As the new year kicks off, it seems like an appropriate time to reflect on some wider trends – as Patrick recently did in this excellent wrap-up of the year just gone. Looking forward, one of the most exciting trends relates to how technology will impact on how we travel. This post marks the first in what I hope to be a long-running series on transport technologies. In this initial post I want to focus on wider factors that might shape changes in transport technologies.
Some people may find this strange. After all isn’t technological change a random gift from the gods, i.e. something which emerges from the ether without any particular rhyme or reason? Au contraire. Technological change doesn’t occur in a vacuum; it arises from entrepreneurial people and businesses anticipating people’s wants and needs. And just because a particular technology is developed doesn’t mean it will find a market and become widely adopted.
For this reason, before we try and portend too much about future transport technologies themselves, I think it is useful to step back and think about the process through which technological change occurs, and in particular the factors that capture the attention of entrepreneurs and/or shape the market for new technologies in other ways. The following sub-sections identify three factors, namely 1) Land use; 2) Public policies; and 3) Demographics, which I expect to direct the arrow of technology change in coming decades.
You may be able to think of others, and I’d be interested to hear what they are.
1. Land use: Denser cities favour space-efficient transport modes
Why begin a conversation about transport technologies by talking about land use? Put simply, the demand for transport (especially when measured in terms of passenger-kilometres travelled) is strongly dependent on the choices people make about where to live in relation to where they want to be. Land use also impacts on the relative effectiveness of different transport modes. For example, when average trip distances are short, then walking and cycling become more viable and vice versa. Hence, trends in land use are likely to have a bearing on the scale and composition of future travel demands.
What is happening to land use in New Zealand? Two over-arching trends emerge from the data: 1) urbanisation, i.e. more people are living in cities and towns and 2) densification, i.e. the dense areas of our cities are growing the most rapidly. The first trend is well-established and has persisted for the best part of a century, so I won’t cover it here. The second trend, however, is not well-understood in some quarters. David Seymour, for example, was recently quoted by The Herald as follows (source):
I don’t believe in 50 years time when we’re a society with vastly more sophisticated transport that people will be as attracted to living so intensely,” he said. “As transport technology improves, as it has for the last 200 years, people will say that’s great and travel farther and faster and we’re going to consume more space,” he said.
Seymour’s forecast runs contrary to observed land use trends over the last two decades or so. The table below is extracted from a paper written by my colleague Peter Nunns, which summarises densities for New Zealand cities in the period 2001 – 2013. We find that most cities that are growing have also experienced increases in density in this period, with Auckland leading the pack with a 33% increase in density.
I should point out that this table uses “population-weighted densities”, which measures the density at which the average resident lives. Population-weighted densities are a more accurate indicator of urban density than the more-commonly cited “average density”, for reasons Peter discusses here.
The following two graphs provide strong evidence of how density is changing in Auckland. The first figure shows population growth in Waitemata compared to other parts of Auckland. The second figure then shows population growth in Auckland’s city centre from 1996 to 2015, in which time the population of the city centre grew at an average rate of ~12% p.a.. This is approximately six times higher than the Auckland average, which in turn is higher than the New Zealand average.
It’s reasonable to suggest that where density increases, then we can also expect the value of land to increase – holding other factors constant. Research by Arthur Grimes into land values in Auckland suggests that the “pull” of Auckland’s city centre has indeed increased in the last two years (source).
And where space becomes more valuable, then one might reasonably expect space efficient transport modes to become relatively more attractive. A paper aptly titled “The Future of Motorized Transport” had this to say about the relative space efficiency of different transport modes (source).
This analysis suggests that, on average, cars require ten times more space than the next least space-efficient transport mode (buses). In my opinion, this seems to indicate that where density increases, and space becomes more valuable, then cars will be placed at an significant disadvantage compared to other transport modes.
Is my hypothesis borne out by data on people’s transport choices? While we can never be sure, I would cautiously answer “yes”. The following figure, for example, shows how the total number people accessing the city centre using cars or public transport has changed in the period from 2001 and 2014.
Basically, all of the growth in travel demands to Auckland’s city centre over the last 15 years (plus some) has been met by public transport. Moreover, the following figure shows total public transport patronage in Auckland since 1920. While much hooplah has been made of recent patronage growth, this figure shows how PT patronage in Auckland has actually been growing at a decent pace since the early 1990s, which is around the same time that the population of central areas started to grow. Coincidence? I suspect not.
Is Auckland unique in terms of its land use trends? After all, what matters most to technological development is not what’s happening in Auckland but the general trends that are happening globally. It’s hard to say conclusively, and I don’t have time to do a detailed survey in this blog post (please let me know if you know of one). However data does suggest that Auckland is not *alone* in terms of the land use trends that it’s seen over the last two decades or so. For example, here’s what a recent publication had to say about trends in the value of land in Amsterdam (source): “The price of land in the Amsterdam city centre is 200 times as high as that in the countryside … this price difference more than doubled between 1985 and 2007.”
Now at this point you might not be convinced by my dot-joining between density, land values, and transport outcomes, and for quite understandable reasons: Not all of the transport outcomes illustrated in the preceding figures will be caused by trends in land use. You might argue that changes in travel demands are likely to reflect a myriad of other factors, such as policy changes and demographic trends. And I think you’d be correct, which brings me to my next two points …
2. Public policy: Slowly recognizing the need for change?
The preceding section argued that trends in land use in Auckland have increasingly favoured space-efficient transport technologies. This raises the question of whether policy-makers have been responding to these trends? The answer, I think, is “yes, albeit rather slowly”. The key point I want to make in this section is that future trends in travel demands will be impacted by shifts in public policies which are already underway. Hence, it is useful to understand these shifts because they are relevant to the question of which technological developments are adopted by people with the most vigour.
Parking is perhaps the most notable example of policy change in the Auckland context. So-called minimum parking requirements, or “MPRs”, were removed from Auckland city centre in the 1990s. For those of you who haven’t heard of MPRs, they are regulations imposed by Councils which require new developments to provide a certain “minimum” amount of parking. The amount is based on predictions about the peak demand for parking at each individual development.
Of course, if you provide a lot of free parking then you are providing a large subsidy to people who drive, and at the same time reducing the density of development. In this recent post, Peter discussed the removal of MPRs in terms of the proposed Commercial Bay development at the foot of Queen Street. He comments as follows:
… if those MPRs still applied to the city centre, Commercial Bay would have required over 2,000 carparks. That’s seven times as much parking as the developers actually want to build … According to Precinct, Commercial Bay will cost $681 million to build. If MPRs required the development to include another 1,750 carparks, at a cost of $30-50,000 apiece, it would add $50-90 million to the cost of the project. That suggests that MPRs would impose a “regulatory tax” of 7-13% on downtown development.
In a nutshell, removing MPRs can be expected to both 1) increase the costs of owning and operating cars and 2) enable more intensive development. For this reason, the Unitary Plan proposes to remove MPRs from areas where they are considered likely to do the most damage, as illustrated by the red areas in the figure below (source).
* This map is slightly out of date due to recent changes.
I note that Auckland is not alone in rolling back MPRs: Many cities in New Zealand and overseas are moving in a similar direction. Basically, it seems likely that the size of the red blobs in the figure above will grow over time. In this context, it seems reasonable to suggest that parking policies will increasingly shift in a direction that is, by historical measures, not as favourable to individual car ownership and use.
What other policy shifts might change the way we travel in the future?
The recent “Paris Outcome” on climate change and carbon emissions is an obvious one. Given its multi-lateral nature, the Paris Outcome seems like a policy that might impact on global trends in transport technologies. Personally I think the transport technology game-changed in Paris; our transition to a low carbon economy needs to start immediately and be complete by the middle of the century if we are to avoid catastrophic climate change.
Congestion charging is another potential policy shift. It involves charging differential prices by time and location so as to keep vehicle demands within the available road capacity. Over time, congestion pricing is becoming more attractive as the benefits of adopting such a scheme increases (due to Auckland’s growing population), while the costs of doing so decreases (due to improvements in technology). Congestion charging is supported by the likes of this Blog, the Auckland Council, NZCID, and the Productivity Commission.
The general point I want to make, however, is that public policies are changing in response to wider transport and energy issues. Unfortunately I think it’s all-too-common to focus on how policy should respond to technology, without thinking also about how technology might respond to major policy settings. Widespread adoption of policies associated with parking reform, the Paris Outcome, and congestion charging will change the way we use existing transport technologies in the near future, while also changing the incentives associated with new technologies. There is a mutual dependence between policy and technology that operates in both directions.
The final factor I want to discuss is the question of demographics, i.e. what the hell is New Zealand’s population going to look like in 30 years?
3. Demographic trends: Which horoscope do you prefer?
Demographic trends are increasingly difficult to predict, hence I prefer to talk in terms of “scenarios”, rather than defined outcomes. The two key demographic attributes are size and age.
To highlight how uncertain these projections are, just consider that barely 5 years ago New Zealand was effectively staring down the barrel of a major demographic problem: We’d done so well at exporting young people to more exciting cities overseas that our population growth was slowing and our demographic profile was becoming increasingly imbalanced. This was all occurring at the same time as the first of the baby-boomer generation were entering into their retirement, with all of the associated fiscal costs this implied. Back in 2011, Natalie Jackson from the University of Waikato’s (excellent) NIDEA research group had this to say on the issue of demographics (source):
As elsewhere, New Zealand’s population is ageing. As elsewhere, this ageing has two main drivers: increasing longevity, and declining birth rates, both outcomes of the Demographic Transition. In New Zealand’s case, however, the population is also ageing ‘prematurely’ from another cause, the legacy of net migration loss at young adult ages (typically 20-24 years) which New Zealand experiences in most years, and at 15-19 and 25-29 years in many other years as well. The loss, compounded by the falling birth rates at the time each cohort was born, has created a deep bite in today’s age structure across ages 25-39 years. This bite is not only driving up the median age faster than would otherwise be the case, given that New Zealand has the highest birth rate in the developed world, but has enormous implications for the country as it faces the retirement of its baby boomer generation.
Around the same time, economists working at the NZIER published a separate working paper titled “The Flight of the Kiwi”. This made the following comments on net migration between New Zealand and Australia, which was accompanied by the figure below (source):
If economic growth for the 2010-2025 period in New Zealand and Australia were to be at the rates currently projected by the OECD, then we should expect a net 412,000 people to emigrate between now and 2025. This is the equivalent of the whole population of Wellington, including the Hutt Valley and the Kapiti Coast, moving to Australia.
Fortunately, subsequent events have ensured these demographic predictions have not materialised. I can’t shake the feeling, however, that this owes more to Australia’s relative misfortune (due to the collapse in global commodity prices) than it does to New Zealand’s good management. And despite New Zealand’s economic performance relative to Australia’s being about as good as it gets, we still only achieve a net migration gain between the two countries of a couple of hundred people p.a. This suggests that if/when Australia gets on top of its economic/fiscal challenges, then the net outflor might return to the sorts of levels predicted by the NZIER.
Personally, I think volatility in population and demographic statistics is something we need to get used to. In gneeral, New Zealanders seem to be a relatively mobile, skilled group of people who are benefiting from the opportunities afforded by an increasingly globalised world. As such, movements of people appear to be increasingly sensitive to relative socio-economic performance. When New Zealand is not performing well, then tends of thousands of us are likely to take our leave and head offshore (mostly to Australia), and vice versa. This is good for them and generally good for the receiving country. I doubt that it’s good for New Zealand, given the aforementioned demographic issues we face.
This has led me to consider two rather divergent population/demographic scenarios for New Zealand:
- “The home-coming queen” – New Zealand’s socio-economic performance exceeds that of the countries with which we compete for people, such that fewer people depart while more New Zealanders currently living overseas decide to return home. As a result, New Zealand experiences strong population growth of 2-3% p.a., which helps to grow the workforce and mitigate the demographic imbalance introduced by the baby-boomers; or
- “The gerontocalypse” – New Zealand’s socio-economic performance lags behind that of the countries with which we compete for people, most notably Australia. Young and/or mobile New Zealanders depart en masse, and population growth to fall to approximately 1% – almost all of which occurs in Auckland. The growth in the workforce is unable to offset increasing costs of health and super, but necessary policy reforms are opposed by baby-boomers. As a result, tax rates rise, further exacerbating the exodus.
The transport implications of these two scenarios are obviously rather different. The “home-coming queen” scenario might require increased transport investment, especially in the upper North Island where most of the population growth is likely to occur. It might also require different types of transport technologies, such as driverless metro systems and/or and inter-city passenger rail between Auckland and surrounding urban centres, namely Hamilton, Tauranga, and possibly even Whangarei. It might a new tunnel under the Kaimai ranges, or Auckland and Tauranga ports to merge into one “super-port” located midway between the two cities. I don’t know.
In contrast, the “gerontocalypse” scenario would be associated with lower economic growth, and lower socio-economic well-being generally. In terms of transport, we’d expect transport budgets to come under pressure. Some roads may need to be closed or sold off, and/or road user charges might need to rise simply to fund maintenance of the existing network let alone new investments.
I don’t know which scenario is more likely, but I know it’s important to discussions of transport technology. There’s a big difference between what technologies might work for a country of 5 million versus a country of 10 million, where most of the growth is located in and around Auckland, Hamilton, and Tauranga.
Without having answers to such question, it’s hard to frame discussions of which transport technologies might need to be adopted in the future. Dare I say it, perhaps this raises the need for some strategic thinking at the national level about demographic/population changes? It seems like National is betting on our ability to attract young people as a means for mitigating the rising costs of health and super associated with an ageing population. If so then that’s fine – but it would be useful to know this such that it can inform discussions of transport technologies, and the appropriate policy responses.
Discussions of future transport technologies often occur within a “transport silo”, where the interaction with wider socio-economic factors is downplayed. In reality, the development and adoption of transport technologies does not happen in a vacuum but is instead shaped by prevailing socio-economic factors. Current trends in land use and public policy, for example, indicate that transport technologies which are space and energy efficient are likely to have a comparative advantage in the future. Demographic outcomes are something of a wild-card. Whether New Zealand is able to address its demographic imbalances, and more specifically maintain socio-economic performance at levels comparable to the countries with which we compete for skilled migrants, may have a large bearing on the transport technologies needed over the coming decades.