Transport

Good transport infrastructure is key to unlocking economic growth, and efficient transport of goods around the country is vital to keeping costs low. This does not mean that the government has to fund this infrastructure though - a user pays model is relatively easy to implement and the most efficient method for managing demand between transport modes. Currently road taxes are heavily subsidizing rail and public transport, artificially shifting demand between these modes and resulting in suboptimal outcomes.

Roading:

The cost of constructing and maintaining roading infrastructure is currently funded from various sources. Petrol is taxed at a fixed rate per litre, so how much you pay depends on the efficiency of the vehicle, and any off-road or non-vehicular use is still taxed. Deisel and electric vehicles must pay road user charges which are fairer, charged per km at different rates depending on the type of vehicle, but off-road use is often still charged for, and some vehicles (such as agricultural vehicles) can use roads for no cost. Local roads are funded about two thirds by property rates, so residents pay for roading costs regardless how much they drive, and visitors to the area don't contribute at all. Vehicles must be registered annually, with a fixed cost regardless of usage, and which includes a portion for ACC to cover the medical costs of accidents. Road tolls are also charged on a few select roads to recover construction costs.

I propose that the current confusing and unfair system be replaced by a single funding mechanism - GPS based tolls. Every vehicle would have a GPS tracker that communicates road usage to a central system, and tolls would be charged based per km with variable rates for vehicle type. The toll rates would be set by the organisation that operates the road, and the revenue generated by each road would be forwarded directly to the operator. This means that each road would have precise user data, and revenue could be matched with costs, resulting in the costs being borne by those who actually use the road. Vehicle transporters would have a special designation in the system, and any vehicles that match their track exactly would be assumed to be on the transporter and be exempted from the tolls.

Congestion increases travel times, reducing productivity and suppressing the economy. To incentivise travelling at non-peak times, the toll rates could be automatically varied depending on congestion levels (but not based on arbitrary times which would often add costs to transport that weren't justified). This would enable those to whom time is more valuable than money to travel faster at peak times, partly subsidising those to whom money is more valuable than time who could travel more cheaply at non-peak times.

Strict measures would be implemented to protect privacy. Usage data would be linked to vehicles, not drivers, protecting identities. Individual vehicle data would not be accessible to anyone other than the owner unless it is needed to assist in solving a crime, in which case a court order would need to be obtained. Road operators would only have access to anonymised and collated data. Each vehicle would have to be allocated to an account, which would have to be set up with either prepaid funds or an automatic payment. GPS units linked to an account that has unpaid tolls would display a red light, and any cars seen driving with this light or without a GPS unit would be subject to fines. Police and fixed checkpoints could potentially have a sensor that can check if each vehicle driving past has a valid GPS unit.

To incentivise well designed and maintained roads, road operators would be liable for medical costs and loss of income resulting from any accidents that happen on their roads. These costs would be funded from road tolls, so dangerous roads or vehicle types could be charged higher toll rates, incentivising drivers to use safer roads and vehicles. ACC levies would no longer be charged with vehicle registrations, and annual vehicle registrations would only be enough to cover the costs of providing the GPS units and managing the tolling system.

Revenue from road tolls would be ring fenced and only able to be spent on constructing or maintaining roads and related facilities such as public toilets, carparks, and rest areas. One exception to this could be DOC, who could charge higher toll rates on their roads that could be used to fund maintenance of tracks and huts. This system will benefit areas with high tourist traffic, as toll revenue could fund tourist facilities rather than relying on property rates from residents, and it would also replace the international visitor levy. To prevent surprises, any toll rates above a set limit would have to be prominently signposted on the affected roads, all toll rates would be publicly available, and hopefully mapping services could use this data to calculate the cost of any route.

Another use of the GPS based road tolls would be to incentivise the minimisation of traffic disruptions. The bugbear of many drivers, excessive traffic management for road works currently has nothing to rein it in. To solve this, any preplanned road works or events would be entered into the tolling system, and delays for any vehicles of more than one minute compared to regular traffic flow would result in a negative road toll proportionate to the length of the delay. This means drivers would be partially reimbursed for their delay, reducing annoyance, and road operators would be incentivised to minimise disruptions, and could pass on the cost of negative road tolls to the roading contractors doing the work. National regulations for traffic management would be ended, and roading contractors would be responsible for balancing keeping their workers safe and minimising costs relating to disruption. This would encourage working during off-peak times, removing traffic management when not working, working faster, and innovative traffic management techniques that could give contractors a competitive edge.

In addition to government departments, private businesses would also be able to be road operators. New roads could be designed and consented by government then offered for tender, with the operator promising the lowest toll rates winning the contract and the right to collect tolls for 50 years (tolls could only be increased in line with inflation), after which the ownership of the road would transfer to the government. Alternatively, private operators could identify opportunities for new roads themselves and take care of the design and consenting process (any competing operator interested in the same route would be given a chance to bid for it).

Fiscal Impact: I estimate that the government would save $1.6 billion by shifting to a 100% user pays system

Public Transport:

Only about one third of the cost of public transport is currently funded by fares from users, with the shortfall being made up by a combination of national and local government funds, which ultimately come from road taxes and property rates. This means that people that never or rarely use public transport are still paying for it, which doesn't seem fair, and distorts the choices people make. A common justification for this is that public transport benefits road uses by decreasing congestion, but if the money that has been spent by government on public transport had instead been spent on roading infrastructure, there is a good chance that congestion would be lower than it currently is.

Public transport is a doomed industry. There are many downsides to public transport; it routes passengers via hubs rather than directly (resulting in longer travel times), it doesn't take you from door to door (meaning you usually have to find alternative transport for the first and last miles), it is prone to disruption (if a rail line is blocked, there aren't usually any detours available), and passengers have to share cabin space with strangers (causing safety and sanitation issues). The only advantages of public transport are that it is cheap (although this is largely due to government subsidies), and you can do other activities (work, sleep, entertainment, etc.) while travelling. Public transport will not have a monopoly on these advantages for much longer though, as autonomous vehicles will have the same advantages while also sharing all the advantages of driving yourself. Direct, door to door transport in a private, comfortable cabin for less than the cost of even subsidised public transport is closer than most people realise, and it will destroy public transport.

Investing in new public transport infrastructure that likely to have few users within 10 years is obviously foolish, and any projects not yet started should be cancelled. Government subsidies for operational costs should also end to prevent the distortion of the transport market - if they wish, local governments could continue to operate public transport lines as an interim measure until autonomous vehicle networks are operational, however they should target the property rates that fund this to areas that have access to public transport lines so that those who do not have the ability to use them are not paying for them.

Autonomous vehicles will be transformative to many parts of the economy. They will lower transport costs and make the economy more efficient, they will reduce accidents and the related costs, and they will enable many parking spaces to be used for more productive uses. To accelerate their implementation, autonomous vehicles would be given a favourable regulatory environment (i.e. minimum regulation). Roading infrastructure will become more important than ever, and more capacity should be constructed, including tunnels in congested urban areas. Once autonomous vehicles become prevalent, following distances could be reduced due to much faster reaction times of autonomous vehicles (allowing increased capacity on existing roads), and lanes and possibly entire roads could be reserved for autonomous vehicles only.

Fiscal Impact: I estimate the government would save $576 million by ending support for public transport.