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Source: Reuters -
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New Zealand's state highway network is subsidised by about $1.5 billion each year, which is scuppering the coastal shipping industry, the New Zealand Shipping Federation says.
It cited a government-commissioned report, the Rockpoint Corporate Finance report, Coastal Shipping and Modal Freight Choice, for the New Zealand Transport Agency, which was released last week.
The 253-page report assessed the prospects of coastal shipping increasing its share of the freight market from road and rail. It was produced in response to the Ministry of Transport's Sea Change initiative to increase use of the industry.
It found that users of the state highway network were paying only 40% of the full costs of providing roading infrastructure, said New Zealand Shipping Federation executive director Sam Buckle.
Buckle said there was a lot of talk about the cost to the taxpayer of the rail network.
"However, the chronic under-pricing of roads is the elephant in the room," he said.
"The report shows that users of the state highway network are effectively subsidised to the tune of $1.5 billion per year."
Based on Treasury's $20b valuation of the state highway network the report calculated that if operating commercially it should generate about $2.5 billion in revenue each year. Instead, it only generates approximately $1b - a shortfall of $1.5b, he said.
"This is possibly the biggest issue in the transport sector. It artificially cuts the price of moving freight by road, creates a competitive advantage for trucks, contributes to congestion and emissions and denies taxpayer billions of dollars in much-needed revenue."
Buckle said management and pricing of road use did not meet government expectations of no subsidies in the transport sector and for the market to determine how freight was transported.
The report said rail, which received significant government funding, was coastal shipping's most direct competition and if it was forced to increase prices to be profitable it could boost coastal shipping.
The report made a number of recommendations, including the Government spelling out what it wants from KiwiRail, from a commercial and national good point of view.
It also recommended getting more information on freight movement through ports, road and rail, which would be publicly available.
New Zealand's maritime regulations should be more pragmatic to allow a competitive coastal shipping industry to develop.
Regions should also formally analyse their existing freight requirements and growth over the next 10 years.
Coastal shipping should also be better promoted, the report said.
It accounted for 3% of the freight market.
The country relied heavily on international carriers and the commercial domestic fleet comprised just 15 vessels over 45m in length, including the five Cook Strait ferries.
Tony Friedlander, the chief executive of the Road Transport Forum, which represented road freighting interests, could not be contacted for comment.
