New Zealand Government proposes record transport funding of $20.8 billion over 2024-27

land transport, new zealand,

August 22, 2023

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Following the release of the ‘Draft Government Policy Statement on land transport 2024-27’, the NZ Government is proposing to increase transport funding to a record $20.8b.

Transport Minister David Parker has today released the draft Government Policy Statement (GPS) on land transport for consultation. The draft GPS is proposing to increase transport funding to a record $20.8 billion over 2024-27.

“The funding – an increase of $5.3 billion, or 34 per cent, on 2021-24 – is the highest by any Government,” Prime Minister Chris Hipkins said. “Funding under the new draft Government Policy Statement on land transport 2024 will enable a major boost to road maintenance, along with key critical new roading and public transport projects that New Zealanders want and deserve,” says Transport Minister David Parker.

“This funding targets spending where it’s needed most: reducing congestion and emissions, boosting productivity and improving the resilience of our transport network,” says Transport Minister David Parker.

Transport Minister David Parker said that the Government has been turning around the road maintenance crisis that it inherited.

“Flat maintenance budgets between 2008 and 2016 made our roads much more vulnerable to damage from the recent severe weather events. We have shown a commitment to maintaining the level of service on our roading network, increasing the funding going towards road maintenance by 20 per cent in GPS 2018, and 15 per cent in GPS 2021. This year we have committed more than $1 billion into road repairs in cyclone-affected areas of the North Island,” says Transport Minister David Parker.

“The draft GPS 2024 increases the investment range available to essential maintenance of state highways and local roads, including pothole repairs, by 41 per cent per cent to between $5.4 and $8.1 billion over 2024-27. This additional investment will greatly strengthen the resilience of our roading network,” says Transport Minister David Parker.

The draft GPS 2024 guides how funding will be allocated to different transport activities. Over the next three years, the draft GPS 2024 proposes a minimum level of investment of:

• $5.4 billion in road maintenance ($2.4 billion for local roads and $3 billion for state highways)
• $3.8 billion in road improvements ($460m for local roads and $3.4 billion for state highways)
• $3.6 billion in public transport ($1.9 billion for running services, $1.7 billion for public transport infrastructure)
• $1.5 billion on safety programmes like road policing and road safety advertising
• $1.2 billion on upgrading and maintaining the rail network
• $500m on walking and cycling improvements

As part of this programme, the Government has identified 14 key strategic projects for Waka Kotahi to consider as it develops its next 10-year National Land Transport Plan.

“My focus as Prime Minister has been on making sure we are investing in the priorities of New Zealanders. To achieve our full potential as a country, we need fast progress on key transport infrastructure that will support our economic growth and improve productivity,” Prime Minister Chris Hipkins said. 

“The Government views these 14 new routes as critical nation building transport priorities for New Zealand over the coming decades,” says Prime Minister Chris Hipkins. 

The routes are:

• Warkworth to Whangārei – State Highway 1; Te Hana to Brynderwyns, Warkworth to Wellsford and Whangārei to Brynderwyns
• Auckland Northwest Rapid Transit
• Auckland third and fourth rail line expansion
• Avondale to Onehunga rail link
• Level crossing upgrade and removal – Auckland and Wellington  
• Cambridge to Piarere – State Highway 1
• Tauranga to Tauriko – State Highway 29
• Wellington CBD to Airport – second Mount Victoria Tunnel and upgrades to Basin Reserve/Arras Tunnel
• Wellington CBD to Island Bay – Mass Rapid Transit
• Napier to Hastings – four-laning State Highway 2
• Nelson (Rocks Road) shared path – State Highway 6
• Richmond – Hope Bypass – State Highway 6
• Christchurch Northern Link – State Highway 1
• Ashburton Bridge – State Highway 1

“These routes include a balanced mix of public transport and roads, which require work as a priority to reduce congestion, manage emissions, improve safety, grow the economy and open up areas for housing,” says Prime Minister Chris Hipkins. 

“These new priorities complement our existing investments in roads like Otaki to North of Levin, the Takitimu North Link and Melling under the New Zealand Upgrade Programme, as well as faster, more reliable public transport through Auckland Light Rail, the Eastern Busway, and City Rail Link,” says Prime Minister Chris Hipkins. 

“They also complement the major programme of repairs and resilience upgrades that we have already funded for state highways across cyclone-affected areas like Tairāwhiti and the Hawke’s Bay which is being supported through the National Resilience Plan,” says Prime Minister Chris Hipkins. 

“The significant increase in funding for land transport responds to demand across New Zealand to fix our cyclone-damaged roads, build new roads and improve public transport choices. This Government agrees that this investment is essential – but it has to be paid for,” says Transport Minister David Parker.

“Some of the additional funding needed will be raised by small increases in petrol taxes and road user charges. These sources fund the core of our transport networks. Past governments have regularly increased these charges, and this will commence again,” says Transport Minister David Parker.

The increase in the first year is proposed to be split into an initial two cent increase, with another two cents six months later. This is to be followed by a four-cent annual increase in 2025 and again in 2026 – a total increase of 12 cents over three years.

A two cent per litre increase in petrol taxes, equates to a 44 cent per week increase in cost to the average motorist, or a 0.9 percent in the cost of petrol (including GST) at a petrol price of $2.50 per litre.

“The increases in petrol taxes and road user charges will raise the total revenue from petrol taxes and road user charges from $13.1 billion to $14.5 billion over three years, and will be dedicated to improving our transport network,” says Transport Minister David Parker.

Cabinet has agreed to inject $1.5 billion of capital and $900 million of operating funding into the National Land Transport Fund (NLTF) to support Waka Kotahi to progress these priorities.

This funding support is possible due to careful management of the Government’s books in recent years, with our debt position low compared to other countries. The additional funding means that the standard NLTF funding mechanism of Fuel Excise Duty and Road User Charges can support record road maintenance investment.

Civil Contractors New Zealand Chief Executive Alan Pollard noted similarities in the National Party’s proposed transport policy, and said it was positive to see both major parties proposing consistent forward work programmes, increasing the likelihood planned projects would go ahead without disruption following the 2023 election.

“It’s good to finally see what the government’s transport priorities are after months of waiting. Our decision makers don’t seem to be poles apart, and an increasing focus on priority projects, maintenance and resilience is encouraging, given recent severe weather events,” says Civil Contractors New Zealand Chief Executive Alan Pollard.

Other proposed funding sources for the draft GPS 2024, in addition to petrol taxes and road user charges, are:

• Crown grant to the National Land Transport Fund ($2.9 billion – inclusive of CERF below)
• Crown loan to the National Land Transport Fund, to be repaid over 10 years from petrol taxes and road user charges ($3.1 billion)
• Climate Emergency Response Fund contribution, dedicated to walking and cycling activities ($500 million)
•  Safety camera and fine revenue, dedicated to safety initiatives ($300 million)

Mr Pollard said many of the priority projects proposed were sorely needed. Contractors were likely to support the Policy Statement’s strategic priorities, which focussed on maintenance, resilience, safety, emissions reduction, urban development and integrated freight.

A significant increase in maintenance funding would keep the country’s transport network in a safe condition for road users and help resolve the degradation in pavements that had led to a plague of potholes over the past decade.

Maintenance investment was also a great way to provide certainty and retain capacity and capability in the industry, and consistent investment in rail would mean a growing industry of skilled constructors that were well-prepared to service rail projects.

Renewed focus on value for money innovation and best practice was laudable, but Mr Pollard noted this should focus on the best ‘fit for purpose’ solutions. The procurement process needed to be clear that lowest cost doesn’t equal best long-term solution.

Greater emphasis on partnership and collaboration with the people and companies constructing and maintaining the transport network was needed for the ‘best value’ approach to be successful.

“Many of the issues we are experiencing at present result not just from underinvestment, but also from cases where the project price at tender time has been kept artificially low. That approach may be cheaper in the short-term, but it rarely yields the best long-term result,” Civil Contractors New Zealand Chief Executive Alan Pollard

Mr Pollard said there was also a looming issue around long-term funding as the revenue from the National Land Transport Fund was projected to decrease, putting an increasing amount of pressure on short-term funding packages rather than creating a workable user-pays system, or enabling investment from external infrastructure funds.

The fall in income from road user charges and petrol tax were likely to continue over the coming decade, and this demonstrated the need for a long-term vision to sustainably fund improvement and maintenance of the country’s transport networks in different ways, rather than relying on bigger and bigger crown loans and national debt to prop up the programme.

Mr Pollard said he was disappointed no consideration had been given to private funding, which could bring projects forward and take the pressure off already strained government finances. He was also disappointed to see escalations to fuel taxes, and that the free ride for electric vehicles would continue – neither of which would fully fund the work required.

“Our comprehensive transport plan will strengthen our nation’s infrastructure and provide certainty to the construction industry that this Government will invest to close New Zealand’s infrastructure deficit,” says Prime Minister Chris Hipkins.

“The issuance of a draft Government Policy Statement on Transport is the standard process that sets out a Government’s forward spending priorities for land transport, so that local authorities and industry can plan ahead with certainty,” says Prime Minister Chris Hipkins.

Transport Minister David Parker said GPS 2024 recognises that critical work on major existing and new roads cannot come at the expense of road maintenance, rail, public transport, walking and cycling pathways, or safety.

“A rapid public transport corridor from Auckland city centre to Brigham Creek in the city’s northwest is included in the Strategic Investment Programme as it would support emissions reduction in this growing area,” says Prime Minister Chris Hipkins.

“Planning has already started to accelerate work on this corridor, which could include staging early delivery of stations from 2024 to 2027,” says Prime Minister Chris Hipkins.

“In Wellington, we’re committed to kick-starting work on long-delayed transport solutions for the city including a second Mt. Victoria tunnel, upgrades to the Basin Reserve and Arras Tunnel, and mass rapid public transport. Local authorities agree that the Government should take the lead on projects on the state highway network and we want to see work accelerated across these city-shaping projects,” says Prime Minister Chris Hipkins.

“Decisions on these major new public transport corridors in Wellington will be critical to the city’s future growth and development – however, we must also recognise that’s what’s right for public transport investment in our major cities can’t easily be replicated elsewhere. Much of New Zealand will continue to rely on resilient roading networks for the foreseeable future,” says Prime Minister Chris Hipkins.

“From Auckland to Northland, a series of upgrades to State Highway 1 have been included as we believe these will strengthen links, save lives and provide greater network resilience to support a growing population, tourism and economic growth,” says Prime Minister Chris Hipkins.

“In the Central North Island, we’ve included upgrades to the Waikato Expressway, key investments for State Highway 29 near Tauranga, and four-laning the State Highway 2 Expressway between Napier and Hastings,” says Prime Minister Chris Hipkins.

“In the South Island, we’re signalling that improvements to State Highway 1 north of Christchurch to improve safety and support economic growth and freight access, is of strategic importance to our transport plans,” says Prime Minister Chris Hipkins.

“This includes the Christchurch Northern Link, by upgrading State Highway 1 from the Waimakariri River to Ashley River and a new alignment around Woodend, and improved links across the Hakatere/Ashburton River, which could include a new second river crossing,” says Prime Minister Chris Hipkins.

The Government is inviting local government, the transport sector, community groups and the wider public to have their say on the draft GPS.

Consultation on the draft GPS closes at 5pm on Friday 15^th September 2023.

Click here to read New Zealand’s Draft Government Policy Statement on Land Transport 2024/25 – 2033-34.

Source: Crown copyright | Civil Contractors New Zealand | Crown copyright

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