In my last post I suggested NZ is at a transport cross-roads: Evidence shows people are driving less and that they have been doing so for some time.  Along the way I could not help but poke fun at the NZTA and MoT for resolutely sticking to the line that “traffic volumes are growing”, when they quite clearly are not and have not been for sometime (either in NZ or overseas).

My main idea (which is not particularly original) was that a combination of demographic, socio-economic, and technological factors are reducing per capita demand for vehicle travel.  For this reason I suggested NZTA/MoT should consider deferring (at least for now) major investments in state highways.

After last week’s post I have done some further digging and analysis.  The first thing I did was to check whether the decline in demand for vehicle travel is evident in other data sets.

And indeed it is: data from the MoT’s household travel survey shows that  total vehicle kilometres travelled have fallen by approximately 3.2% in the last five years, while per capita vehicle travel has fallen by 7.8%.  The rate of decline even seems to have accelerated over the last two years, as shown below.

The second thing I wanted to check was the relationship between state highway travel and economic activity.   The chart below plots vehicle kilometres travelled on the state highway network versus (real) GDP (both per capita).  It shows that vehicle travel has started to fall, whereas GDP continues to grow.  This trend is consistent with evidence found in a number of other countries and implies that New Zealand’s economic growth is not dependent on growth in vehicle travel.

The “decoupling” between economic growth and state highway travel is further highlighted if you divide the total kilometres travelled on New Zealand’s state highway network by the real GDP recorded in each year.  When you do you get a graph that looks similar to that shown below.  The y-axis in this graph measures the number of vehicle kilometres that is undertaken on the state highway network  in order to produce one dollar of GDP.

Maybe I’m a nerd but this graph makes me sit up and take notice;  if MoT/NZTA weren’t nervous before then they certainly should be now.

The graph suggests that, since 1998, NZ’s economic growth has increasingly outpaced the growth in state highway traffic – a decoupling that continues unabated to the present day.  During this period, the number of vehicle kilometres travelled per $ of GDP produced declined by 25-30%.  Ultimately this suggests NZ’s economy has, during the last 14 years, been able to develop in ways that do not depend on (or subsequently cause) growth in state highway travel.

But wait there’s more. Analysis by the OECD actually suggests that New Zealand’s historical investment in state highways (“motorways”) has had negative impacts on macro-economic performance.  The impacts of highways are particularly bad when compared to positive benefits found for other types of transport investment, such as roads (in general) and rail.

** NB: I’m not completely sure but there seems to be a slight methodological issue with the OECD analysis, in that the investment in “roads” category appears to include investment in “highways”, while the latter is also included separately in the regression.  So if Roads = Local Roads plus Highways, then the effects of Local Roads on its own would be calculated as Roads – Highways, or 1.85 – (-0.34) = 2.19.  But that’s a econometric detail that would not change the key result  …

You may be sitting there wondering why  investment in highways would negatively impact macro-economic performance?

One possible explanation is that highways are very, very expensive.  Thus investment in highways creates the need for the government to raise additional taxes, which in turn has negative macro-economic impacts.  Another possible explanation is that NZ’s investment in highways simply caused our cities and towns to disperse, which in turn undermined potential agglomeration economies (i.e. external benefits of density).

Irrespective of the rhyme or reason for the negative macroeconomic season, all this empirical evidence casts serious doubts over the wider economic benefits of the Roads of National Significance” (RoNS).  It also raises questions over why National has increased funding for state highways at the expense of other categories of transport investment, such as local roads and rail, which seem to have more positive macro-economic impacts.

So where does this leave us?  Well, my original suggestion was that kiwi’s were driving less and loving it.  We now know that not only are kiwis driving less, but we are also growing our economy at the same.  And all this evidence is directly at odds with the claims of the National Government, and the bureaucrats at the MoT/NZTA.  Honestly, what gives?

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56 comments

  1. In this morning’s Herald there is a short piece about how the Bush administration manipulated their way to war with Iraq with this little gem from General Powell’s former chief of staff:

    “intelligence was being worked to fit around policy”… Sounds like you’re average day at the office for MoT strategists.

    Iraq result? 100,000 dead, many more maimed, and hundreds of billions of taxpayer dollars blown up. Here, just the determined impoverishment of the whole country.

    How about a government that based its policy on the evidence and not the other way round?

  2. It’s interesting isn’t it how a government can become so ideological and decoupled from fact-based decisions. Transport isn’t alone in this area, there are dozens of oher examples where Nationa’s free-market ideology overrides evidence showing it will produce a worse outcome but I don’t want to stray from the topic.

    1. Yes, although the RoNs are not “free-market ideology” because the market would never invest in what are (by and large) dud projects. The RoNs are extremely interventionist, ala “Think Big” – and I suspect that Joyce’s political legacy will be similar to Muldoon’s.

  3. I don’t have as much of about issue with the government being ideological as I do with the supposed experts at NZTA and the Ministry of Transport being utterly ignorant of something that should be ‘front and centre’ in their work. Where is the oversight from Treasury?

    1. I agree Peter- to some extent the government is elected for its ideology, although how clear or understood the detail and outcomes of that is another matter.

      But perhaps a problem here is the way that the policy seems to reach down into the so called neutral ministry and agency in this area. There is a cosy group think at work here.

      Perhaps this is always the case but the current government’s attack on the public service may also be at work here: There is little evidence that the MoT ever even bother to check their assumptions with the real world but if they did which brave civil servant with a family to support is going to raise their doubts when the Minister [previous I know, but what’s changed?] writes like this?:

      Steven Joyce26 JULY, 2011
      Transport investment for growth confirmed

      The government has today confirmed plans to invest around $36 billion through the National Land Transport Fund over the next ten years, with a focus on projects supporting economic growth, value for money and road safety

      The investment plans are contained in the Government Policy Statement on Land Transport Funding (GPS) which has been released today by Transport Minister Steven Joyce.

      The GPS outlines the government’s priorities for expenditure from the National Land Transport Fund and determines how funding is allocated between activities such as road policing, road safety promotion, state highways, local roads and public transport.

      “GPS 2012 builds on the government’s progress in supporting economic growth through investment in much needed infrastructure,” says Mr Joyce.

      “Continued funding for State highways and the Roads of National Significance will help encourage business, tourism and jobs, and will improve road-user safety.

      1. to some extent the government is elected for its ideology

        Of course, but that doesn’t mean that we should let them blithely trample all over any semblance of evidence-based policy-making. Right now National are ignoring everything that looks like evidence in order to follow their ideological dreams.

        It’s possible to use evidence to achieve an ideological outcome, though in National’s case that appears to be pretty much impossible because their ideology is completely at odds with the evidence. Evidence for charter schools? bzzzt. Evidence for national standards? bzzzt. Evidence for roads uber alles? bzzzt. Evidence for screwing workers to the wall? bzzzt Evidence for cutting taxes and letting “the market” grow itself? bzzzt. Evidence for trickle-down? bzzzt.

        1. Agree – especially in NZ where the general population tends (based on historical voting patterns) to eschew ideology in favour of pragmatic politics.

  4. This from the MoT website:

    “Why are RoNS given such a high priority in the GPS?

    Transport priorities from a national perspective focus on increasing economic growth and productivity.”

    Any evidence that the second sentence is in any way related to the first?

    Just because it might feel right means very little. Remember Twain: ‘It ain’t what you don’t know that get’s you into trouble. It’s what you know for sure that just ain’t so.’

  5. Labour and the Greens need to make as much political mileage out of this dislocate as they can. What are they doing about it thus???

    1. Aside from the Greens, and their excellent former shadow-transport minister Gareth Hughes, Labour slept walked in regards to raising issues about the economic falacy that is the RoNS. But the media is also to blame, and I guess how much of a debate can you have when the minister simply responds with one line snarky responces to any questions about the projects. I don’t think there’s anything to change their mind.

    2. Labour are in a difficult position over this. The only new motorways that National have funded are Waterview and sections of the Waikato Expressway, and Labour were committed to building those any way. On the other hand, the last Labour Government gave us the Mt Roskill extension, the Upper Harbour motorway, the Mangere bridge duplication, the Manukau Extension, the NW motorway extension at Whenuapai, the Northern gateway, and bits of the Waikato Expressway. If none of this motorway building was evidence based and all of it was actually costing the economy money, then Labour needs to front up and explain what they were doing for nine years.

      However, this does mean the end of the “induced” traffic theory. Labour built all those motorways and traffic volumes actually reduced. That means induced traffic is a fallacy. It also means it is possible to ease congestion by building roads. (Altho it may not be worth easing congestion, and the congestion in Auckland may have eased on local roads as traffic moved from those roads to motorways.)

      1. Thankfully Labour now has a very different policy to the last Labour government; they plan to fund the CRL and not the Holiday Highway for example. And remember that the new pattern of no growth in travel on state highways only began towards the end of that administration. Also they did not have a programme of State Highway expansion anything as aggressive as this government, so clearly there is no difficulty there at all.

        You’re point about induced travel is a different question. There is no doubt that the focussing of the lions share of investment on state highways creates all sorts of problems on local roads. Any extra lanes across the Harbour for example will be completely un-servicable by the local city roads that are already over stretched. Insane that it is even being considered.

        1. I thought the CRL versus P2W policy was an attempt to win back Auckland Central. It didn’t work. It’ll be interesting to see if they try the same thing in 2014.

          But is there a different policy on, say, Waterview? I can’t see any statement from David Shearer opposing it. The press release here (http://www.labour.org.nz/news/shearer-welcomes-national%E2%80%99s-u-turn-waterview-connection) seems to support it, as long as the route is the same as or similar to that proposed by the Clark Government. Which it is. So it looks like the Leader of the Opposition supports the construction of a motorway in his own electorate. I presume that he knows it’ll make local Mount Albert streets a bit more civilised, and that voters would punish him if he opposed it. It’s not the position an anti-motorway politician or party would take.

          1. Waterview is basically underway, and frankly worth doing now as the completion of the network. Also in terms of mitigation underground is as about as mitigated as you can get. Don’t expect any difference there, especially as contracts have been signed.

            The new Labour party now does have transport policy that is much closer to the Greens than to National, [and still completely supports funding the CRL] which is a huge relief, it was incredibly frustrating how there was little difference between them until recently. But as I said the facts on the ground are much much clearer and frankly it is National that now has the radical interventionist policy outlier. National’s is the nanny state ‘we know what’s best’, not reflecting demand, reality denying approach, weirdly. Joyce truly is the heir to Muldoon.

          2. It would be a good thing if a lot of people would make use of pulibc transport. It might be inconvenient for some though specially to those who are always in a rush. But seeing the pulibc officials try out these pulibc transports, I think it would really be pretty interesting. It is a good way to show that they are really reaching out to the pulibc.

      2. I don’t think Labour are in a politically difficult position on transport. It’s over three years since they were in government and will be six if they win the next election, they’ve had new spokespeople since then, and a changing transport environment (including oil prices and lowered demand) can be considered too. They ‘get it’, mostly, and nobody seems to think they’re insincere.

        If Auckland’s population continues to accumulate in Auckland, and they take on the issues Aucklanders consider important (which include transport obviously), then momentum builds in their direction. Thus far however transport hasn’t been particularly important to the political commentariat. I think it’s becoming more so, and this should assist the parties with better policies.

        1. Just to be clear; you will be familiar with me and other contributors on this blog being critical of the current government and I promise that we will be sure to give any future government, local and central, just as hard a time when they disappoint us too.

          None of us are members of any party and don’t see our roles here to uncritically support any one over others but rather criticise and praise where, under our analysis, it is due.

          1. Absolutely. I do think that it’s important to point out where parties are inconsistent, and praise them when they make genuine change – and for that reason a positive comment in this case is warranted. I also think that any party that stresses transport issues in a way that makes sense to Aucklanders is going to win their votes.

      1. Good work Julie. Maybe try to have a good chat to Mathew Dearnaley at the NZ Herald about the issue? I think it can be spun into an interesting news story – most people seem incredibly surprised that traffic volumes are falling, they just assume the never-ending increase of the past 80 years is still going. The numbers don’t lie though.

      2. I think the key message is that volumes are dropping and this can’t simply be written off to the economy (which is what National have done previously about this), furthermore the same is happening overseas.

  6. Could the less kms travelled on the state highway network be related to the fact that the domestic driving holiday staying at motels along the way has died a miserable death? According to a motellier the motel business dropped off with the last rise in GST, and has never really recovered.

    1. This is something I touched on a few days ago. People used to holiday in NZ and driving was involved. Now they tend to fly somewhere that is likely to be warmer. I’m guessing that foreign tourism to NZ is likely to be reduced too since Europe is in the economic pits… not that you’d know it looking at the number of Germans driving around the South Island in campervans.

  7. The rate of decline even seems to have accelerated over the last two years

    That’s really not surprising, and I wouldn’t say it shows anything beyond the impact of the economic situation. Petrol prices have mostly been above $2 for the last two years, and the job market is very, very tight. Other costs are increasing (Why hello, not-yet-partially-privatised electricity companies. How YOU doin’?), incomes are stagnant, the first thing that gets cut is discretionary driving.

    The long-term trend is very interesting, though. See if you can farm this out to Matthew D at the Herald, and wave it in Rudman’s face too.

    1. Yes and no. The petrol spike was in 2008, prices have settled back a bit since then although the economy is now only muddling along – whereas the big drop in travel demands came from 2009 onwards. I think what we’re seeing is some delayed impacts of many different things that are cumulatively undermining the demand for vehicle travel. But you’re right that it’s very risky to draw conclusions from short time horizons – and I would not suggest that travel demands will keep falling at the rate that they have from 2009-2011 (2.5% p.a.). But they are obviously falling at a reasonable click, and that’s the main point – as you rightly point out.

      1. Mid 2008 the petrol price peaked at $2.189/litre.
        The all time high was May 2011 $2.219/litre.
        The price today is almost the same, at around $2.200/litre

  8. Nice post. I like graphs. Maybe they are all hoping and praying the trend will reverse once the economy picks up in a few years. I just don’t see how anyone can look at this stuff and not realise we need to take a breather and rethink the way we are doing things. This is getting beyond incompetence and heading for downright criminal.

    1. Thanks Ari, always good to get positive feedback. I think you’re right, they are praying that the economy picks up (and I hope it does too!). Problem is, they’re planning to spend $10+ billion on highways at a time when it’s not clear that they’re needed. I think that’s an irresponsible thing for govt to do.

      I should say that these highways may be needed at some point in the future (and I would fully support continuing planning to that effect), but the prudent decision would have to be to defer *construction* until such time as we know that the demand for vehicle travel warrants such huge investment.

  9. Hi Stu

    Would you please provide the name of the OECD report that the table came from, as the link to it doesnt work.

    thanks

  10. Stu, the inclusion of that table from the OECD report really weakens your argument here. I don’t believe that anyone here really knows what that table is trying to say and your interpretation of it is flawed. You should be adding the mean group coefficients to the country specific ones, so for motorway investment, you’d add 0.42 to -0.34 and see that motorway investment is not shown to be negative for NZ (nor is it shwon to be positive).

    However, roads are overall strongly positive according to this report as you can see from the table and this quote: “In case of the transport sector, a stronger positive influence of length of roads per capita on the level of GDP per capita levels and short term growth than would be the case for other types of investments can be identified for New Zealand and the United Kingdom, being relatively robust.”

    1. I’m wrong here regarding adding coefficients, sorry about that. (neither should you add the road and motorway coeffs together).

      My point stands that roads are a large overall positive in NZ according to this analysis. And the table is a dog’s breakfast that doesn’t really help anyone.

        1. The report doesn’t define what it means by motorway. I doubt it uses the definition state highway = motorway.

          But my point is that that report is an arcane piece of work that doesn’t help your argument.

          1. David – this very OECD report was referenced in the National Infrastructure Discussion Document with the suggestion being that OECD research supported investment in RoNs, i.e. highways.

            I’ve discussed it here because it actually suggests that other forms of transport investment have historically generated greater macro-economic benefits than highways (motorways more specifically).

            So while it may be arcane, I think it’s highly relevant, both because of its findings and also because of the way it was initially misused by the Government in developing the NIP.

      1. P.s. I’m not necessarily arguing against investment in roads, just against increased investment in RoNs based on:
        1. Declining demand for vehicle travel; and
        2. Lack of robust evidence to support their wider positive impacts.

        I’d support increased investment in local roads, definitely.

        1. OK, motorways are pretty much what you would expect. Probably what we call motorways and expressways here. The definition they used was:

          “a road, specially designed and built for motor traffic, which does not serve properties bordering on it, and which: is provided, except at special points or temporarily, with separate carriageways for the two directions of traffic, separated from each other, either by a dividing strip not intended for traffic, or exceptionally by other means; does not cross at level with any road, railway or tramway track, or footpath; is specially sign-posted as a motorway and is reserved for specific categories of road motor vehicles. In calculating the length of motorways, entry and exit lanes are included irrespectively of the location of the sign-posts. Urban motorways are also included.”

    1. Gareth Hughes has already tabelled the OECD report showing better returns from investments in railways over motorways (prior to the last election), I think Steven Joyce’s response was to call him a ‘man boy’ that’s the level of debate we get from this government.

      1. I was lucky enough to chat to Julie at the Auckland Multicultural Festival yesterday. I know that reads this blog, takes seriously these issues, and has already advanced similar arguments. Specific work such as this is extremely useful, because a busy Member of Parliament doesn’t have the time to do research like this, they generally pull in what others have done. So I wouldn’t be surprised if these figures appear in a speech in Parliament soon!

        Though a brand new MP, she’s already holding a full portfolio (as opposed to Labour and National, who give their MPs 3-9 years before allowing them near responsibilities). While Gareth was absolutely excellent – a complete natural – he had to split his time with energy, youth and other portfolios. It’s great to have a MP with few other issues on their plate.

    1. “Today it is said that young people have little interest in cars as there are much more interesting things … I find this quite frustrating,” said Toyota’s president Akio Toyoda

      What an amazing quote.

    1. It’s a shame that Question Time doesn’t get more coverage, because Gerry isn’t allowed to be “too busy to comment” in the House. The Greens will nail him on this, but it almost certainly won’t make the news. It should, because wasting billions of taxpayer dollars on roads that aren’t needed should be front-and-centre (far ahead of whether or not Sally Ridge will be starring in a “scripted reality” (oxymoron if ever I heard it) TV show) for all news outlets, but it won’t be because our media just don’t give a toss about real journalism and calling politicians to account.

      1. Gareth Hughes did a very good job the last couple of years in the house, the problem is, as you say, that National knows they can simply respond with meaningless responses like “those trends are an anomaly, more highways means a better economy” and that’s that. Debate closed. Nothing to see here. Julie-Anne needs to push this with outside media sources as she appears to be doing with Radio NZ, if you could convince the Sunday Herald to do a huge expose on the whole topic there would be a wealth of stuff to write on. Presuming they didn’t do a hatchet ‘balanced’ reporting job.

  11. Just fyi, I’m asking Q7 in the House today: “Why is the Government prioritising state highway projects with low benefit cost ratios, given that traffic volumes are back to 2004 levels and the Crown is borrowing $12 billion a year?”. Any juicy points for supps, send them through!

    1. Great to hear Julie. The answers to a series of written questions submitted by Phil Twyford provide some useful potential supps with hard numbers on how much money has been wasted on low cost benefit projects in recent years.

      1. Julie, It would be good to try to get a real BCR for Puford out of the minister. He will dodge this and say it hasn’t been calculated as the route is still to be finalised. Supp with on what basis then has the project been promoted. What rate of traffic increase is required to keep this road anywhere near a positive BCR? Then ask what has the rate of traffic growth been on SH in the last 5, 7 years ? How then can the project be supported? At what point of no traffic volume growth will Treasury call the next set of RoNS uneconomic? How up to date on traffic volumes is the advise from MoT?

        Perhaps it would be good to start with asking the minister if he would support investing in a big say 2billion$ public transport project that has been recording little or no growth over the last 7 years? No? Then why is he spending way more than that on SH network that is not growing? Where is the evidence that links SH investment to economic growth this century? Why does min of finance support this vast waste of taxpayers money? Are officials asleep at the wheel, or too terrified to tell the truth about the dubious nature of expensive SH investments because the min like previous one just likes building roads?

  12. The National Govt’s denial of the declining rates of traffic and car use is just a lame attempt to push the National Govt agenda that they need to sell off all the energy assets so they can build more roads.

    Sing it with me: “We gotta sell of the energy assets and BUILD MORE ROADS! … We gotta sell of the energy assets and BUILD MORE ROADS! …”

    Why are they focusing on building roads when road usage is declining and will continue to decline as the price of oil continues to rise?

    Why not spend some money on something useful like a national advanced warning system for earthquakes. The technology has been developed and well tested by the mining industry. Assuming there is no graft or corruption it would cost about the same as a large apartment building (approx $100mil) to cover the entire nation with an advance warning seismic grid lowering insurance costs and potentially saving lives. The only barrier is political will. Do it now while we still have some fossil fuel coming to our shores and we will save more money.

    But NO, National would rather keep their heads in the sand promoting the agendas of their Bankster investors instead of looking at the real issue of exponentially increasing consumption and declining reserves of fossil fuels.

    They would rather sell off the critical existing energy supply and push New Zealanders further into debt based slavery by embarking on costly infrastructure projects that are not needed so that we can prop up the foreign banks by forcing us to pay for the debt incurred by the National politicians as well as sending any profits from the energy sector directly offshore which will mean in the end we will never pay off the debts they have incurred and will also have no control of the profits earned by our energy assets.

  13. You need some stunts. For example in one hand hold a wad of (say) $10,000 cash – the amount each family of 4 will be taxed for motorways over the next 10 years, and in the other hand a wad of the benefits (say) $4,000. Even some of these “benefits” would be dubious, such as reduced travel time valued at (say) $4/hour, when the family would rather put food on the table than save 10 minutes on their trip.

    Another stunt would be to have a car, a cow and some milk drums. Each car requires imported oil of ~$2000 per year and a replacement cost of ~$2000 per year, requiring NZ to export ~8000 litres of milk just to make ends meet. So anything that can be done to reduce car dependence will allow exports to build national wealth rather than just pay for mobility. There’s not much choice for mobility in rural NZ apart from making sure there’s plenty to export, but in the larger cities there are opportunities to reduce car dependence.

    The real market for these stunts is not parliament but the media. It needs to have good entertainment value. Eventually this should build to news value, if a Greens/Labour alliance starts to rise in the polls. However unless there is such an alliance that is a credible alternative government, both parties are doomed to opposition and being ignored by the Nationals. Both Greens and Labour should compete for votes but have a working arrangement for how they would co-operate in government. If there are more Green politicians elected, there would be more Green policies and more Green ministers. Pre-publicity of these arrangements would help keep both constituencies happy with the inevitable compromises and deviations from each party’s stated policies.

  14. The above post was in response to Julie’s question, but was mistakenly placed at the end of the comments rather than nested under hers.

  15. It is becoming increasingly apparent that this National Governments THINK BIG scheme for Motorways needs to be compared with Rob Muldoon’s National Government Think Big Schemes. We need to start making this connection.

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