Poor government policy settings destroy roads, and risk collapse of Aotearoa's national rail freight and passenger network

Is our vision for Aotearoa one of an efficient, low emission, and safe rail passenger and freight network? Or, in contrast to all other advanced economies around the world, through poor decision making, are we committing our future generations to rely solely on trucks and cars to move freight and people around the nation?

The Future is Rail wants to see a network of passenger rail services re-established across New Zealand. But passenger rail especially in the regions, depends on having a thriving freight network. We are concerned about the future of rail freight infrastructure across the motu, for both North Island/ Te Ika ā Maui and South Island/ Te Waipounamu. Without rail enabled ferries across Cook Strait, much of the South Island rail network is at risk.

Key customers have made significant investments to support the transport of their domestic and export goods by rail in Aotearoa. In contrast to that vital customer support, government led transport policy changes, have progressively eroded the competitive position of the national rail freight network. The network is now at a point where, for many prospective rail freight customers, pricing is too expensive, and requires minimum volumes that are too large to be feasible. Maintenance funding for the rail network is to be progressively reduced, under the Government Policy Statement (GPS) on Land Transport 2024-2034. It has become increasingly apparent that the national rail freight network as a whole, is at risk of closure, outside of Auckland-Tauranga.

Three government decisions over the last three decades in particular, have been devastating for the competitive position of the national rail freight network.

The first change was the change in regulations in 1994, which enabled the carriage of domestic and transshipment containers under a cabotage agreement, incorporated within the Maritime Transport Act. Cabotage is defined as the right of a company from one country, to trade within the borders of another country. This meant that international shipping companies could “top-up” their payloads, with domestic freight, during the short voyages between domestic ports, while in the course of their international trade. This step, overnight, impacted the prime price-competitive position that the then rail operator; Tranz Rail, held in the core Auckland to Christchurch domestic transportation market. As a consequence, the investment by Tranz Rail’s shareholders in the rail network in 1993, was undermined, almost from the “get-go”.

The other two key decisions, that have brought the national rail freight operator; KiwiRail to its present parlous position, has been (a) the introduction of HPMVs (High Productivity Motor Vehicles) from 2010, and (b) the RoNS (Roads of National Significance) programme that also began from around 2010. The outcomes from the RoNS programme, as envisaged by its authors, saw a large increase in productivity and price-competitiveness of HPMVs, typical of the types of truck and trailer units competing with the parallel rail network. But, in order to make the funding for RoNS work for key roads; money was diverted from general road maintenance.

Road User Charges were never allocated to correctly reflect wear and tear, at the time that the new class of High Productivity Motor Vehicles (HPMVs) was introduced. The result is a “bow wave” of deferred maintenance on local and national roads within New Zealand. This is reflected in the widespread potholes and other damage done to our deteriorating roads. 93% of road wear costs can be attributed to heavy vehicles, despite them making up only ~7% of VKTs. This is because they do far more damage to the roads. A 63-tonne heavy truck does more than 10,000 times as much damage as a small car.

Recent weather events have certainly had an impact on the condition of Aotearoa’s roading network including potholes and subsidence. A key feature of many highways, especially those in the regions, is the use of chipseal surfacing over an unbound granular structure. The road substrate is very thin, and allowed for the rapid and cost-effective development, and subsequent maintenance, of the state highway network from the 1960s. However, it appears that these roads do not cope with HPMVs or heavy road vehicles.

The government has recently announced an increased maintenance budget of $4 billion over the next three years. However, cost recovery from the principal cause of the deferred maintenance has not been addressed. Heavy vehicles will receive a direct annual subsidy of $1.4 billion dollars per annum by 2027, mostly attributable to maintenance costs. They will receive a further indirect subsidy of $8.4 billion dollars per annum by 2027, due to pollution costs ($7.2 billion) and social costs ($1.2 billion) associated with deaths and injuries. Collectively, these numbers represent a massive subsidy for heavy road vehicles, relative to rail and coastal shipping.

Every billion net tonne-kilometres (NTK) of freight diverted from heavy road vehicles to rail and sea, saves an estimated $43 million annually in avoided direct subsidies, and $230 million in avoided direct social and environmental costs per year by 2027. In addition, local councils will save $20 million annually by 2027, in avoided weight and wear maintenance costs, per billion NTK diverted.

The revenue collection and funding strategy regarding heavy road vehicles, needs to align with other modes. Consistent investment in all modes including roads, rail and sea, benefits all road users and lifts productivity. A freight train can be a very cost-effective and more appropriate HPMV, operating on our national rail network, provided basic maintenance such as effective drainage and protective culverts from heavy rain fall, and regular maintenance of tunnels and bridges is carried out.

Investigation into Heavy Vehicle Subsidies on New Zealand Roads

This document was originally submitted as a review of the draft Government Policy Statement (GPS) on Land Transport 2024-2034. The report delves into the details behind the Road User Charges for HPMVs. The analysis within the report uses publicly available data sourced from Waka Kotahi NZ Transport Agency, the Ministry of Transport, and a host of other sources, all of which have been referenced within the report. The team at The Future is Rail will explore key aspects through a series of blog posts over the next few months. These will provide further explanation for the current situation, and how we can invest better, in Aotearoa.