Transport planning and costs

This page provides an overview of the AA's policy positions on a range of issues related to transport infrastructure, planning and costs.

The AA bases its views on the results of regular surveys of AA Members, research undertaken through the AA Research Foundation, and information from other researchers and experts in the transport sector.

 

Transport infrastructure planning and investment

People need a safe, efficient, and affordable land transport network of roads, public transport, and walking and cycling infrastructure to get to and from work or school, spend time with family and friends, run errands or pick up groceries. 

Such a transport system doesn’t come about by chance. There are normally more projects proposed than there is funding available to deliver them, making it essential that we carefully plan to ensure our transport system meets our needs, and that we have reasonable funding approaches in place.

Motorists fund the bulk of our transport system through petrol taxes and road user charges. Funding pressures are high as travel demand is increasing, trauma from road crashes remain high, and we work to meet the challenges of climate change.

In the AA's view, the use of road taxes to also fund major non-road capital expenditure (e.g. KwiRail and rapid transit) has complicated things. It has diluted the focus on value-for-money and transparency, led to multiple funding sources and decision-making processes for land transport* and ongoing uncertainty about transport investments. It makes it much more difficult to follow how much road users are paying and what services are being delivered for the money they invest. 

Increased revenue generated from motorists has not been met with a proportionate increase in investment in services that directly benefit motorists. The Government's Policy Statement on Land Transport (GPS) in 2018 reduced funding for state highway improvements by approximately $5 billion over 10 years, meaning projects NZTA had assessed as high value for New Zealanders stopped.  The NZ Upgrade Programme largely replaced this funding, which we support, rebalancing funding in the short term. However, this approach has delayed these projects, created planning and market uncertainty, likely reducing value for money. The GPS 2021 further decreases state highway funding (by $1.25 billion over 10 years compared to GPS 2018) and local road funding (down $1.7 billion). This continues the uncertainty in the transport sector, impacting capacity to deliver transport investment, and some communities are left without clear plans.

The AA supports more investment in road maintenance and road improvements (e.g. barriers, wider shoulders, rumble strips) and the national road safety programme Road to Zero.

The AA supports capital investment in metro rail, rail freight and rapid transit, as important parts of the transport system, and these investments need to be coordinated with road investments. However, these investments need separate funding sources**. The AA opposes road user revenue funding rail capital, as the opportunity cost is direct road safety investment. 

The AA supports investments aimed at mode shift (encouraging the use of public transport and walking and cycling) where these provide demonstrable transport benefits, made through a transparent and balanced assessment process that chooses the best mode for the task. Such investments must be realistic about the potential for change, based on actual level of desire (not just the stated level of desire) to change modes, and an understanding of why people choose to live and travel the way they do.

Travel demand is forecast to continue to increase over the next 10 years, albeit likely at a lower rate of growth than pre COVID-19 predictions. Increased investment is needed in all modes to accommodate growth, accompanied by optimum funding arrangements, given the escalating and unsustainable reliance on motorists to generate revenue.

Transport needs are different in each region and so solutions should vary accordingly. The AA believes good consultation with the community is essential through all stages of infrastructure planning. Similarly, people’s individual circumstances shape what they need from the transport system, and not all modes are interchangeable.

Great gains in network efficiency are increasingly becoming possible with developments in digital technology - for example in monitoring the network to identify congestion issues and opportunities, and providing timely information on transport services for users. The AA is a strong supporter of creative solutions like these to improve transport systems and make better use of already existing infrastructure.              

It is also important that transport decision makers plan for and accept some uncertainty when considering the future of travel. This will enhance our ability to adopt and benefit from rapid advances in transport technology.  

*For example, the NZ Upgrade backfills some of the road taxes diverted from road funding.
**Multi-year budget appropriations are well suited; and the impact of planning uncertainties would be mitigated with funding allocated from a much bigger pool.

 

AA submission on the draft Government Policy Statement on Land Transport 2021/22 – 30/31

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Public transport investment

In recognition of its crucial role in transport, fares for public transport trips have been subsidised by road user revenue since 2008 (the subsidy covers approx. 25% of bus fares and approx. 60% of rail fares).

The AA supports this as a reasonable contribution from motorists to services that reduce congestion on the road network. Our Members have also supported some level of subsidy for public transport in surveys.

Given the high costs of building new infrastructure it is important that authorities analyse public transport proposals very thoroughly, as they do when considering building new roads. Otherwise as a society we risk building infrastructure that is under-utilised and costs us all to maintain while only a small proportion benefit. The AA does not want to see funding from motorists for some public transport infrastructure at a level where funding for high value road safety investment is compromised. Therefore, other revenue sources for expanding public transport capital investment are required.

Given the localised benefits of some of the biggest public transport investments, particularly big rapid transit projects, we support targeted funding whereby those who directly and significantly benefit from the project meet more of the cost (provided robust and transparent processes are in place). For example, a levy on developers, or targeted rates on home owners in the area of a major project.  

Public transport is part of the solution to address transport emissions. However, NZ has a small taxpayer base for its geographic area, which places limits on where effective public transport services can be provided at a manageable cost. For this reason, we call for more investment in alternative fuels (e.g. biofuel), demand management, shared mobility, and low or no emissions vehicles.    

The AA believes that building sufficient park and ride facilities at public transport stations is a particularly effective way to encourage more public transport use on main arterials because it gives people flexibility and independence at the home end of their journey.

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Road maintenance

New Zealand has over 90,000km of roads.  The length of road per person in New Zealand is one of the highest in the world.  Like all assets, these roads need to be adequately maintained to ensure they remain safe and fit for purpose. 

Good road maintenance is a critical factor in road safety – safer roads are one of the four pillars of the national road safety strategy Road to Zero.  Maintained roads are safe roads - road surface quality determines the grip a vehicle has with the road and its risk of skidding. Poor quality roads increase crash rates, especially loss of control crashes where vehicles cross the centre line or run off the road.

With rising maintenance costs, the amount of driving increasing (including by heavy vehicles) and an increase in the overall length of the road network, it is essential that funding increases to keep pace with the increased maintenance requirements. This was not the case from 2010-19. As a result, the road network condition declined and there is a significant “backlog” of maintenance work required to restore the condition to the standard it should be.

Road maintenance is a major concern for AA Members. ’Money wasted through repeated rework’ and ‘road surface quality’ have regularly been among the top concerns out of 46 options in our annual District Concerns survey. These two issues are collectively ranked ahead of other transport concerns like congestion, speed, parking, and policing.     

The AA monitors road maintenance delivery nationally and locally, and has concerns about the condition of road surfaces (including the increasing number of pot holes) and the level of funding available for maintenance work. While there has been a welcome increase in road maintenance investment in recent years there are further safety gains to be had from lifting the level of funding higher – and we will continue to advocate strongly for this.

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Parking

Parking rules help to ensure fair access to a limited number of parking spots. When demand for parking outstrips supply, there’s an increase in illegal parking and road safety issues that arise from driver frustration.

Local councils are allowed to set fees within the maximum permitted by national regulations, however these regulations only cover local government parking facilities. The AA believes private parking companies should also be subject to the same regulations as local government, but until this is mandated in law, the AA advocates for private operators to at least follow voluntary guidelines. The AA would like more consistency in parking rules and fines across the country and clear uniform signage which is fairer and makes it easier for motorists to comply.

Parking fines need to be reasonable and kept in proportion to the offence. There should be a scale of fees as there is with council parking, with higher fines reserved for more serious traffic offending. A fair and independent process of parking disputes is essential.    

The AA has long called for a ban on wheel clamping, but we supported the new law that limits wheel clamping fees to $100, although this doesn’t address the main cause of unauthorised parking - inadequate signage.

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Insurance

Compulsory vehicle insurance

Most New Zealand motorists hold insurance – either a comprehensive policy, or third party cover. Third party insurance only covers drivers for damage they cause to another person’s vehicle or property, not their own. The AA encourages all drivers to take out full vehicle damage and property insurance or at a minimum, third party insurance.

However, having some level of vehicle insurance is not a legal requirement in New Zealand and the AA is often asked why this is.

Putting in systems to enforce a compulsory insurance law has been deemed not worthwhile in New Zealand because of our already high levels of insurance (92% in 2009 Ministry of Transport survey), and the fact that we have the Accident Compensation Corporation (ACC) which covers everyone for motor vehicle injury costs.

When considering the issue the AA believes:

  • Given already high levels of vehicle insurance, there would be questionable benefit from establishing systems to enforce compulsory vehicle insurance, and non-compliance could remain an issue.
  • Insurers can choose to spread the cost of higher risk customers across all their customers, or charge higher risk customers a much higher premium, but doing this tends to lead to higher risk individuals choosing to pay nothing.
  • There is no evidence that having compulsory vehicle insurance would substantially change driver behaviour for the small number of people currently uninsured.
  • The only way to guarantee 100% compliance is to apply a levy on fuel, like ACC, but this will have no impact on driver behaviour.   

The AA’s primary concern is that vehicle insurance is managed in a way that holds premiums at a fair and reasonable cost so that the majority of motorists think it is a worthwhile expense. Given most New Zealanders are insured, it appears this balance has been achieved.

If someone is unlucky enough to have damage caused by another driver who has no insurance, the victim will  likely be insured themselves and therefore have their costs covered by their own policy.

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Paying for the network - taxes, tolls, congestion charging and ACC     

Fuel taxes and Accident Compensation Corporation (ACC) vehicle levy

A large amount of the price we pay for petrol is tax collected by the government (fuel excise tax paid at the pump on petrol; diesel vehicles pay road user charges (RUC) instead).

This money is dedicated for transport spending like road maintenance and improvements, road safety initiatives including road policing, and public transport.

The government of the day often imposes annual increases (3-4 cents) to fuel excise tax and RUC. This is done to keep pace with inflation and growing infrastructure demands from population increases. The AA monitors the fairness of these increases.  We particularly take into account the government’s delivery of transport services, whether their spending matches the tax take and if they are making good value-for-money investments.  We speak out when we think these tax increases are excessive.

Most of the ACC for motor vehicle accidents is also funded from petrol tax. The AA supports this as it means those who travel more, pay more in insurance levies, which is a proxy for risk exposure. There is no ACC on diesel fuel however.

In addition to these taxes, the government also collects GST on excise tax, which goes into the government’s general account. The AA believes this GST component should be removed because it amounts to a tax on a tax.

Tolls

The AA is broadly comfortable with tolls on new roads, providing there is a free alternative route, and providing public consultation on the toll takes place in the very early stages of the project (as close as possible to the decision to build).

Before putting forward any new tolling proposals however, the AA believes that the Government needs to develop a much clearer picture of its plans for tolling nationally, setting out how, where and why it intends to use tolling as a funding tool in the future. Without greater clarity about the national context, it is very difficult for stakeholders to properly assess any individual tolling proposals. 

Congestion charging

There is growing interest in congestion charging internationally, and an increasing number of jurisdictions are seriously looking at it as a partial solution to their congestion challenges.  The theory and the intention behind congestion charging are compelling, but the reality is that it has only been implemented in a very small number of cities, and none that have similar characteristics to New Zealand cities in terms of geography and the structure of the transport system.

The AA recognises the potential benefits of congestion charging for the transport system in general, but we know that it is challenging territory for our Members and much of the public.  A 2020 survey of Auckland and Wellington AA Members shows that they remain skeptical about congestion charging due in particular to concerns over fairness and affordability.     

The AA believes that what is needed now is detailed analysis – by the Government – to ‘make the case’.  More than anything, that means demonstrating that the benefits of any congestion charging scheme would justify the costs, and that fairness issues can be managed – including offering valid alternative modes. If the case stacks up, then public discussion needs to start as soon as possible.

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Transport sustainability and emissions

A challenging issue for the transport sector is its contribution to greenhouse gas emissions. The AA recognises that motorists can contribute to combatting climate change by moving to a more fuel efficient vehicle, driving less or transitioning to more environmentally-friendly transport when they can.

Through surveying our Members, we have found that the AA Membership generally support environmentalism but they are increasingly sensitive to measures that increase costs.

As the world moves towards charging more for CO2 emissions to discourage higher-emitting activities, motorists will face growing costs related to fossil fuel use. Care needs to be taken that the cost of new lower-emission transport options does not become a barrier for people, resulting in the erosion of people’s mobility.

The AA therefore supports investment in alternative transport options that will realistically help people replace fossil-fuel-powered private trips. These include:

  • More use of ebikes and small electric vehicles (e.g. scooters) to replace cars where feasible
  • Incentives for electric vehicles – such as the current road user tax holiday
  • More working from home, for those who can
  • Better public transport and walking and cycling infrastructure where the benefits stack up against the costs
  • More sustainable fuels from woody mass like the second generation biofuel technology that can completely substitute for ordinary petrol, diesel or jet fuel.

The AA is active in providing practical support and information for motorists on electric vehicles and supports investment in alternative fuels (such as second generation biofuels) and well-considered government incentives to increase uptake of low and no-emission technologies. However we recognise that because New Zealand imports all our vehicles, the pace of change internationally will determine the pace of change in our own fleet – for example the production of right hand steering electric vehicles globally is very limited.   In addition New Zealand vehicle buyers are by necessity cost-conscious.

To help reduce emissions in the shorter-term, the AA has for a long time encouraged uptake of more fuel-efficient vehicles and a more fuel-efficient driving style, as well as regular vehicle servicing, keeping tyres correctly inflated and having emission standards for vehicles entering the fleet.

The AA is open to new transport solutions that will actually result in meaningful reduction in emissions, rather than just adding costs to motorists. We want changes that enhance people’s ability to travel to work and make other trips that contribute to their wellbeing and society.

Some initiatives that the AA would like to see include:

  • The introduction of a levy on imported tyres to be used to fund greener disposal at the end of their driving life
  • Provide meaningful financial benefits that incentivise businesses to purchase electric vehicles, which will lead on to more electric vehicles available to purchase by the general public in the future    
  • The development of a joint Government and industry strategy for improving New Zealand’s vehicle fleet including timelines and steps for getting more people into safer and less-polluting vehicles.

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Fuel prices

For many of us, the cost of fuel is one of our biggest regular expenses, and it's no surprise New Zealanders like to keep a close watch on the price.

There are three things that make up the price of fuel: the actual product cost (in NZ dollars), which fluctuates; fuel company overheads; and taxes. For petrol, tax is by far the biggest component, making up over $1/litre of the price. Most of the tax on petrol is ‘excise’ which goes into the National Land Transport Fund (NLTF) to pay for road maintenance, road safety upgrades, new roads, rail, road policing and public transport. Diesel prices are much lower than petrol prices because there is almost no excise tax on diesel fuel. Instead of excise, diesel vehicle owners contribute to the NLTF via Road User Charges.

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Monitoring fuel prices

The AA will  speak out on behalf of Members when motorists are not getting a fair deal from the fuel companies or government taxes.

Inquiries into fuel prices

2008 New Zealand Petrol Review

In 2008 the AA called for an inquiry into fuel prices after motorists were hit hard by record fuel prices. We called on the government to establish an independent inquiry into the New Zealand market to ensure that motorists weren't being overcharged and that price decreases were being passed on at the pump quickly.

The outcome of the review, published in July 2008, determined that:

  • the domestic petrol market is fundamentally competitive
  • retail petrol prices are not fast to rise and slow to fall
  • recent price rises were mainly due to increases in crude oil prices overseas
  • more transparency about the makeup of importer margins and a move to reporting daily margin movements would be useful for consumers

2017 Fuel Market Financial Performance Study

After the Global Financial Crisis in 2008 which resulted in a substantial drop in commodity prices, and in turn pump prices, the New Zealand fuel market underwent significant changes, including the sale of Shell to Z Energy and the growth of “no frills” unmanned brands. In the ensuing years, fuel company gross margins gradually climbed, while at the same time there was an increasing regional price disparity (notably with higher prices in Wellington and the South Island), a growth in price discounting, and a bigger price differential between regular and premium petrol. Because of this, the AA called for another independent inquiry into the retail fuel market.

This review was undertaken in 2017 by NZIER, Grant Thornton and Cognitus Economic Insight, and the key findings were:

  • they could not definitely say that fuel prices in New Zealand were reasonable, but had reason to believe they might not be;
  • weighted average retail gross margins had increased from approximately 13 cents per litre (cpl) in the 2013 financial year to 21.3cpl in the 2017 financial year;
  • retail gross margins in Wellington and the South Island had risen at a faster rate than margins in the North island (excl. Wellington);
  • this was attributed to a lack of competition from independent retailers;
  • retail gross margins have increased while gross margins for aviation, marine, bulk fuel and truckstops have been flat or declining; and
  • the increase in retail gross margins could not be fully explained by significant capital expenditure.

The study recommended that the government undertake a more comprehensive analysis of the industry to provide some definitive answers.

2019 Market study into the retail fuel sector

Following the 2017 inquiry, in 2018 the Commerce Act was amended to give new powers to the Commerce Commission to undertake detailed market studies. The retail fuel sector was the first industry to be investigated under these new powers. The inquiry took a year, with the final report published in December 2019. This report concluded that:

  • fuel companies appear to have been making persistently high profits over the last decade;
  • regional differences in retail fuel prices are not all explained by cost differences;
  • discounting does not compensate for higher pump prices; and
  • there is an increasing price difference between regular and premium petrol.

The market study made a number of recommendations, including:

  • stimulating wholesale market competition by introducing a transparent Terminal Gate Pricing regime (like in Australia)
  • regulating wholesale supply contracts
  • requiring service stations to display premium fuel prices on price boards

The AA had long called for mandating the display of premium petrol prices as this will increase price transparency and competition, and reduce the price differential between the regular and premium grades.

In June 2020 Parliament introduced a Fuel Industry Bill to implement these recommendations and other changes, likely to take effect in 2021-22.

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More information

Find out about the AA's policy positions on road safety and mobility.

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