Last week Finance Minister Steven Joyce gave a speech to Massey University and Auckland Chamber of Commerce about the economy and this year’s budget. There were some notable elements related to transport in it worth highlighting, especially those in relation to demand management.

The demand management part of the speech came after a decent amount of chest puffing and back slapping over all the major transport projects underway in Auckland including motorway projects, local road projects and the CRL.

However as this work comes to fruition over the next five years, Auckland as a city is going to come up against a hard constraint, and that’s one of geography.

There is no getting away from the fact that central Auckland is built on a narrow isthmus which makes it hard to get around – and the available land transport corridors are rapidly being used.

So beyond the current building programme we are going to have to look at demand management to reduce the reliance on the road corridors, in favour of buses, trains and ferries.

That was one of the conclusions of the joint Government/Auckland Council ATAP process last year.

To have this being acknowledged by Joyce is hugely positive given many of the comments he’s delivered over the years about transport issues in Auckland, especially during his time as Transport Minister. Quite how he’ll act on it could be another thing entirely though and so we’ll need to wait to see if as Finance Minister he delivers any money for PT projects.

If in the future we were to look back on what ATAP achieved, getting the government to finally acknowledge that we can’t just rely on more roads in Auckland will surely be near the top of the list.

Another big outcome from ATAP was the general acknowledgement between government and the council on the need for demand management, including the use of road pricing to achieve that. One positive of ATAP was that it assessed the need for road pricing outside the need to raise additional revenue to pay for infrastructure but even so, it found that just in the next decade alone an additional $400 million per year is needed.

The Government is developing a work programme to look at demand management tools including electronic road tolling in the medium to long term.

But to be clear, we see this primarily as a way to make the roading system work better – and not as a revenue raising exercise.

And today, I can confirm the Government’s position is:

First, we would expect that any road pricing initiative on existing motorways and highways would predominantly be a replacement for petrol taxes and road user charges not in addition to them.

We’ve suggested for many years that if introduced, road pricing should initially done so in a revenue neutral manner by replacing existing rates and/or taxes. While some would pay more and some less than they do today, the idea is that overall revenue gathered remains about the same which would help improve acceptance of any road pricing scheme. So in this case too it feels we’re roughly aligned with Joyce. This isn’t to say there still shouldn’t fuel taxes though, we still want to encourage moves to more fuel efficient vehicles after all.

The next part to note relates to his response to Mayor Phil Goff who had been pushing for a regional fuel tax.

And second, I stress that we are not interested in introducing a regional fuel tax. I have reiterated to Mayor Goff this morning that we do not see regional fuel taxes as part of the Government’s mix for transport in Auckland because they are administratively difficult, prone to leakage and cost-spreading, and blur the accountabilities between central and local government.

However we are keen to have a more detailed discussion about demand management tools, and explore further options for longer term funding for new infrastructure, including the use of private finance for certain projects, such as Penlink for example. Mayor Goff and I have agreed to work together on those.

Finally something to disagree on, I honestly can’t see how regional fuel taxes would be administratively difficult. I’m sure fuel companies know how much they sell at each of their stations and how many people are realistically going to drive outside the Auckland to get fuel. With the exception of a few people, most would probably spend more on the fuel to get out of the Auckland region than they’d save on petrol prices. Fuel taxes certainly may be a raising additional revenue in the short term till other solutions are put in place – and remember ATAP suggests we need to raise $400 million extra each and every year on top of what we’re already spending.

This announcement disappointed Mayor Phil Goff who claimed that without a new funding source, rates would need to rise by 16% – although that also includes covering for the special transport levy which we (and the AA) feel should be retained.

The last comment quoted above is concerning though, Penlink has long been proposed as a toll road but the problem with it has always been that tolls would only cover a small fraction of the costs. Waiving the PPP phrase around doesn’t suddenly make it more viable, in fact it is likely less so as PPPs require significant contracting work by agencies and are ultimately just a private loan which ratepaters would be paying back.

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  1. My take, having listened to Joyce for years: “Demand management” from Joyce almost certainly means getting those pesky cars out of the way of his truck and bus operating mates. The RONs were always huge subsidies for truck and bus operators…..mainly the former. Cars can use them, too, provided they don’t get in the way of “business” and “growth”. After that, it’s off to public transport with you…..waving the stick…saving the carrots for your mates. In a way, this aligns with my / our ultimate goals…..but the underlying reasons may lead to things happening we might not expect, like diesel-choked motorways through residential areas just as the move to electric cars may have started to clear the air a little.

    Trucks are noisy and they emit loads of bad stuff. I live near SH1 at Greenlane. More trucks? Make them electric or please……

    1. Truthseeker – trucks are the most difficult of all vehicles to go Electric, due to their weight, and so they will be the last sorts of vehicles that will still use diesel as fuel. Be prepared for (over time) most cars to change to electric, but long after that has happened, your friendly neighbourhood trucks will still be pumping out diesel soot.

      1. Light delivery trucks and vans should be able to go electric now – after all, milk has been delivered around Britain by electric trucks for decades. iirc light commercials make up a large percentage of freight milage, and most tradies vans cover small milages.

  2. Why on earth would we spend a fortune in tax / rate money now, or spread over 20 years to pay back a PPP loan to build a road to a peninsula that is constrained by geography and zoning to have almost no population growth?

    There are far more pressing projects that need funding to cater for aucklands growth.

    1. The growth is certainly there, go take a look. I would hazard a guess that next to South Auckland some of the biggest numbers of homes being built are on that peninsula.

      1. Ricardo, that is incorrect. Looking at the RCG Development tracker there are 9 Developments on the Peninsula:

        Manly Ridge Apartments – 26 dwellings – Marketing
        The Link – 58 dwellings – Completed
        Mariner Rise – 60 dwellings – Marketing
        k Road – 27 dwellings – Completed
        David Sidwell Place – 13 dwellings – Marketing
        Woodridge Estate – 100 dwellings – Proposed
        Brightside Road SHA – 40 dwellings – Proposed
        Stanmore Bay Retail Centre – 0 dwellings – to be completed Q1 2016
        Melia Rise – 16 dwellings – 3 completed 2008, the rest “under construction” since then.

        So 9 developments, 1 dubiously under construction, 1 shopping centre, 2 completed. The rest are fairy dust for now.

        Compare that to the numbers happening elsewhere in Auckland and common sense dictates that this is a minor area.

        1. Ricardo = Trump.

          Throw out nonsense, somehow not expecting to get called on it, or that someone will have done some actual research.

          Every. Single. Time.

        2. And, compare it to what is being built in Millwater, Silverdale and Orewa North. The Local Board are so fixated on Penlink that they’re ignoring a rapidly expanding population nearby.

  3. A stopped clock is right twice a day… ‘Demand management’ is code for tolls; and if they are considering tolls, it won’t be for demand management, it’ll be to support some as-yet unrevealed proposal for new motorway capacity.

  4. Seems relatively sensible. With regards to the debate about a fuel tax versus road pricing, they seem to me to respond to different (albeit related) issues. Specifically, if *demand* is the problem, then road pricing would seem to be the best policy tool, because it charges more for driving at peak times. On the other hand, if *funding* is the problem, then a regional fuel tax may be better because it’s easier/cheaper to implement.

    From where I’m sitting, funding seems to only be a problem because Auckland is trying to build too much stuff at once, and the reason we’re trying to build too much stuff at once is because without road pricing you get excessive demand for road travel at peak times. If we had road pricing, then we’d see much lower demand for road travel, and we’d be able to defer some of the uber expensive road projects.

    So in the Auckland context road pricing seems like the better policy tool.

    1. Not so Stuart, there will be some who would try to avoid the tolling periods, but most who use their vehicles to get to work and back would still be stuck driving at the same times of day. The government is painfully aware (even more so in an election year) that any extra charging hits the poor the hardest and no politician wants to be remembered for an additional tax on already strapped families. People can’t just change their working hours on a whim or threat of additional taxes, or if they could, trust we they would.

      1. Not everyone has to change their driving habits for it to have quite a big impact on congestion. Some people will have opportunity to change travel times. re The poor – it seems that “the poor” use more PT than the rich snobs that don’t want to bother with such “lowly citizens”. Hopefully any perverse outcomes (on poor families that really need to use a car etc) of a congestion charge can be offset with some simple system. I think timing it with the new bus networks will help as the frequency and hours of operation are better for late/early/weekend workers etc.

      2. Effects on low income households are easily managed: make sure you compensate them by at least as much as they pay.

        Let’s say pricing costs low income households 1000 per annum. Then find ways of using revenues to compensate them by at least this amount. Problem solved.

        In terms of political acceptability, i also think thats a red herring as it shifts over time as the policy debate progresses. As joyve says, lets have the discussion about road pricing and then decide whether we can find something that is politically acceptable. Rather than pre-empting that outcome.

    2. Auckland is trying to build too much stuff at once because so much of this stuff should have been built years ago but wasn’t due to lack of money for infrastructure along with councils believing they could constrain the sprawl.

      1. It is true that we have an infrastructure deficit and that will take time to address. Its also true that if we had road pricing then we could reallocate some of the existing transport budget away from expensive road capacity expansions and into PT.

    3. Stuart I agree with everything you have written about road pricing but I think you are under estimating the infrastructure challenges NZ faces.

      Last year NZ had the fastest growth ever -in absolute terms -nearly 100,000 people to June of last year.

      This is creating massive pressure to ‘make room’ for these new comers. Most of those new comers will come to NZ’s big cities -with Auckland getting something like 45% of the increase. Some of that population increase can go into existing urban areas -through intensification -in which case we will need better tools to allocate existing transport corridor space -such as road pricing and we will need upgrades to those transport corridors -such as the CRL and Dominion road light rail.

      But some of that ‘making room’ will be outwards -such as what the government is doing with parts of its SHA programme. This outward growth means new transport corridors will be required. But NZ needs to learn from previous mistakes and not double down on automobile only growth of only providing road corridors. These new growth areas need to be provided with multiple transport mode corridors from the start.

      All of this will cost money -but not as much money as doing nothing -which transfers costs to vulnerable groups in society through excessive rises in housing costs.

      So transport funding is very much in question.

    4. Funding seems to be a factor for Auckland’s Mayor -Phil Goff supporting road + BRT tunnel to the North Shore, which he says could be upgraded to light rail at a later stage. Rather than going for rail from the start. Greens transport spokesperson Julie Anne Genter says this option is chosen due to short term cost restriction reasons imposed by the National government.

      1. Hey brendon – i think you’re assuming a wee bit there about what i think about infrastructure etc. I do think we need a lot of infrastructure, but whay we’re spending right now, if sustained, should be sufficient to have a decent transport system. So its more about priorities than level of funding in my view.

        1. Hey Stu -any assumptions I made about what you were thinking were based on your comments -which I think I addressed and explained where my thinking differs from your thinking -or more specifically your written expression of your thinking. If you want to clarify, expand, explain more about your thinking so we can understand it -go for it. I certainly will not be offended. This is what debate is for……

        2. I disagree. In response to a generic comment on the relative effectiveness of road pricing vis a viz fuel taxes you said “I think you are under estimating the infrastructure challenges NZ faces.” How on Joyce’s green earth do you know what I think about NZ’s infrastructure challenges? Personally, that strikes me as a bold and unwarranted statement and I’d suggest phrasing it as a question next time, lest this snowflake gets irate.

          In terms of my views on infrastructure spending, let’s limit the discussion to transport.

          In that context, I understand that NZ has been spending ~2% of GDP p.a. on transport infrastructure, which I also understand is high when compared to other OECD countries. Moreover, the greenfields infra you talk to is somewhat distinct from the road pricing debate. Naturally, if we had road pricing then the congestion effects of new development wouldn’t be so much of a concern. The nature of the street networks — and who pays for them — are something to figure out during the consenting process don’t seem relevant to a discussion on road pricing vs fuel taxes.

          Basically, my view on transport infrastructure is that if we sustain current levels of expenditure, but re-prioritise to maximise the effectiveness of this spend, then there is enough money in the kitty.

        3. Stu you made the good point that “Specifically, if *demand* is the problem, then road pricing would seem to be the best policy tool, because it charges more for driving at peak times. On the other hand, if *funding* is the problem, then a regional fuel tax may be better because it’s easier/cheaper to implement.”

          I took that as meaning we have two distinct problems -managing demand on the road network that we already have. Which definitely road pricing would be excellent mechanism for achieving that.

          On the other hand it probably isn’t the best mechanism to fund the expansion of the transport network -road or other transport modes -cycling, rapid transit etc.

          I introduced a link showing a well qualified transport knowledgeable politician -Julie Anne Genter believes a lack of funding is inhibiting/limiting the correct choices for the expansion of the transport network.

          I also introduced a link showing NZ has rapid population growth -probably far greater than the OECD average -so necessitating a higher spend on transport infrastructure to cope with the urban expansion of our cities.

          Historically, especially in Auckland and I would argue in Christchurch and some of our smaller centres we have had incomplete transport networks. We repeatedly do things like build motorways without busways, we haven’t protected transport corridors to important locations -like rapid transit to airports. And so on. Surely it cannot be argued that NZ has a bias towards under providing transport infrastructure?

          New Zealander seem to have this belief in silver bullets in the urban environment. In the 1950s it was motorways, in the 1980s it was deregulation. We are flirting with ideas like driverless cars and road pricing being the next silver bullet. I am concerned that road pricing becomes the next excuse for under providing our cities with good transport networks.

        4. Stu if you want a reply in question form. Here is two.

          If Auckland keeps growing at its current rate of over 2% or by 45,000 people a year -which is a little under the population of Nelson City every year -do you think it will require any additional transport infrastructure or will road pricing be enough to manage this growth?

          If additional transport or other infrastructure is required what would be the best funding mechanism?

        5. Good questions.

          1) Yes I think additional transport infrastructure will be required; and
          2) Optimal funding mechanisms: Combination of rates, (national or regional) fuel taxes, and road pricing. The precise optimal mix would depend on what sort of transport improvement and where.

          In terms of #1, it’s worth highlighting that Auckland is planning to spend billions of $$$ on new infrastructure in the next 20-30 years. So we already have a large (by historical and OECD standards) funding envelope to play with. All this talk of funding being squeezed occurs in an environment where road is seriously under-priced at peak times, hence leading to congestion, hence leading to the need for expensive second/third best policies like public transport subsidies. If we start to correct prices for road travel, then we can also start to reduce public transport subsidies.

          This highlights how road pricing does several important things at once:
          1. Reduce car demand by say 10-20%, taking the pressure off to build so many projects so quickly. Note that 10–20% is about 10 years of demand growth;
          2. Induce people to switch to alternative modes. This will increase demand/revenue for public transport –> more money to invest in services/infrastructure; and
          3. Potentially (depending on the scheme) generate a new source of revenue to fund more infrastructure investment, where needed.

          So I do not see much value in discussing Auckland’s needs more for infrastructure in isolation from what is driving demand for that infrastructure. And as Joyce has rightly pointed out, demand drivers includes not just population growth, but also pricing. Basically, my view is that Auckland has simultaneously under-invested in certain types of infrastructure while systematically under-charging for the infrastructure we do provide. Worst of both worlds!

        6. Stu would you also apply road pricing to say Greater Christchurch which doesn’t seem to have a 20-30 year pipeline of transport expenditure planned? After the Belfast diversion and the $1/4 billion northern corridor I am not aware of any transport projects for Greater Christchurch.

          Yet after Auckland on a percentage Canterbury has the second fastest population growth.

          How would you fund transport infrastructure for places like Greater Christchurch so they do not repeat the transport and built environment mistakes that Auckland made?

        7. yes a national road pricing scheme would seem to make sense, given that 1) there are other cities with road capacity constraints and 2) electric/autonomous vehicles will require a shift away from fuel tax anyway.

          Your last question is fairly broad. When you say “mistakes” it seems like you are referring to planning rather than funding considerations, which I think is a bit far off-topic for this thread (albeit an interesting question!). One general comment I would make is that with road pricing, planning for capacity investment becomes much simpler, because transport authorities wil lbe responding more to revenue considerations (which are somewhat easier to predict) than congestion externalities (which are rather difficult to model).

        8. Stu and Brendon; good discussion. Can I suggest Stu that if NZ spends, at 2% GDP, a lot on transport infra compared to OECD, isn’t that likely to simply reflect our small population spread over a large (same size as UK) and geographically challenging (and active!) country?

    5. +1. Also once you have road riding in place you might as well use it for funding new infra if required. Indeed it will be a feature of this system that when new infra is justified, market prices will be high enough to justify it.

    1. Yes it seems Joyce policy will require a regional reduction of fuel taxes proportional to how much demand management revenue is captured in each region. Yet his policy is not to have regional fuels taxes, so all seems rather contradictory.

  5. Joyce, the Lord High Strategist of Everything (whose transport strategies for Auckland haven’t in practice, been working out too well) really needs to come to grips with our transport funding mechanisms and project priorities. This is especially important for Auckland.

    The basic guts of it is that NZTA needs a total reform of purpose and project selection based on proper cost/benefit analysis. In addition, for a city like Auckland full consideration and prime emphasis needs to be given to the least intrusive solution in order to maintain quality of place. Inevitably this will result in curtailing motorway expansion ( especially widening) and with funds directed predominately to the forgotten area (since 1950’s) of public transport.

    If the personnel in NZTA cannot embrace and handle the change in emphasis they should be thrown out and replaced by others who can.

    I suspect the National Party is a little out of touch with the changes in thinking, now prevalent among many Party members in Auckland. They need to wake up fast because September looms.

  6. It seems that in this context “demand management” means “private motor vehicle demand management”, hence the talk about road tolling, encouraging PT, etc. All very worthy in its own right, but it’s interesting that we barely seem to focus on TRAVEL demand management, i.e. why do we have to make the trip at all (or at least a long trip). Thinking in terms of overall travel leads you to look more closely at other strategies such as tele-commuting, internet commerce, greater use of delivery services (rather than everyone driving to the shop), and more compact mixed-use land use planning (leading to shorter journeys).

    1. I would have thought private motor vehicle demand management would have quite a significant impact on travel demand, which could drive all of the examples you give above.

  7. The problem with regional fuel taxes (well, a minor one) will be boundary effects; there will be (some) petrol stations on the borders that are (20c) cheaper than others 100m away.

    1. If the boundaries are in rural areas with large distances between petrol stations then this spill over effect shouldn’t be such a problem. Also there already is large differences in regional pricing that the public seems to accept.

    2. We have such large differences already, between stations and often weekday compared to weekend pricing. Experienced this while on summer holiday trips.

    3. Thats pretty common for petrol stations not too far away to vary by 20c/litre today, and 40 if you travel a bit further

    4. Well the Auckland region is almost perfect for reducing boundary effects to the inconsequencial. East and west: the sea; no gas stations. North and south, empty countryside. Pretty much anyone wanting t dodge the regional surcharge would have yo drive so far as to render it pointless: and if they stil want, good luck to them, it is unlikely to occur at a scale to harm the fund.
      In fact almost everything Joyce has uttered on this is abject nonsense. Administratively complex? That’s very hard to take seriously; nothing could be easier, no physical infrastructure, a little bit of accounting is all.

      He has other reasons, including not wanting any slip in centralised control, and of course he nixed it all those years ago, so perhaps he fears it look like that was a mistake, and of course it’s election year; but still it’s Goff’s tax really.

      1. Patrick this is part of a coordinated government response so they can pretend that haven’t made a complete pigs ear of managing our biggest cities where most voters live. See what I say below about Bill English’s latest ‘government in gritty talks with Councils……’ announcement.

    5. 20 cents a litre would be a pretty huge regional tax. I haven’t crunched the numbers to see what might be needed, but I’d guess it would be a lot lower to be politically acceptable.
      The Auckland region goes to Wellsford in the north (the next petrol stations after that are probably Whangarei) and Pukekohe in the south (more of an issue, as some of the ‘motorway service centres’ are probably outside the border), but a fuel tax across the region would pick up the vast majority of the petrol Aucklanders buy.

  8. Steven Joyce is clutching at straws if he thinks road pricing being implemented in the medium term will solve the shemozzle that his infrastructure, housing and built environment policies have created. Look at ANZ’s report on the headwinds facing Auckland’s construction. It is a multi-faceted disaster of epic proportions, which will take a decade of hard work and new policy directions to fix.

    1. Note: I meant if Steven Joyce thinks road pricing by itself and implemented some years down the track in the medium term is enough to address the housing affordability, transport deficit and 1950s built environment shemozzle we have in NZ then he is dreaming. But of course he is a/the major policy driver inside the National party government which has created this shemozzle, so it is unlikely he will acknowledge that it is a failure.

  9. Mr Joyce has done major damage to the social and economic fabric of New Zealand, by further-entrenching us in car- and road-transport dependency; also by failing to boost rail as a means of reducing this. His wrong-headed ‘RoNS’ programme represents a massive misallocation of resources in favour of the mode we should be urgently pulling-back from. His insistence that rail must pursue “profitability” at all costs (while in competition with heavily-subsidised and poorly-regulated road-transport), has squandered an opportunity that might have helped to right this balance. His inaction in allowing Hillside railway-workshops to close is indicative of his very poor understanding of what a strong rail-industry could and should be doing for this country.

    He has set us back decades, environmentally, economically and socially. Maybe, just maybe, he is starting to realise the error of his former attitudes, but any positive noises he is making now are far too little, far too late. The best thing that could happen after 9 dark years of his, and his party’s mis-governance of New Zealand’s transport policy is to see them tossed out of office. It is long overdue.

  10. Personally I think charging people lots of money because they have to use certain public infrastructure at certain times is quite unfair.

    1. “Personally I think charging people lots of money because they have to use certain public infrastructure at certain times is quite unfair.”


      Personally I think charging people lots of money a lot higher taxes, because they have to use fund certain public infrastructure that very much benefits a few private users over many public users funding it at certain times is also, really quite unfair.

    2. Just as unfair as airlines charging more if you want to fly at popular times. Many years ago the Cook Strait ferries had a single price system. Peak days were sold out within hours of bookings opening months in advance. Too bad if you needed to get a vehicle across in December or January your only option was to queue on the wharf for a “no show” yet the ship’s had untold unsold spare capacity in the off season. Variable pricing properly executed means expensive assets can be efficiently used driving down average costs.

      1. It is a bit different as the majority of aucklanders pretty much have to use roads to get to work and back every day. A lot aren’t overly well off and don’t have another option other than quitting and going on the dole. It is quite a regressive tax as the people who can get flexible hours or work from home are generally the well paid office workers.
        We could also put demand management in our hospitals to save on doctors I guess.

      1. Not saying they should, put up fuel tax if needed, at least that hits everyone in a fair and affordable way. Roads are already demand managed – if the journey time gets really bad then people who don’t have to make the journey will reschedule. We don’t need a tax to allow the rich to get around faster at the expense of the poor who can’t afford to go anywhere.

        1. Fuel taxes are still a subsidy. Its just that offpeak and rural drivers, who dont use expensive high capacity road infrastructure in the city, are subsidizing people who live in suburbs who drive to work at peak times.

        2. im more than happy for a regional fuel tax if Auckland needs more than it’s fair share of the current fuel tax. A city congestion charge might be a good option too as I don’t think anyone should drive to the city for work. But tolling the motorways will end up in some people paying a huge amount with no alternative

        3. I was responding to this comment of yours: “… put up fuel tax if needed, at least that hits everyone in a fair and affordable way.”

          And merely trying to point out that fuel taxes don’t affect everyone in a fair and affordable way, e.g. people on benefits who travel primarily at off-peak times will be paying much more for fuel than they should.

  11. Lets also consider that while Steven Joyce is ruling out a regional petrol tax. In an obvious coordinated move Bill English is discussing the ‘gritty talks’ where the government offers funding of up to a total $1billion low cost loans to local government if they meets with the governments approval of requests constituting good infrastructure that is needed because otherwise housing developments would be delayed/restricted.

    Read about it here.

    Personally I don’t think these are genuine ‘gritty talks’. All parties are just going through the motions.

    $1 billion doesn’t even get you a big sewage pipe in Auckland. Also Auckland and other growing parts of NZ needs revenue streams to pay for infrastructure not more loans.

  12. I feel like that if you feel like you’re able to go out of the Auckland region to get petrol and don’t care about doing this that you’re probably not part of the “congestion” problem (in the sense that if you’re driving in a traffic jam, you’re literally part of the problem).

    Also, re: revenue neutral introduction of congestion pricing… is it just me or does that go some way to easing equity concerns?

    1. Yes revenue neutrality could address equity concerns. So could a rosd pricing scheme that focused only on commercial vehicles (including company cars). Lots of options for implementing road pricing in a staged and sensitive way to address these issues. But it’s important to have the debate and develop these ideas, as Joyce is trying to do, rather than shut it down, as others would have it.

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