic grew 1.4 per cent.
NZ Transport Agency traffic counts for State highways shows a 4.1 per cent growth in heavy vehicle travel in the year to May 2014.
New Zealand’s vehicle fleet is also growing.
Average vehicle ownership growth has increased more than twice the speed of population growth, and recently released data shows new car purchases at their highest level since 1981.
These increases are not only because of population increases and the improving economy, but also because of the choices people make about their preferred modes of transport, and this is in the face of the biggest investment in public transport seen in decades.
So the case for investing in strategic State highways through the Roads of National Significance programme has been proved correct.
Gerry seems to be mixing up a few stats here as vehicle kilometres travelled is quite different from individual traffic counts and they aren’t always going to move in unison – but it’s the strange logic of the final paragraph that is difficult to understand. There are a few options below for what he could be trying to say:
- The case for spending $11 billion on the RoNS is to make people drive more.
- With per capita VKT declining a lot in recent years, it makes a lot of sense to spend $11b on a few motorways to try (unsuccessfully) and reverse this trend
- Construction of the RoNS projects themselves generate heaps of truck trips to move earth around, which is the point of the projects and therefore they are a success
Just as a reminder here’s a comparison of per capita VKT and per capita public transport use in recent years:
What’s your interpretation of what Gerry means?
If there’s one thing – more than anything else – that annoys me about the government’s approach to transport, it’s the double standard they apply between state highway projects (particularly RoNS projects) and public transport investment. Getting any public transport funding requires analysis after analysis, proof that the timing of the project is optimal, proof that it’s definitely the most viable and cost-effective option, links with triggers around the level of use or growth in the area the project is located – the list goes on. This would not be a problem if the approach was applied consistently, after all transport projects are expensive and we should be careful when it comes to the use of public funds.
Yet the same level of analysis is never applied to state highway projects, and even less analysis when it comes to the Roads of National Significance (RoNS). Despite major concerns around the cost-effectiveness of many of these projects and a complete lack of analysis when it comes to triggers for timing, the assessment of alternatives or even basic cost-benefit ratios the projects plough on ahead.
This double-standard is carried on through to the latest version of the Government Policy Statement (GPS), which was released recently. The justification for an $11b spend on state highways is fairly general:
Following more than a decade of increasing concern about under-investment in roading infrastructure, in 2009 the Government began a significant improvement programme. With an intention to invest nearly $11 billion in New Zealand’s State highways over the 10 years to 2019, the Government focused on enabling economic growth rather than simply responding to it, providing high quality connections between key areas of production, processing and export.
Continued funding under GPS 2015 (draft) for State highway improvements will bring benefits for national economic growth and productivity, particularly given that State highways carry most freight and link major ports, airports and urban areas.
This clearly leads to a number of questions that could be reasonably asked to check whether this is the best way of spending $11,000,000,000 of public money:
- What proof is there of recent under-investment in roading infrastructure – what’s the major problem the investment is trying to solve?
- To what extent does investing in state highway infrastructure actually boost economic growth – where are the international examples of state highways being a better investment than other transport, or investing in education, or just letting people keep that money and deciding what to do with it themselves?
- How will success of the investment in state highways be measured?
- How do we know we wouldn’t have achieved the same outcomes (or nearly the same) with a much smaller spend?
- What other options for this level of investment were considered and how did they perform on a relative basis?
- Has the investment been working (and how might we measure that), has it achieved its local goals (like reducing congestion) and has achievement of those local goals (if it’s even happened) contributed to greater economic performance to the extent we would hope from an $11b investment?
In some shape or form, these questions have all been asked of public transport investment (either recent or proposed) by government over the past few years – but surprisingly we don’t seem to have seen the same questioned asked of the state highway programme. You’ll also notice the comment about the investment enabling economic growth rather than responding to it. The only vague reference to the impact of billions spent on state highways in recent years comes in the section on Auckland:
Since 2009, the Government has undertaken a major programme of investment in Auckland’s transport infrastructure. By 2017, Auckland will have a completed motorway network and an upgraded and electrified metro rail network. This investment programme is delivering significant results, helping to hold congestion steady despite population growth.
But if we back up a bit, we see the GPS noting that VKT hasn’t grown in recent years:
It seems like the GPS is saying “despite flat traffic volumes and massive investment in state highways, we haven’t managed to reduce congestion at all“. That seems to be a pretty massive elephant in the room signal that the current approach isn’t working. Yet despite some pretty obvious questions about whether we’ve got any value at all from the billions in recent state highway projects, the GPS doesn’t question ploughing billions more into future state highway spending.
Contrast that with the much more cautious approach to spending on public transport improvements:
Considerable investment has been made in the public transport network to build patronage. Much of this investment has been ahead of patronage demand, particularly in metro-rail services. A period of consolidation is needed where the focus is on securing the patronage gains anticipated from measures such as integrated ticketing, reconfigured bus networks, and metro rail investments.
No “period of consolidation” to see whether the gains from state highway improvements are realised though? No checking whether the billions spent on state highways in the past decade has led to improvements in economic performance or even reduced congestion – as per their stated goal? If we were to compare the per capita use of public transport against the per capita use of the roading network in recent years, we find quite a compelling story:
I’m kind of struggling to see how one can interpret the above graph as “we’re not sure whether the PT investment is working but clearly we need to keep spending billions on roads”.
Which is what the GPS does, showing its hypocrisy.
As I discussed yesterday the debate on big urban issues of housing and transport far too frequently descends into left/right debates and today I’m looking at transport.
One of the reasons this has come up is that we’ve had some interesting conversations on Twitter in the last few days with a couple of Nationals MPs, which apart from highlighting a scary lack of understanding about transport, inevitably touched on the issue about whether the transport policy that we generally advocate on this blog fits into the traditional “left-right” political spectrum. Here’s what the fairly new National MP Paul Foster-Bell said on Twitter:
We have a fairly diverse range of bloggers on this site: a couple of economists, a transport planner, an urban designer, an architectural photographer, a planning student etc and of course myself who most recently working in banking and from our discussions I think we have some reasonably broad political viewpoints.
Furthermore, many of the key changes to transport and planning policy that we have advocated for strongest over the past few years hardly align with any traditional definition of a “left worldview”. Let’s take a look a few of our most common arguments:
- Cut back or cancel some of the Roads of National Significance that do not provide value for money. This seems to me like basic fiscal conservatism – as some of the RoNS projects are simply a huge amount of money being spent on a problem that really doesn’t warrant such high investment. Puhoi-Wellsford could be replaced by Operation Lifesaver, Transmission Gully is just overkill for a city that’s hardly growing in population, the Kapiti Expressway has a cost-benefit ratio of 0.2, the Hamilton bypass will carry fewer vehicles in 20 years time than the Kopu bridge did when it was a single lane… and so on. This seems like cutting wasteful spending, something that those on the right of the political spectrum say they want to do?
- Built the Congestion Free Network instead of the Integrated Transport Programme. Ultimately the CFN proposal is at least $10 billion cheaper than the current transport programme for Auckland. It probably has a much higher chance of achieving the many targets that Auckland has set for its future transport outcomes than the ITP is able to meet (although that’s not hard as the ITP failed to achieve just about any of its targets). Similarly to above, this is achieved through chopping out an enormous amount of wasteful spending on unnecessary projects (both road and rail) – yet again, something that those on the right of the political spectrum say they support?
- Built complete Streets. Democracy equality and choice are meant to be good things aren’t they? Most of our roads focus solely on the task of moving as many vehicles as possible and give scant regard for anyone not in a car. Building complete streets that treat each user equally and allow people to have a real choice in how they get around is the ultimate form of transport democracy.
- Improve walkability. We’ve seen both locally and internationally that when there is a focus on improving the walkability and the pedestrian environment (that includes wheeled pedestrians) a couple of significant things happen. One is that people shop more boosting local retail, perhaps the best example of this is the upgrade of Fort St to a shared space which has seen the hospitality retailers revenue increase by a staggering 400%. The second thing is that people walking (and cycling) more is good for them, improving health and therefore reducing long term costs to the health system. This is further enhanced as often these improvements also see a reduction in traffic crashes. So once again we see a case where we can lower costs while also increasing revenue and therefore tax at the same time.
- Get rid of Minimum Parking Requirements. This key proposal is to get rid of a current regulation that causes more harm than good, that adds significant cost onto developers (thereby discouraging development and growth) and often just adds regulatory churn cost for no gain (as it seems most applications for parking waivers appear to be granted). I would have thought this aligns quite well with a “right of centre” political ideology where reducing regulation (especially regulation that harms economic activity and growth) is a very very good thing.
- Relax Planning Rules to give people more Housing Choice. This was covered yesterday but worth repeating again. Most planning rules limit development potential in existing urban areas: whether that’s through height limits, yard setbacks, density controls, parking requirements, minimum unit sizes or whatever. Through the Unitary Plan process we have advocated for (and will continue to do so) the relaxation of planning controls – particularly in areas where it makes good sense to allow high density developments to make best use of existing infrastructure. Similarly to parking controls, this is a relaxation of current regulation that significantly limits development potential and the prospects of economic growth through making better use of inner parts of the city. The relaxation/elimination of economically damaging regulation should be music to a right-wingers ears you’d think.
There are probably many more examples than above, but they give a good overview of why transport policy (and land-use policy) really doesn’t fit well into a traditional “left-right” ideological spectrum. We could easily point out how bizarre it is that our current supposedly centre-right government has significantly increased petrol taxes to spend on a series of very dubious mega-projects in the form of the RoNS. That seems rather more “tax and spend” than fiscal conservatism.
Furthermore, if you look internationally there are many examples of centre-right political parties taking public transport seriously. In Britain, the current Conservative government is making a big contribution to the £15.9 billion Crossrail project in London and is also likely to spend even more money on the High Speed 2 rail project. That government seems to understand the economic importance of having good rail infrastructure. For example, Crossrail massively increases the residential catchment of the Canary Wharf employment area – somewhat similar to how the CRL vastly increases the residential catchment of the city centre. London Mayor Boris Johnson is a big champion of not only Crossrail but also getting more people to ride a bike and is planning to invest huge amounts of money in cycle infrastructure. In Australia, the centre-right New South Wales government is championing and making a massive funding contribution to the North West Rail Link project. Even in Auckland we have business groups who politically are considered “right of centre” supporting projects like the City Rail Link and improved cycling infrastructure.
It’s interesting to try to understand this political divide through other lenses than a traditional “left-right” spectrum. Pro-urban and suburban/anti-urban is perhaps a better lens in my opinion – particularly because it seems to explain better why some right-wing parties (like the Republicans in the USA, the current Liberal Government in Australia and the National government here in NZ) appear to be sceptical at best about public transport, while others (e.g. NSW government and UK government) seem to really understand the importance of public transport.
Perhaps this “pro-urban” and “suburban/anti-urban” divide even exists within the current National Party. It was interesting that John Key (an Aucklander who has lived in big overseas cities for much of his life) was the person who changed the government’s position on City Rail Link while Steven Joyce (grew up in New Plymouth and now lives on a lifestyle block in Auckland) and Gerry Brownlee (from Christchurch) were apparently the biggest opponents of that change. Or how we get current Associate Transport Minister Michael Woodhouse saying this on auto-dependency:
From Dunedin, in case you were wondering.
In Part 2 of my 2013 year in review I’m going to look at transport other than PT so that includes walking/cycling and roads.
2013 has been a bit of a mix when it comes to active modes. There have been some good things happen however in my opinion simply not enough has been done and from what I’ve heard (but haven’t confirmed) Auckland Transport spent well less than they had in the budget for cycling which is extremely disappointing.
Most recently we’ve seen that the council has agreed to allow the Skypath to move to the next stage where the council officers will come up with an agreement on the project with the financial backers before going to a vote some time in 2014. If that part is approved the project will still need to go through a formal resource consent process. The project isn’t without it’s challenges however with some members of the local communities on either side of the bridge determined to fight the project at every stage.
We’ve seen work begin on the Grafton Gully cycleway and Westhaven promenade and cycleway. Along Beach Rd Auckland Transport have finally proposed a proper separated urban cycleway which will probably the first one in Auckland. My understanding is the consultation saw the project get a lot of support so it is likely to go ahead which is great. There have also been some great new pedestrian (and cycling) bridges opened this year including the stunning Pt Resolution Bridge and the Westgate Pedestrian and Cycle bridge which includes quite a fun set of sweeping curves (which were to solve a grade problem).
In the CBD we’ve seen the shared space at the eastern end of Fort St completed while one on Federal St between Wellesley and Victoria St is now under construction. We also had it confirmed that O’Connell St would become a shared space which was a good result after what was initially proposed in 2012. I believe construction on the O’Connell St shared space will begin in early 2014.
Despite the slow progress of walking and cycling infrastructure we have continued to see cycling numbers increase in the city – it’s becoming much more noticeable all over the place. AT have a series of automatic cyclist counters around the city which show this increase.
Roads of National Significance
Waterview took some big steps forward this year and the project is really in full swing. The massive TBM arrived in July and starting its tunnel boring in November following quite a good public open day on the project in October. I’m not sure how fare in it is now but about 1.5 weeks ago it was about 70m in with the entire machine almost completely underground. The video below from the TBM’s facebook page from just before Christmas showing some of the progress
Also part of the Western Ring Route is the works along SH16 and anyone who has travelled on the motorway in recent months will have seen just how much work is going on. The motorway is almost a constant work-site from east of Carrington Rd through to west of Lincoln Rd. The one patch that isn’t – Te Atatu interchange – will likely start construction in 2014 while we will probably see work beginning on the St Lukes Rd interchange soon too.
Puhoi to Wellsford
Over 2013 we’ve seen the work on the Puhoi to Warkworth section advance culminating in the project being lodged with the Environmental Protection Agency late this year as the NZTA tries to obtain the designation. One of the funniest things I found about this is that despite all of the talk that the project was needed as a lifeline to Northland – all of the supporting documents effectively confirmed that the major traffic issues only really occurred at Holiday times (when many businesses are shut down anyway). We also found out this year the project will almost certainly be built by way of a PPP. There are different forms of PPP and not all are necessarily bad however the way this road (and others like it) will be built will see us paying huge ongoing sums to the private funders with little to no risk for them as they will be paid providing the road is open.
By contrast to the Puhoi to Warkworth section, there has been a deafening silence on Warkworth to Wellsford section. The last we heard the engineers were still unable to find a viable route for an expressway standard road. At this stage I would be quite surprised if it ever happened as originally envisioned and an operation lifesaver type solution is probably more likely – perhaps extending that kind of upgrade further north to Whangarei.
We’ve seen work continue on the other RoNS projects. In Wellington Transmission Gully is being pushed ahead despite performing poorly in economic assessments. It will be the first project to use the PPP model that will also be used on Puhoi to Warkworth and it is expected the NZTA will announce the outcome of the process in early 2014. Recently we’ve also seen more about the NZTA’s attempt to get approval to build a flyover around the Basin Reserve. An independent review highlighted a number of issues with how the preferred solution was chosen.
Much more quietly work has continued on the RoNS projects in Tauranga, the Waitako and Christchurch.
Government motorway package
In June alongside the announcement that they will support the CRL, the government also announced an entire package of other road projects for Auckland, some that saw motorway projects previously planned for 20-30 years-time brought forward. Like with all big road transport projects these days there are actually some useful projects in the mix but they invariably get lumped in with some real dogs
The first of the projects to come out of this fast tracked list of projects was officially kicked off a few weeks ago and will see an extra land added northbound between Upper Harbour Highway and Greville Rd. It is one of those projects that is actually worthwhile but some of the other parts proposed in the area including full motorway to motorway ramps fall into the overkill category.
We are likely to hear a lot more about the progress of these various projects in the coming year.
One of the projects on the fast tracked list that has had a lot of attention, especially in the last few months has been the East-West Link. This has been another excellent example of there definitely being an issue that needs to be addressed but with some of the solutions being equivalent to trying to smash a nut with a sledgehammer (or something even larger). Auckland Transport came up with four different options with the worst by far being Option 4 which would have seen a motorway rammed through the suburbs of Mangere at a cost of many hundreds of homes. AT were planning on going to public consultation on the idea in the middle of 2014 – after the time when it was planned they would go to the government for funding for the project.
Thankfully due to public pressure Auckland Transport backed down and has now agreed to talk to and work with the local communities that are affected, not just the business communities like they had been doing. I would expect the East-West Link to be fairly prominent over the coming year.
Funding – Consensus building group
Of course paying for the massive wish-list of transport projects is going to be a difficult thing – unless we change the wish-list. To try and work out how we might do a Consensus Building Group was set up by the Mayor. The idea was to get representatives from different parts of society – including various business and advocacy groups – to sit down and work through the various funding options. The ended up on the conclusion that the below two options were the best ones but that option two would probably be better at managing travel demand. It was also the option overwhelmingly supported in the public consultation.
In my opinion the process was fairly flawed as the CBG members were required to work off the assumption that the list of projects was not able to be changed to get the best outcomes, even if some of the options may have made some projects unnecessary e.g. if road pricing reduced travel demand then some of the roading projects might not be needed therefore reducing the overall amount we need to raise.
Like with the PT projects, we’ve also seen a range of smaller things going on:
- Work on Tiverton-Wolverton has continued and should hopefully be finished fairly soon (it’s looking fairly advanced already).
- AMETI has been quietly progressed, the primary focus has been on the new road alongside the rail line however next year I expect we will start to see work in other areas – for example I hear the Reeves Rd flyover will be fast-tracked
- Late this year we saw plans from AT for a massive upgrade and widening of Lincoln Rd. It’s a project I’m mixed about it, the road is a nightmare and needs improvement however some aspects are insane like intersections over 9 lanes in width.
- Penlink has once again risen on the agenda after being silent for almost three years. AT is apparently trying to hook the project into the same PPP as will be used for Puhoi to Warkworth.
- I don’t know if it’s just my perception but though-out 2013 there seemed to be a lot more crashes on motorways that ended up causing massive system wide meltdowns.
- A potentially $600m+ bridge between Weymouth and Karaka popped up during unitary plan discussions but was thankfully rubbed out with greenfield development being focussed around the rail line negating the need for it
Anything I miss?
In the comments, “Handlebars Matt” provided a link to this video about how nobody is using Portugal’s motorway system – which was built at vast cost over the past decade:
I often fear that this is the future for many of the Roads of National Significance that are either under construction or due to begin construction in the next few years. Particular candidates for incredibly low levels of use seem to be:
- Puhoi-Warkworth. Due to the new road not being much faster than what’s currently there, the Puhoi ramps providing a link between the existing Northern Gateway Road (which does provide a significant time saving) and the existing SH1 likely to be faster and cheaper for most people compared to a toll road that doesn’t even connect well to Warkworth and requires people to double back through the messy Hill Street intersection to get to the eastern beaches.
- Tauranga Eastern Link. We all know the history of toll roads in Tauranga and I struggle to see how this won’t be another empty toll road offering drivers little incentive to use it rather than the existing route.
- Hamilton bypass. Current projections only see 7,000 vehicles using a section of this $890 million section of the Waikato Expressway by 2021. This route seems unlikely to be tolled but will still be something of a “ghost road” even if the notoriously optimistic projections are correct.
The same might be true of many parts of the Wellington RoNS, although if they are “successful” and attract traffic the main impact will be worse congestion in downtown Wellington and reduced use of the railway line.
A shame we won’t be able to learn from Portugal until many billions of dollars of taxpayers’ money has been wasted.
A couple of months ago the government finally announced that they would support the City Rail Link, albeit with a later start date than the council are pushing for. A few days later they then went on to announce a massive road building binge including upgrades/additions to the areas around the interchange of SH1 and SH18, the Southern motorway south of Manukau and SH20A to the airport. Along with this they also agreed on major support for the AMETI project and the East West Link while pushing ahead with designation for an additional harbour crossing.
In each of the roading projects – perhaps with the exception of another harbour crossing – we feel that there are probably some key parts that are worthwhile while other bits that seem over the top. What we definitely don’t agree on is the suggestion that these projects will be moved ahead of the CRL which gives the package the definite feel of an asphaltaholic statement of “just one more road project then we can quit and build the PT”. Of course for these asphalt junkies there is always just one more road that needs to be built first.
One area where the government have been light on details is what the actual costs and benefits of each project are. Well looking through the parliaments questions for written answer section I found the questions from Julie Anne Genter asking about the costs and benefits of the various projects. The answers from Gerry Brownlee are help to shed a bit more light, and concern on the projects.
First the costs.
I have been advised that the most recent cost estimates for the named projects are as follows.
- Auckland City Rail Link – $2.86 billion. This figure is the revised number Auckland Council and Auckland Transport are now using for the project, and includes the additional rolling stock and track upgrades on the wider rail network needed to implement the project.
- Second Waitemata Harbour crossing – $4.7 billion for a tunnel crossing.
- Auckland Manukau Eastern Transport Initiative (AMETI) – $1.5 billion.
- East-West Link – indicative cost of $1 billion.
- Completing a motorway-to-motorway link between the Upper Harbour Highway and the Northern Motorway at Constellation Drive – $400 million for the current scope of works for the corridor which include:
- Upgrading State Highway 18 (Upper Harbour Highway) to motorway standard
- Motorway-to-motorway connections between State Highway 1 and State Highway 18 (both directions)
- South-facing ramps between State Highway 1 and State Highway 17 (Albany Expressway/Greville Road)
- Widening the Southern Motorway between Manukau and Papakura – the estimated cost of widening State Highway 1 between Manukau and Papakura, including a new interchange at Takanini, is $250 million.
- Upgrading State Highway 20A link to the airport to motorway standard – $110 million for the current scope of works for the corridor which include:
- Upgrading and widening of State Highway 20A
- Grade separation of Kirkbride Road.
There are a couple of interesting points in here.
- Auckland City Rail Link – It’s good to see them finally acknowledging that this isn’t just about a tunnel in the CBD but that the costs include a wider network upgrade
- East-West Link – This is much more than what was budget for in the Auckland Plan and the Integrated Transport Programme which suggested $600m. Does this suggest the thinking is for a more expensive motorway type solution like has been pushed by groups like the NZCID?
- Completing a motorway-to-motorway link between the Upper Harbour Highway and the Northern Motorway at Constellation Drive – No mention of extending the busway through this section like we thought may have been included making this piece of work appear to just be a roadfest
- Widening the Southern Motorway between Manukau and Papakura – The ITP projected this as $500m so this is half the price, still expensive though and I imagine most of it is in the Takanini interchange.
- Upgrading State Highway 20A link to the airport to motorway standard – Again this is cheaper than in the ITP which suggests $235m. I can understand the desire to grade separate Kirkbride Rd but not sure what the point of widening the road is.
Another key point is we don’t know if there are any particular details about the costs, for example we know that the CRL has had its costs inflated to the predicted year of spend but we don’t know if that has happened with the other projects. We also don’t know if the other projects have been though much more detailed costing’s like the CRL has, we know they certainly haven’t had the same level of scrutiny.
Moving on to the benefits the point above becomes even more relevant as the benefits are all listed in Net Present Value terms and that will have happened after taking into account issues like the assessment period and discount rate. This means we can’t do a straight calculation to work out the Benefit Cost Ratio (BCR). It’s worth noting that Julie Anne did ask for the BCR for the projects but was just referred to this table.
The thing that is really striking on here is the East-West link has been effectively been given a green light when its benefits have yet to be assessed. Even just last month Gerry Brownlee was suggesting a funding package for the project will being signed off soon. The whole thing has the stench of the RoNS approach all over it – agree to a project before actually working out if it is worthwhile.
Lastly regardless of what way you look at the numbers, the additional Waitemata harbour crossing project really does look like a dog. If it wasn’t being pushed by politicians (of almost all colours and ideology) then I suspect we wouldn’t even be hearing about it as the economic assessment would have buried it long ago.
3 cents doesn’t get you much these days. But when you’re talking 3 cents a litre, times 2.5 million cars, using 1,000 litres a year, it starts to add up. As of today, folks, the excise duty on petrol has been lifted by 3 cents a litre (from 50.5 cents to 53.5 cents), and that’s how much more you’ll be paying at the pump.
Where does the money go? Straight into the National Land Transport Fund. What’s the main reason for the increase? Current National Party policy: the “Roads of National Significance”. We’ve had plenty to say about those elsewhere on the blog, so I won’t discuss them here. National is planning to increase the excise by another three cents next year, and again the year after that.
I should point out that I’m all in favour of these increases, although I don’t necessarily agree with the way they’re being spent. That’ll have to wait for future posts.
I’ll just note that petrol taxation has had a funny ol’ history. These days it’s a more straightforward system than it used to be, and it’s essentially based on “user pays”, with most of the money going to the National Land Transport Fund – which helps to pay for road maintenance and construction, and of course a token amount for public transport. A bit goes to ACC to help cover the costs of accidents on the road. The graph below uses MED data to show how these taxes have changed over time. Note that GST isn’t included here, but of course we do pay that on petrol as well.
The graph above excludes the effect of inflation, i.e. it’s showing the stats in “nominal” dollars. But of course a dollar went further in 1974 than it does today, so if you allow for inflation – converting everything to today’s dollars, or “real” dollars – you get a different looking graph:
Taxes were highest in the mid-70s and mid-80s, but they’ve been increasing fairly steadily since the early 2000s, faster than general inflation. This seems set to continue, given the increases that have been pencilled in for the next two years.
Just one more reason why you can expect petrol prices to increase faster than other prices!
It’s also worth remembering that New Zealand has lower petrol prices than most of the OECD which is primarily a result of the level of tax charged. The MBIE have done some comparisons on this, with the latest one being up to the December Quarter of 2012: