Show me the money tree

As I look this week at another bunch of speed limit cuts around the country, I have to say, show me the money tree.

Anyone who thinks we should be slowing down the economy in the middle of a global pandemic that is putting companies out of business and workers out of jobs like never before, clearly has access to a money tree in the garden.

Driven by the ideological imperative of taking cars and trucks off the road to make way for cyclists and pedestrians, seldom does this decision-making consider economic impacts.

Commercial road users, who pay for their road use, feel the pain of reduced speeds on their bottom line. Time costs money. Slowing down freight on New Zealand roads costs everyone. And that’s in peace time. Now we face COVID-19 time when to survive, New Zealand is going to have to be able to move exports and imports as quickly and cost effectively as possible. That will be by road – 93% of the total tonnes of freight moved in New Zealand goes by road.

The Government continues to lower speed limits around the country in a piecemeal fashion, with no consideration of the big picture for those who move freight from one end of New Zealand to the other. Modelling showing a minute lost here and a minute lost there does not match the reality of extra hours on the road when you are criss-crossing regions with wildly varying speed limits.

We appreciate that in some cases, lowering speed limits might well have an impact in reducing the road toll. But time and time again, in our submissions and meetings with those who have already decided to lower the speed limits before they go out for consultation, we hit a brick wall when we talk about driver behaviour being the cause of death and injury on the roads. That’s drugs, alcohol, distraction and ability. A lot of government research focuses not on the cause of the accident, but why there was an impact severe enough to result in death. If you look at it that way, the law of physics suggests any speed of a moving vehicle will be a problem.

The sole focus on speed limits will do more harm than good.

I discovered this week we are not a lone voice. Northland Age editor Peter Jackson penned a well-written piece about speed limit reductions in Northland. He said:

“If the Government really wants to make back roads safer it will have to seal them, widen them, and get rid of more corners than anyone can begin to count.

“That’s not going to happen, but reducing speed limits is not a reasonable alternative. Rather it is yet another exercise in wasting money for no benefit. Worse, it could have the opposite effect to that intended.”

Quite rightly, Mr Jackson points out that rates will be diverted to: “be wasted on a forest of speed limit signs that most will ignore”.

He goes on to suggest: “What Parliament needs is a special Common Sense Unit, whose role will be to weed out the dumb ideas before they start costing money on projects that won’t work.”

You can read the editorial Are speed limits the answer? here. We concur with Mr Jackson.

– Nick Leggett, CEO, Road Transport Forum

Infrastructure announcements will not save New Zealand’s economy

The penny is starting to drop that New Zealand is in a precarious economic position we may not recover from for decades. There’s a big difference between saying building infrastructure will contribute to New Zealand’s economic recovery from Covid-19, and the reality of the gap between announcement and creation of paying jobs.

I’ve been quite vocal about my concerns around Transmission Gully. If the Government can’t even complete the one big roading infrastructure project on the books, how can we have confidence they can get others running and completed?

Many share my concerns and this week, New Zealand’s largest construction company Fletcher Building announced it would be slashing about 1000 jobs in New Zealand as it moves to reduce staffing by 10 percent.

It has been reported that Fletcher Building had more than 400 operating sites closed during New Zealand’s level 4 lockdown. It said it recorded zero revenue in most of its New Zealand operations during the lockdown. In Australia however, where there has not been a total lockdown, revenue ran at about 90 percent of its prior expectations.

Our biggest construction company doesn’t have much confidence in the road ahead and the expected market downturn means it has to reduce its workforce, losing valuable skilled workers. They are not alone. We are seeing 1000 people a day join the unemployment queue. The cost to this country will only play out over time, but we can expect our young people won’t want to stick around and pay the bills being racked up now and we will be looking at another brain-drain.

The Government has tagged about $15 billion for infrastructure, but announcements do not jobs make. There’s a big gap between something being deemed “shovel ready” and well, the shovels actually going into the ground with workers attached to them.

Even the Amalgamated Workers Union national secretary Maurice Davis is calling for a faster start on infrastructure projects to offset job losses in the construction sector. He suggests the Government look at fast-tracking projects they deferred when they came to power.

In a last-ditch attempt to get some business nous into the economic recovery the Prime Minister’s Business Council has told her that Australia is “co-optimising” the economic consequences of the Covid-19 outbreak better than New Zealand. Chair Fraser Whineray sent a blunt letter holding up Australian Prime Minister Scott Morrison’s high-powered National Covid-19 Coordination Commission as exemplary.

The voice of business is not so well heard here in New Zealand. You can see that in suggestions for a four-day working week and an extra public holiday. These are further costs already crippled businesses simply won’t be able to bear. They’ve only just got back to work in many instances and now the Government wants them to pay for more days off. This also shows the Government’s complete lack of understanding of the fact that many businesses operate seven days and/or are coordinating with parts of their businesses in other time zones. The five-day, 9am-5pm work week is no longer reality for many.

You can see the disregard for business in the policy – written by people with no business experience – and in Wellington where we now wander in a ghost town. Public servants are staying home instead of coming into the city to work and contributing to the retail and hospitality businesses that have conveniently been there for them for years.

If the Government really cared about jobs, jobs, jobs, they would get their own workers back into Wellington’s offices spending their considerable salaries.

The trouble we are in will not be cured with kindness. It won’t be fixed by well-meaning workshops. The meaningless daily press conferences and the hiding behind Covid-19 needs to stop. As Mr Whineray put it in his letter:

“To avoid the endemic problem with the public sector’s misallocation of New Zealanders’ resources held by the Government in non-core activity and low productivity within the public sector we need a very strong business in involvement alongside central Government.”

– Nick Leggett, CEO, Road Transport Forum

What Budget 2020 holds for trucking

What a difference a year and a global pandemic makes.

The 2019 Budget delivered a $7 billion surplus, the 2020 Budget, a $28 billion deficit.

Quite rightly, the 2020 Budget focuses on jobs as we look at about 1,000 people a day joining the unemployment queue. Many of these are people who have never been unemployed, and have not previously experienced poverty.

Some commentators have remarked that it borrows big, splashes the cash and hopes for the best, rather than delivering a strategy to get New Zealand out of one of the deepest economic holes it has ever been in. You only need to look at the $32 million the Budget allocates to food banks to realise what’s ahead.

Our net debt will be 53 percent of GDP – that’s some borrowing.

Two aspects of the job creation interest us – the industry will be very pleased to read about significantly more support to trades training and a greater infrastructure spend.

We are also pleased to see an extension of the wage subsidy. Although, the threshold for the further eight weeks of wage subsidy is a 50 percent year-on-year reduction in the business’s income, as opposed to the original 30 percent reduction. For businesses in that situation, you have to wonder about their viability going forward.

As the RTF hopes to embark on a road freight transport specific training scheme later this year – Pathway to success – we hope the Budget allocation to trades training ($1.6 billion for a Trades and Apprenticeships Training Package to help workplaces retain their trainees) will have some capacity for our industry. We have after all, demonstrated ourselves as a critical industry to our country’s economy, particularly in the minds of the public.

Infrastructure is a tried and true lever to create jobs, both as an economic stimulant and to enhance capacity for greater productivity over the long term. So it is not surprising to see a further $3 billion to fund infrastructure projects. This comes from the $50 billion the Government has set aside in this Budget to recover from COVID-19.

This infrastructure spend is in addition to the previously announced $12 billion New Zealand Upgrade Programme. The Government’s Infrastructure Industry Reference Group is giving advice to Ministers on which projects should progress. As always, we advocate for spending on roads to ensure freight can move efficiently and more safely around New Zealand to the ports and airports that take it to our export markets. Exports will be a massive contributor to our economic recovery.

We are disappointed to see New Zealand First grab more money for rail projects that don’t stack up, to the tune of $4.6 billion. Within the past week we have seen two rail lines ruled out by KiwiRail as uneconomic. The Gisborne to Wairoa freight line didn’t stack up. And $250,000 was spent to find the obvious – that a passenger line from Hokitika to Westport on the South Island’s West Coast came at an unrealistic price of $92 million. That would leave passengers paying $400 for the return trip on a train. Now, more than ever, the economic benefits of infrastructure projects must stack up so they aid our nation’s recovery.

We support spend on rail to ease city congestion and improve public transport. We’d like to see Auckland’s City Rail Link project completed, and the budget not to blow out completely, as a first best step. We think it is sensible the Government has shelved Auckland’s light rail project. As the West Coast project showed, there has to be a realistic cost-benefit ratio to any future rail investment.

We support this Budget’s goal to create jobs at a time many New Zealanders are facing unemployment. We support training and re-training as one path to employment and we believe road freight transport can make a strong contribution to this.

We support infrastructure spend but we want to be sure it is more than big announcements. We want confidence that there is the capability and capacity in New Zealand to pull off these big projects in a timely fashion and within budget.

– Nick Leggett, CEO, Road Transport Forum

Free up freight to keep the economy moving

Week one of the Government’s lockdown has been a grim one for business. Air New Zealand is a shadow of its former koru, Bauer media shut its doors, and the forestry industry is in dire straits.

Most businesses are feeling the pain, with no end in sight. Even while the Government focuses on the health aspects of the global pandemic that is Covid-19, part of its enormous resources needs to be looking at economic recovery.

In a democracy, you can’t lock up a population and keep them terrified with mind-blowing numbers of fatalities for too long, without some serious questions being asked. Words like “unprecedented”, “we’re all in this together” and “the new normal” are carefully crafted to maintain control. But in the lounge rooms around New Zealand people are losing their livelihoods and there won’t be enough money to maintain that for too long.

The solution that has been mooted of a Depression-era road building gang under yet another government department’s control cannot be the only way out of this.

While we desperately need better roads, there have to be viable businesses using them and people who have jobs to go to. And this project is being headed by Transport Minister Phil Twyford who previously said, “there has been an over-investment in roads and motorways for decades in this country”.

Everyone is scrutinising the behaviour of our leaders, so when the Health Minister flouts the lockdown rules and the Transport Minister has a 360 degree change of heart, it feels like the recovery strategy might be a bit shaky.

Talk of an “institute” to train workers for the road building smacks of creating an even more bloated public service – there are already training programmes for this and what about the Reform of Vocational Education? The only people assured of jobs through this are public servants.

Trucking essential goods is an essential industry, but trucking companies are doing this at a loss because they cannot operate their businesses efficiently.

Supply chain links vital to getting essential supplies where they need to go must be allowed to work if trucking companies are to survive long enough to meet the demands of the Covid-19 response.

The Government needs to listen to business people and understand how business works. It is the private sector that will re-build the economy, not the public sector. The public sector spending on infrastructure won’t dig us out of a hole. New Zealand needs to generate wealth as the Government will need someone to tax. They have to keep people in business and that’s not just big business either. Small and medium businesses are the backbone of our country. The government can’t afford to forget that.

The decision to classify freight into two arbitrary groups – essential and non-essential – shows a lack of understanding of what is an integrated global system.

You take one link out, and the whole chain starts grinding to a halt.

As an importing and exporting nation, goods have to be able to come in and go out.

But at the moment, goods deemed “non-essential”, such as logs and processed wood products, are not allowed to go out. That means other countries that don’t have these restrictions are taking our market-share and we may never get it back. The longer this goes on the more people in the New Zealand provinces where forestry is a key employer will be out of work and the more businesses will fold.

The imperative to plant one billion trees is out the window and down the road.

We can’t export without importing. We must be able to move goods. Workers are already working in the “new normal” conditions of social distancing and strict hygiene, so this is doable under Alert Level 4.

We know that it is vital that items deemed essential move quickly through the supply chain, and priority should be given to them. However, for the supply chain to actually function now, and during our nation’s economic recovery, the classification to control its movement should be scrapped.
– Nick Leggett, CEO, Road Transport Forum

Road users should fund roads, not rail

This week, the Government laid down the track to siphon money out of the state purse for building and fixing roads and into the bottomless money pit that is rail.

With the first reading in Parliament of the Land Transport (Rail) Legislation Bill, the Government is on its way to extending the National Land Transport Fund (NLTF) to subsidise rail. That means, the fuel tax and road user charges that people who use roads pay to help fund those roads, will now be “competitive” dollars, available to rail. It doesn’t matter if you don’t use rail, you’ll still be paying for it when you use the road. And given the fund is already not enough to pay for roads, you can expect to pay more for everything to add the dollars needed to prop up the Government’s pet project, rail.

While the legislation introduces track charges for rail service providers that will place revenue into the NLTF, there is little detail on this and it is unlikely this money will come close to funding the likely draw-downs for rail. And rail projects going through the NLTF will not have to go through the rigour roading projects do – they can just be signed off direct by the Minister of Transport.

Let’s be clear, KiwiRail is a State-Owned Enterprise that is supposed to make its own way by making a profit. We think the NLTF should be ring-fenced for roads and other funding sources should be found for rail.

It is also clear there is a place for rail.

Rail is important in cities, where it is electric and it can provide public transport to ease road congestion and reduce emissions. As a user of commuter rail, I know it’s effective at removing vehicles off roads and therefore, relieving congestion. To continue to do that, public transport must be convenient, affordable and reliable.

Outside the cities, New Zealanders rely on roads because there is no public transport and the distances travelled are too great for most people to walk or cycle. They use roads, and they pay for them. The Government’s carless nirvana is a wee way off yet.

Rail’s place in the regions needs to be considered with economics and facts, and without all the romanticism and emotion that seems to be associated with it when it comes to the freight tasks.

In its rather breathless press release backing the Government’s Bill, the Rail and Maritime Transport Union said:

“As the smoke from Australian bush fires stains New Zealand glaciers the colour of old blood, we are all forced to consider the burning urgency of confronting and defeating climate change.

“The only way to do that is through dramatic reduction in carbon emissions, and the only way to do that is by replacing dirty and inefficient modes of transport with cleaner and greener technology. Rail is the future we’ve been waiting for, and we don’t have any time to delay.”

Let’s not pretend this is a win for the environment. Outside the city boundaries rail is powered by diesel, the same as the trucks that are in fact, the preferred freight movement option. Trucks win every day because they deliver door-to-door, on time. Road carries 93 percent of New Zealand’s freight task. Rail carries six percent.

To have any comparative environmental benefits, a rail journey needs to be long, like about 400km at least. And one of the things that rail is good for is heavy loads, like bringing coal out of the mines to end-users; not a task favoured by the environmentalists.

We are sick of the rhetoric, double-standards, and of the Government demonising trucks. We are keen to look at better ways of funding both road and rail, but if it is to truly be a level playing field, rail needs to pay their way. Large parts of the rail network are very old and will need billions of dollars in new investment and we think that should come from Government borrowing, rather than the NLTF. That’s of course, assuming the case for pouring those billions of tax payer dollars into rail stacks up economically.

Merry Christmas, and if you are still waiting for a package for under the tree, it will come to you via road.

– Nick Leggett, CEO, Road Transport Forum

 

Spend that cash

On Tuesday, the Government slapped itself on the back and congratulated itself on a massive $7.5 billion surplus – the biggest surplus since 2008 prior to the global financial crisis.

This is against a backdrop of the lowest business confidence since just after that global financial crisis; a massive dive in rural confidence tagged to farmers’ concerns about the Government’s policy direction; and a slowing economy in the provincial regions that previously, had been booming.

There is something wrong with this picture. The adage that perception is reality rings true. Most of New Zealand is feeling the pinch, but the Government continues to tell us everything is OK.

For some time, we have been calling for the Government to urgently spend some money on roads – making existing roads safe and building new, four-lane roads where they are most needed. It is our roading network that keeps our economy moving and growing and food on our tables. People and goods need to get from A to B in the most timely, safe, cost-effective and efficient manner. Even if you are giving a nod to the environment, that makes the most sense, as congestion and delays on the road only increase the emissions the Government is trying to reduce.

But with the ideology in play, circular reasoning is being applied around the negative impacts of cars and trucks, rather than their essential role in our high standard of living. This sees a reluctance by the Government to follow all the expert advice that says, “spend some money on infrastructure to boost the economy”.

Back in June, the Prime Minister’s Business Advisory Council warned that New Zealand is at an “infrastructure crisis point”. It said there is “no overarching vision or leadership in New Zealand for infrastructure development”.

You would think this would raise some concerns, given the Government’s heavy reliance on advisory groups at the expense of core government agencies such as Treasury, who are surely recommending spending some money to make some money.

Last week, we saw stark evidence of the impact of not spending on infrastructure. A key part of the State Highway network collapsed, literally (pictured above – photo from Mark Brimblecombe). Locals say Parapara Road, on State Highway 4 between Whanganui and Raetihi, has been problematic for the past 15 years.  A sizeable crack appeared last week and then the road broke entirely, with hundreds of cubic metres of soft earth slipping and sliding and cutting off vital transport links for an indefinite period.

Drone footage and photos of the slip illustrate how significant it is. The slip is still moving and it is not going to be fixed any time soon, if ever.

This leaves farmers, school children, ambulances, and freight companies facing major detours for an indefinite period of time. The recommended detour route will add at least one hour to every journey. About 1000 vehicles use the Parapara Rd daily, about 10 percent of which are heavy vehicles. Health care professionals are looking at helicoptering out critical patients, as a road journey will now be so long. This is a critical situation.

Steve McDougall from McCarthy’s Transport has been quoted as saying the company’s logging trucks will now have to connect with State Highway 1 at Bulls, or State Highway 3 via New Plymouth, to travel northwards. He says this will have a catastrophic effect on the business that will cost between $30,000 and $40,000 per day. It will reduce productivity – less trips will be possible each day. That cost will be passed on to the forest owners and the end user customer.

The cost of not investing in roads ultimately hurts all New Zealand families. Basics, such as food costs and access to health care cause the initial pain, but the cost across the supply chain of all goods just goes up and up.

We cannot have major roads collapsing. Look at how long it is taking to find a fix to the Manawatu Gorge. The Government needs to apply some basic economics to its thinking. How much cost are they prepared to add to every Kiwi household so they can say, “look how much money we’ve got in the bank”?

– Nick Leggett, CEO, Road Transport Forum