Unfortunately, the recent past paints a grim picture of New Zealand’s ability to invest wisely in infrastructure. The New Zealand Infrastructure Commission notes that despite spending around 5.5 percent of GDP on public infrastructure—higher than Australia and the OECD median—New Zealand ranks near the bottom 10 percent of high-income countries for infrastructure efficiency.
In a recent speech to the Local Government New Zealand Infrastructure Symposium, Minister for Infrastructure Chris Bishop noted that New Zealand faces a suite of gnarly infrastructure challenges. Decades of underinvestment, poor pricing signals, and a lack of private capital have left our roads, rail, and water systems struggling to keep pace with the demands of a growing population.
Nowhere is this more evident than in our transport network. Congestion, maintenance backlogs, and a looming funding crisis threaten its very foundations.
The root of the problem is that New Zealand's approach to transport funding is outdated. For too long, the country has relied on fuel excise duty to pay for roads. However, as vehicles become more fuel-efficient and electric cars grow in popularity, this model is no longer fit for purpose. Waka Kotahi NZ Transport Agency estimates it will face an annual shortfall of $4-5 billion over the next decade.
New Zealand needs a new approach to transport funding – one that is fairer, more efficient, and more sustainable. In his speech, Minister Bishop hinted at the solution: road pricing. He noted that Transport Minister Simeon Brown has a "massive programme of work underway to use better pricing on our roads," including tolling and congestion charging. This is a welcome development, and a theme that I explore in depth in my forthcoming report for The New Zealand Initiative, Driving Change: How Road Pricing Can Improve Our Roads.
The economic rationale for road pricing is clear. Directly linking charges to road use ensures that those who use the roads the most (and impose the greatest costs through congestion and wear-and-tear) pay their fair share. And we already do this through higher charges on heavier diesel vehicles. This approach would send clear price signals to encourage more efficient use of scarce road space, reduce congestion and unlock productivity gains. It would also provide a stable revenue stream to fund much-needed infrastructure investment.
International evidence supports this approach. Cities like Singapore and Stockholm have successfully used congestion charging to reduce traffic and improve air quality. Japan’s extensive tolled expressway network, meanwhile, offers a model for how road pricing can fund the development and maintenance of world-class highways.
Of course, any mention of new charges is bound to raise concerns. Minister Bishop acknowledged this in his speech, noting that some of the Government’s infrastructure funding and financing plans will be “edgy” and “controversial”. But as he rightly pointed out, we cannot afford to shy away from tough decisions any longer. The costs of inaction – in terms of lost productivity, reduced quality of life, and forgone economic growth – are simply too high.
In Driving Change, I propose a future-oriented solution to New Zealand’s transport funding woes: a comprehensive road pricing model for New Zealand called Smart Road User Charges (Smart RUC). Under this system, fuel excise duty would be gradually phased out and replaced with distance-based charging for all vehicles. Users would choose between an automated “pay-as-you-drive” system or a pre-purchased RUC license similar to the existing diesel RUC system. Crucially, charges would vary based on factors like vehicle type, weight, and time of travel, ensuring that costs are allocated efficiently and equitably.
I will not give away more of the report’s recommendations here. Suffice it to say that a transition to Smart RUC would need to be carefully managed, with a staged approach, robust public engagement, and best-practice privacy safeguards. But as Minister Bishop’s speech made clear, the Government is open to fresh ideas and innovative strategies.
Implementing road pricing is just one part of the broader changes needed to address New Zealand's infrastructure challenges. The New Zealand Infrastructure Commission wisely notes that we cannot simply build our way out of these problems. Instead, we need to make better use of the infrastructure we already have. This means embracing new approaches to pricing, funding, and demand management.
Road pricing is not a silver bullet, but it is a proven tool that can help New Zealand create a transport system fit for the 21st century. And it may just help us get more out of that $68 billion.
Dr Matthew Birchall is a Research Fellow at The New Zealand Initiative, focusing on infrastructure and the housing market. This article was first published HERE
Nowhere is this more evident than in our transport network. Congestion, maintenance backlogs, and a looming funding crisis threaten its very foundations.
The root of the problem is that New Zealand's approach to transport funding is outdated. For too long, the country has relied on fuel excise duty to pay for roads. However, as vehicles become more fuel-efficient and electric cars grow in popularity, this model is no longer fit for purpose. Waka Kotahi NZ Transport Agency estimates it will face an annual shortfall of $4-5 billion over the next decade.
New Zealand needs a new approach to transport funding – one that is fairer, more efficient, and more sustainable. In his speech, Minister Bishop hinted at the solution: road pricing. He noted that Transport Minister Simeon Brown has a "massive programme of work underway to use better pricing on our roads," including tolling and congestion charging. This is a welcome development, and a theme that I explore in depth in my forthcoming report for The New Zealand Initiative, Driving Change: How Road Pricing Can Improve Our Roads.
The economic rationale for road pricing is clear. Directly linking charges to road use ensures that those who use the roads the most (and impose the greatest costs through congestion and wear-and-tear) pay their fair share. And we already do this through higher charges on heavier diesel vehicles. This approach would send clear price signals to encourage more efficient use of scarce road space, reduce congestion and unlock productivity gains. It would also provide a stable revenue stream to fund much-needed infrastructure investment.
International evidence supports this approach. Cities like Singapore and Stockholm have successfully used congestion charging to reduce traffic and improve air quality. Japan’s extensive tolled expressway network, meanwhile, offers a model for how road pricing can fund the development and maintenance of world-class highways.
Of course, any mention of new charges is bound to raise concerns. Minister Bishop acknowledged this in his speech, noting that some of the Government’s infrastructure funding and financing plans will be “edgy” and “controversial”. But as he rightly pointed out, we cannot afford to shy away from tough decisions any longer. The costs of inaction – in terms of lost productivity, reduced quality of life, and forgone economic growth – are simply too high.
In Driving Change, I propose a future-oriented solution to New Zealand’s transport funding woes: a comprehensive road pricing model for New Zealand called Smart Road User Charges (Smart RUC). Under this system, fuel excise duty would be gradually phased out and replaced with distance-based charging for all vehicles. Users would choose between an automated “pay-as-you-drive” system or a pre-purchased RUC license similar to the existing diesel RUC system. Crucially, charges would vary based on factors like vehicle type, weight, and time of travel, ensuring that costs are allocated efficiently and equitably.
I will not give away more of the report’s recommendations here. Suffice it to say that a transition to Smart RUC would need to be carefully managed, with a staged approach, robust public engagement, and best-practice privacy safeguards. But as Minister Bishop’s speech made clear, the Government is open to fresh ideas and innovative strategies.
Implementing road pricing is just one part of the broader changes needed to address New Zealand's infrastructure challenges. The New Zealand Infrastructure Commission wisely notes that we cannot simply build our way out of these problems. Instead, we need to make better use of the infrastructure we already have. This means embracing new approaches to pricing, funding, and demand management.
Road pricing is not a silver bullet, but it is a proven tool that can help New Zealand create a transport system fit for the 21st century. And it may just help us get more out of that $68 billion.
Dr Matthew Birchall is a Research Fellow at The New Zealand Initiative, focusing on infrastructure and the housing market. This article was first published HERE
5 comments:
There is a gulf between the public and the professional managerial class on this issue. National do this at their peril.
It’s just another tax. In theory I’m not opposed to user pays. However, before more taxes are imposed, the rampant public service bloat must be addressed, as well as the many rorts, such as the recently revealed Health Research Council funding for highly questionable cultural projects, which is surely but the tip of a large iceberg our coalition govt is reluctant to address. In brief, don’t tax me more until you stop wasting and stealing from the taxes I already pay.
The issues around heavy multi axle transport are relevant and the understanding that each wheel heats the road and the following wheel exacerbates the potential heat /damage and multi axle/wheel last wheel considerably heat /damages the roading tarmac. Whereas lighter vehicles and the driving space between vehicles limits this heat /damage conundrum.
Without changing the law and resricting multi axles , road pricing would assist to put heavy transport onto coastal shipping where the ocean is a very low maintenance road.
What a brilliant idea. Well, unless you happen to live outside any main campus ty. The province's will be dumped on again. But, who really cares, they are really only there to supply support for holiday homes for the wealthy. Although even they may struggle to pay for access to their nice little enclaves.
If the problem is lack of funds, then why not simply increase the tax on fuel?
The advantage of fuel taxation is that it acts as a disincentive for using the stuff, thereby encouraging efficiency. I would go further and increase fuel tax in order to reduce income tax, because we need the incentives to point in the right direction.
Also, why invest a small fortune so that the government can monitor everyone's vehicle movements? Is it REALLY to fund infrastructure?
Congestion charging is another topic - probably a good idea for Auckland.
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