News & Thinking

2018: Looking back to look forward

Contributed by:

Chris Dann

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Chris Dann

It’s been a busy year for our regulators in the transport and supply chain sector. In this final issue of FTD for 2018, we look back at some of the year’s highlights and take a peek at what’s coming up.

Transport funding and Government policy priorities

In June, the Government Policy Statement (GPS) on land transport was issued heralding record transport spending of $4 billion per annum, increasing to $4.7 billion per annum by 2027/28, funded by increased fuel levies and road user charges.

GPS 2018 signals a shift away from building new roads to maintaining and improving what we’ve got, improving safety and taking a more holistic, lower emission and “mode neutral” view of transport options.

Policy initiatives will be paid for by annual 3.5c/litre increases in petrol excise duty and road user charges this year, in 2019 and 2020.

GPS 2018 informed the 2018-21 National Land Transport Programme which was published at the end of August by the NZ Transport Agency (NZTA) and sets out the planned activities to give effect to the GPS. In announcing the programme, NZTA said: “There is greater focus on one complete transport system that embraces and better joins all travel options including public transport and walking and cycling. We’ll be investing in activities with strong safety outcomes, providing better access to all forms of transport and making the system more resilient to keep communities, people and businesses connected”. Overall, $16.9 billion will be spend over 3 years, a near doubling of transport investment compared with the equivalent NLTP a decade ago.

A second stage GPS is planned in 2019 taking into account the future of rail study and a new road safety strategy (more on that below). We expect this second-stage GPS to expand funding for rail and coastal shipping (neither of which contributes to the National Land Transport Fund) and also focus on emission reduction initiatives.

Pain at the pump

The so-called “national fuel price” rose over $2.40 for 91 octane petrol in October this year following increases in crude oil prices and weakness in the New Zealand dollar.

Adding to the rise was the 3.5c/litre excise duty increase mentioned above and the Land Transport Management (Regional Fuel Tax) Amendment Act which came into effect on 1 July enabling NZTA to collect an extra 10 cents per litre in the Auckland region.

The Act allows any regional council, following public consultation, to propose a regional fuel tax scheme in order to provide additional funds to pay for transport projects that would not otherwise be funded. However, any such proposal must be approved by the Ministers of Finance and Transport and the Act restricts a regional fuel tax to Auckland until at least 1 January 2021. Already the Government has ruled out a Wellington regional fuel tax despite pressure from Councils in that area.

Officials warned that the impact of regional fuel taxes could spread, particularly to regions where there is less competition. In August the AA wondered aloud whether exactly that was happening.

Looking forward, Minister Faafoi is expected to announce a market study by the Commerce Commission into fuel markets before the year is out following the passing of amendments to the Commerce Act to facilitate such studies in late October. But don’t expect that to yield results any time soon: the study itself will take months and, if any uncompetitive behaviour is identified, the Government will then have to work out how to respond without driving suppliers out of the market and perversely reducing competition.

Regulatory issues at NZTA and a new enforcement approach

October saw an acknowledgement by NZTA that it has not been properly monitoring heavy vehicle certifiers and has been too reliant on education rather than enforcement to address non-compliance. In response, NZTA announced a review of regulatory compliance, including investigating 850 open compliance files, and signalled a hardening of approach: “the reliance on the industry to self-regulate has not worked”.

Speaking of compliance enforcement, in the same month NZTA announced their new “Weigh Right” Programme. Heavy vehicle screening technology will be installed at 4 existing weigh stations (now called “commercial vehicle safety centres”) and 8 new sites throughout the country. When a heavy vehicle is screened as potentially overweight, the number plate will be displayed on an electronic sign directing that vehicle to ‘pull in now’. NZTA says that further locations and enhanced technology are planned to screen across multiple areas of vehicle and driver compliance.

In a similar vein, the Ministry of Transport is currently developing a comprehensive new 10 year road safety strategy, due for release in September 2019. That strategy could include:

  • adopting a “Vision Zero” policy approach aimed at eliminating all fatalities, used successfully in countries such as Sweden and Norway;
  • reconsidering NZ’s approach to fatigue management, particularly for commercial and heavy vehicle drivers;
  • the role of logbooks and whether they remain appropriate; and
  • New Zealand’s chain of responsibility (CoR) laws, following major changes to the Australian CoR regime from 1 October. The Australian approach now focusses on an overarching, positive duty of care: each party in the supply chain has a primary duty to ensure that everything reasonably practical to ensure the safety of transport activities is done.

New Customs & Excise Act

On 1 October the new Customs and Excise Act 2018 (and amended regulations) came into force. There are no major changes in policy. Rather, the language and structure of the Act has been modernised. NZ Customs recently released a comparison guide on the differences between the 1996 and 2018 Acts to help navigate from the old to the new.

The new Act also introduces a number of changes designed to give importers and exporters greater certainty and flexibility; update Customs’ processes so that they are appropriate for the modern business environment and adaptable going forward; and facilitate greater information sharing between Customs and other government agencies, whilst protecting individual privacy.

Technology and Intelligent Transport Systems

Unsurprisingly, given the incredible pace of technology development, the area where we have seen the most varied, voluminous and (perhaps) valuable news is in the AI/intelligent transport space:

  • In January Deloitte released a report on: “Unlocking commercial opportunities from intelligent transport systems”. The report focused on three areas – drones, smart logistics for land freight and autonomous self-driving vehicles – and found New Zealand has a good regulatory and business environment to benefit from such technology, estimating it could contribute $1.5billion per annum to the economy.
  • In February, the 2018 KPMG Autonomous Vehicles Readiness Index was released ranking New Zealand ninth out of 20 countries. We rank second on policy and legislation – because we have a generally supportive government and a strong reputation as a technology test-bed. On the other hand, we are in the bottom five when it comes to infrastructure as we have relatively few electric charging stations and low levels of 4G coverage outside urban areas.
  • In March the Government announced both an Innovative Partnership programme to attract international companies working in future-focused technologies to develop their products in New Zealand, and a Future Technology Leadership Group to develop a 10-year Land Transport Technology Roadmap.
  • The Civil Aviation Authority completed a review of New Zealand’s rules for unmanned aerial vehicles (drones) with a key theme to emerge being a need for better education and safety promotion for the rules (particularly following a large number of close calls involving drones and weekly reports to Airways of drones operating without authorisation in controlled airspace). We expect changes to the rules in the near future (possibly a compulsory registration system for drones), but the Government will be keen to maintain our reputation as having one of the most accommodating regulatory frameworks in the world given the potential prize: Goldman Sachs Research forecasts the UAV market to be worth US$100 billion by 2020.
  • Driverless cars could be tested in red-zoned Bexley in Christchurch’s east if a scheme announced in November involving NZTA, Christchurch City Council, Ministry of Business Innovation & Employment, Civil Aviation Authority and Canterbury University is approved. The scheme aims to attract private companies to test and deploy driverless vehicles, transport technology like connecting vehicles to real-time data, high definition mapping and fare payment systems in order to tap into the mobility market which experts have estimated will be worth $7 trillion in the next 30 years.
  • One of the issues facing regulators of driverless cars was laid bare by the release in October of a MIT survey of 2.3 million people from over 200 countries asking respondents to choose who to spare in situations where someone’s death from a crash was inevitable: passenger or pedestrian, young or old, rich or poor, more people or fewer. The study’s authors say that the scenarios represent the subtle moral decisions that human drivers make each day and that the results (which varied by country) should be taken into account by governments and manufacturers of driverless cars if they want the vehicles to gain public acceptance.
  • Finally, a “whole stack” of policy options is due to be released by the Government in November to encourage electric vehicle uptake. In October the number of electric cars on the road passed 10,000 but that makes up just 0.25 per cent of New Zealand’s entire vehicle fleet. The programme could include swapping out the Government’s fleet of petrol cars for EVs; strengthening tail pipe emission standards and introducing a feebates scheme (which lowers the upfront cost of EVs and makes them competitive with internal combustion engine cars, including by penalising high emitting combustion vehicles by higher registration fees) – each of which was proposed by the Productivity Commission; and exempting EVs from fringe benefit tax.

Plenty to talk about and plenty more to look forward to. We’ll follow developments closely and keep readers informed.

This article appeared in the FTD Magazine’s December/January 2019 edition.

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