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?