Message from the Chief Executive

Photo of Martin Matthews, Chief Executive

Martin Matthews, Chief Executive

This has been a good year for the Ministry. We have stretched ourselves and grown as a result. We have great staff engagement, we are significantly deepening our strategic focus, we are producing excellent results for our stakeholders and we are more productive; producing more with less resource. This review sets out what the Ministry has achieved over the past year, including:

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I am personally delighted with the Ministry’s response to the hard challenges that we set ourselves a few years ago. Our Performance Improvement Framework (PIF) review also challenged us to sharpen up if we were to meet our Greatest Imaginable Challenge, which is to create the environment to double the value from transport initiatives. We were challenged by the reviewers to improve our strategic understanding of the transport sector. We have appointed four world class Strategy Directors to lead projects to improve our skills and understanding of the transport sector and its future needs.

Investing in the strategic needs of the sector has also paid dividends as we seek to unify the government transport sector. We have worked hard to strengthen ties with our stakeholders, the key players in the transport sector.

Our people have responded to the challenge to stretch our goals and lift our vision. As a result, we have achieved a world-class engagement score in our latest Gallup staff engagement survey. For every twelve highly engaged staff members, we have only one disengaged. This shows me that we have a team of people who come to work because they have strong confidence in the Ministry and know that what they do makes a positive difference for New Zealand. Our overall engagement score was 4.08, the second highest in the state sector.

We have worked hard to improve the quality of our work. Our primary output is high quality, timely advice to the Minister. The New Zealand Institute of Economic Research independently assesses this advice, and this year they have given us an average score of 7.4. This falls short of our aspirational target to achieve a score of 7.5, but is a good improvement on our 2013 score, and places us third in the state sector (against 2013 scores). This assures me that we are delivering a great standard of work.

We are delivering strategic depth, high engagement with stakeholders and staff, and high quality advice, with less resource. Over the past six years we have worked to improve our operating model to give better value for the taxpayer. As at June 2014, we are 25 percent smaller than in June 2008, and have a 15 percent smaller operating budget taking into account inflation. But we have lifted our performance in response to this, whilst going through a lot of change. I am proud of what the Ministry has achieved.

While we have done well over the past year, we still have a long road ahead of us to reach our Greatest Imaginable Challenge. There are aspects of our performance that we need to build up and improve on - these are identified in this report.

We want to have a strong, healthy organisation because the job we have to do is so important. It is vital for the future of New Zealand that we have a transport system that maximises economic and social benefits, and minimises harm. We are working to ensure that we have a system that is resilient, effective, efficient, safe and responsible. This matches the Minister’s priorities for transport:

Over the next few pages I will set out what the Ministry has achieved against the Minister’s priorities over the past year.

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Our contribution towards the Minister’s priorities for transport

Investment in infrastructure

Intelligent Transport Systems - an Action Plan for 2014 -18

In June 2014, the Ministry published the government’s Intelligent Transport Systems Technology Action Plan 2014-18. This followed extensive consultation with the sector. Intelligent transport system technologies exploit advances in information processing and communications, and have the potential to greatly improve the effectiveness, efficiency and safety of transport systems. The plan commits to 42 actions involving several government agencies, including attention to regulation, geospatial mapping, and data security and privacy. The Ministry is leading this work and will convene a sector leadership forum to bring together key public and private sector players.

We are also delighted to have been elected to the Intelligent Transport Systems World Congress Hall of Fame as the Asia-Pacific winner of the ‘Local Government Award’ for our work on promoting intelligent transport systems.

Working to deliver an accelerated Auckland transport package

The Ministry has provided the government with advice and support for the delivery of an accelerated package of transport projects for Auckland. During 2013/14 we worked with the Treasury, and the NZ Transport Agency to provide advice to the Ministers of Transport and Finance on a proposed programme to deliver the package including funding options. As part of Budget 2014, the government provided a $375 million interest free loan to the NZ Transport Agency to enable:

  • acceleration of $800 million worth of motorway projects within the Northern Corridor (State Highways 1 and 18), Southern Corridor (State Highway 1) and State Highway 20A by 2019/20
  • the continuation of investigations into the East-West Link and the Auckland ManukauEasternTransport Initiative during 2014/15.

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Auckland City Rail Link

After considering advice from the Ministry, the Treasury, and the NZ Transport Agency, in June 2013 the government committed to:

  • a joint business case with Auckland Council for the CityRail Link in 2017
  • have its share of funding available for a construction start in 2020.

The government also stated it would consider an earlier start date if it becomes clear that Auckland’s central business district employment and rail patronage growth will hit thresholds faster than current growth rates suggest.

We are closely monitoring this project and current growth rates, and provide regular updates and advice to the Minister.

Up to date freight information and forecasting

The Ministry released an updated National Freight Demand Study in March 2014. This study is the pivotal source of information on the New Zealand freight task. It provides an up-to-date picture of freight movements and a long-term view for New Zealand freight, which is projected to grow by 58 percent over the next 30 years.

Complementary to this, we are also developing a Future Freight Scenario Study. This builds on the National Freight Demand Study to explore strategic challenges that face New Zealand in the trend towards larger container ships. When completed, this study will improve our understanding of the possible impact of larger ships on the efficiency of domestic and international supply chains, the international competitiveness of New Zealand’s firms and the implications for land transport investments.

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Determining the need for a ferry terminal at Clifford Bay

The Clifford Bay ferry terminal project set out to determine the commercial viability of establishing a ferry terminal at Clifford Bay. The Ministry, in collaboration with a number of experts and stakeholders, carried out comprehensive analysis between 2012 and 2013. The analysis estimated that the cost of developing this ferry terminal would be $525 million, and that this would not be commercially viable. We recommended against proceeding with development of Clifford Bay citing the cost to government, remaining risks of the project, and the lack of a compelling constraint at Picton.

Following completion of the report, the government released a decision in November 2013 that they would not proceed with a ferry terminal at Clifford Bay and that Picton should remain as the southern terminal for the inter-island ferries.

Developing the Government Policy Statement on Land Transport 2015/16-2024/25

Over $3 billion is allocated through the National Land Transport Fund each year. This investment is accompanied by a further $1 billion of local government investment. The Government Policy Statement on Land Transport sets out the strategy for this investment and the results the government wants to achieve from it over the next 10 years.

The Minister of Transport recently released the draft Government Policy Statement on Land Transport2015/16-2024/25 for formal engagement. We have undertaken a series of regional engagement sessions throughout New Zealand and met with representatives from local authorities, Local Government New Zealand and other key stakeholders.

Final decisions on this document will be made following the 2014 general election.

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Better quality regulation

Review of Civil Aviation Act 1990 and Airport Authorities Act 1966

The Ministry has reviewed the Civil Aviation Act 1990 and the Airport Authorities Act 1966 to ensure they are fit for purpose, given the significant changes that have taken place within the public sector and throughout the aviation environment during the lifespan of both Acts.

We have concluded that there are no fundamental flaws with either of these acts that need an immediate fix. However, the review has identified a large number of issues that it would be beneficial to address with legislative change. We will carry out public consultation on these issues and prepare recommendations for discussion by Cabinet in 2015.

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Improving the transport regulatory framework

During 2013/14 the Ministry jointly developed eight rules with the transport agencies that have been signed by the Minister of Transport or Associate Minister of Transport. Notable rules that have been completed or reached major milestones in 2013/14 include:

  • the Light–vehicle Brakes Amendment Rule which, from July 2015, will phase in mandatory electronic stability control for all new and used light passenger and goods vehicles entering the New Zealand fleet
  • the Vehicle Standards Compliance Amendment Rule which reduces the frequency of warrant of fitness inspections and provides the ability to vary the frequency for certificate of fitness inspections
  • an aviation rule (Part 125) that introduces training requirements for medium sized aircraft. In addition, Cabinet approved development of aviation rules relating to the introduction of Safety Management Systems, legal provision for remotely piloted aircraft and a rule to support maintenance training organisations to attract more overseas business
  • the introduction of a new Maritime Operator Safety System, which replaces the previous Safe Ship Management system. This system establishes a safety framework that will be easily understood by vessel operators, and places a clear emphasis on operator responsibility
  • the introduction of the Seafarer Certification and Operating Limits framework, which changes personnel certification and requirements for seafarer qualifications. It also updates vessel operating limits.

In addition to core regulatory business the Ministry has an ongoing regulatory reform programme. This is a joint programme with the transport agencies. The current programme includes a review of regulatory design for the land, maritime and aviation regulatory frameworks to ensure they are fit for purpose and to improve their flexibility and responsiveness. The programme also includes improving the quality and timeliness of rules development in terms of process, resource and capability.

Regulatory reporting, management of the 2014/15 rules programme and implementation of agreed changes resulting from the Productivity Commission’s Regulatory Institutions and Practices report will be a core business focus for the Ministry in 2014/15.

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Fit for purpose vehicle licensing

The Ministry has worked closely with the NZ Transport Agency to identify opportunities to reduce the regulatory burden and compliance costs of four vehicle licensing systems, while ensuring ongoing safety. Changes to the warrant of fitness system, which came into full force on 1 July 2014, are estimated to result in net benefits to motorists and businesses of $1.8 billion over 30 years.

Changes to the certificate of fitness operating model will be implemented during 2014/15. The changes will reduce the time commercial vehicles are off the road, and the estimated net benefits are up to $460 million over 30 years.

The Ministry also supported the NZ Transport Agency to develop and assess options for improving the annual vehicle licensing and transport services licensing systems.

Fit for purpose driver licensing

The Ministry has commenced a targeted review to identify parts of the driver licensing system where regulatory efficiency can be enhanced, or the compliance burden on system users reduced, while maintaining road safety. We will present the full analysis of issues raised and advice on any changes to the system to the government in 2015.

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Reducing the risks and impacts of maritime oil pollution

During 2013/14 we worked on a number of projects to reduce the risks and impacts of oil spills in the offshore environment.

Rena review

The independent review of the response to the Rena incident identified opportunities for organisational and technical improvements in Maritime New Zealand’s capability. The Ministry secured funding of $2 million for Maritime New Zealand to develop a strategy and formal capability to enable it to respond to future serious or complex maritime pollution incidents.

Offshore Oil Exercise

The Ministry secured funding of $400,000 for Maritime New Zealand to undertake an offshore oil exercise to test the capability of a whole-of-government National Emergency Management response to an offshore oil incident. The exercise was carried out in May 2014 and was co-ordinated by Maritime New Zealand in co-operation with the Department of the Prime Minister and Cabinet.

Review of financial assurance requirements for offshore oil installations

We continued to work on increasing the financial assurance requirements for offshore installations to meet the costs of oil spills. The Ministry publicly consulted on increasing the level of assurance held by offshore operators from NZ$26 million to NZ$300 million. In 2014/15, we will amend the maritime rule having taken into consideration the outcome of this consultation.

We also commenced a review, in conjunction with the Ministry of Business, Innovation and Employment, of the wider financial security regime for offshore oil installations. The project will assess whether financial assurance requirements should be scaled based on the specific characteristics of each installation. It will also consider where in the consenting process an assessment of risks and costs should take place, if scaled requirements are introduced. We will present our recommended options for improving the financial security regime to Ministers in 2014/15.

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A safer transport system

Safer speeds on our roads

As part of our Safer Journeys 2013-15 Action Plan, we are, together with the NZ Transport Agency, NZ Police and ACC, developing a National Speed Management Programme. This provides an appropriate speeds framework for road types based on function, use, and safety levels.

Reducing the risk of alcohol and drugs

We have worked with the NZ Police to propose legislative amendments to the Land Transport Act 1998. These proposed amendments were to lower the legal alcohol limits for adult drivers from 80 to 50 milligrams of alcohol per 100 millilitres of blood (and an equivalent reduction in the breath alcohol limit). This Bill has now been passed.

We are leading work on two major inter-agency reviews relating to alcohol and drug impaired driving. The first is a review of the drug driving enforcement regime and related issues.

The second is a comprehensive review of court-based penalties for alcohol related driving offences that apply to serious and/or repeat drink drive offenders.

Finally, we have also started a review of drug and alcohol management in the aviation, maritime and rail sectors. This was in part a response to a call from the Transport Accident Investigation Commission (TAIC) for significant drug and alcohol regulation in its report on the Carterton hot air balloon crash. The TAIC recommendation covered both commercial and recreational activities, and included random testing. The Ministry prepared advice for the Minister of Transport on improving drug and alcohol management in these sectors, including any need for legislative or regulatory change. We expect to consult on this issue later in 2014.

Improving the vehicle fleet

In 2014 we have established a programme to co- ordinate work related to improving the safety, emissions and efficiency of the New Zealand vehicle fleet. The aim is to provide a mechanism to identify gaps, synergies and priorities in the Ministry’s work programme and ensure an overall focus on the improvement of the vehicle fleet. This will contribute towards the reduction of costs to society of road crashes, vehicle-related respiratory problems and climate change, and reduce the costs of travel for vehicle owners, operators and users.

Improving the driver awareness of international visitors to New Zealand

As part of the Safer Journeys Signature Programme, we are working to improve visiting drivers’ awareness of New Zealand driving conditions. Over the next year the Ministry will be reviewing the policy around our international obligations and the law around provisions on unsafe driving.

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Opening markets

Air services liberalisation

The international regulatory environment requires that an air services agreement is in place between New Zealand and each other country involved before international air services may be operated. The Ministry leads the New Zealand teams negotiating these agreements.

In 2013/14, we once again successfully negotiated a record number of new or amended air services agreements in accordance with the International Air Transport Policy. These agreements provide opportunities for airlines to offer additional services, increasing New Zealand’s connectivity with the rest of the world.

We have put in place entirely new open skies agreements with eight countries, and enhanced existing agreements with a number of key or emerging economies including Hong Kong, the Philippines and Viet Nam. New agreements have allowed code-share services from airlines in markets as diverse as Finland and Ethiopia.

Over 2014/15 we will continue to enter into negotiations to put in place or liberalise bilateral air services agreements. The focus will continue to be on new and emerging markets as well as enhancing existing agreements which are not fully open skies, particularly where these present a potential barrier to airlines looking to inaugurate or expand services.

Construction industry study

In 2013 we commissioned a study to improve our understanding of cost pressures in road construction, maintenance, and operations, and to recommend ways in which such cost pressures could be better managed or mitigated. This research was carried out by the NZ Institute of Economic Research (NZIER).

The report was completed in November 2013 and found that in per kilometre terms, the costs of road construction, maintenance and operations had increased by 58 percent in the 10 years to 2012, compared with a 28 percent increase in consumer prices.

The study identified nine key factors contributing to cost pressures and made six main recommendations. The NZ Transport Agency reviewed the report’s recommendations. They agreed in most part and could demonstrate good progress towards improving aspects of their procurement approach in line with the recommendations.

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Improving transport agency performance

Strengthening our governance relationship

We have moved to strengthen our relationships with the transport sector Crown agencies. In January 2014 the Ministry formed a new team to provide advice on the governance, performance and accountability of the four transport Crown entities. This team has four core functions: strategic engagement, trusted ownership adviser, performance monitoring and Board appointments.

Funding Reviews across the transport sector

In late 2013 the Ministry, in conjunction with the transport sector agencies, developed a framework for the successful co-ordination and delivery of the regular reviews of third party fees, charges and levies which take place across the sector. The development of the framework took in considerations of value for money, quality and completeness.

Some 20 funding reviews are typically underway at any one time, with a total of 75 reviews carried out on a 3 yearly cycle. The new shared tools are designed to help spread best practice and give smaller agencies the benefit of larger agencies’ experience and skills.

The result will be consistent, better quality information that will reduce the time and resources required for the Minister to make decisions.

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Improving our performance

As noted earlier, the Ministry underwent a Performance Improvement Framework (PIF) Review in 2013. This found many areas where we are doing well, and identified challenges in five areas of strategic focus.

The Ministry requested a follow-up PIF review to measure the degree to which it was acting upon the recommendations of the previous review and the pace at which it was progressing in the five focus areas. This review was conducted in June 2014.

The 2014 follow-up PIF report emphasised that we have made a number of substantial advances in the 12 months to date including improved stakeholder relationships, further embedding of the Ministry’s Purpose and Philosophy, engagement of staff, improvements to the operating model and increased consistency in the quality of the Ministry’s policy advice.

The Ministry’s purpose and philosophy is embedded in our culture and in the minds of staff. The 2014 follow-up PIF report notes that staff know what the Ministry wants to achieve and ownership of the goals is more noticeable. Staff are increasingly more engaged with the big picture outcomes of the Ministry.

A renewed focus has been put on professional development for staff at all levels. A refreshed programme of structured development shows the journey for a graduate adviser through to principal adviser. This programme allows the Ministry to ‘grow its own’, and the wider public sector will also benefit through natural turnover of high quality staff.

Other areas where the Ministry could do better are identified in this report, including continued improvement in project management, to ensure that we manage our resources and time more effectively. In 2013/14 we reviewed our project management methodology and carried out training with all policy staff. We expect that this will lead to better planning and a gain in the efficient use of resources.

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Working across the transport sector

Stakeholder engagement

During 2013/14, the Ministry invested time and resource in developing stakeholder relationships to ensure our work is more visible.

We have developed a fresh approach to stakeholder engagement over the last 12 months which involves a programme of structured engagement with key stakeholders led and delivered by the Ministry Leadership Team.

Early in 2014 the Chief Executive and Ministry Leadership Team held breakfast workshops in Auckland, Wellington and Christchurch to outline priorities for the year ahead, and policy teams have undertaken targeted engagement events.

We held a series of workshops around New Zealand to talk to stakeholders about the development of the Government Policy Statement on Land Transport and the National Freight Demand Study. The end result is that local government has been more involved, were able to make more informed submissions during formal engagement, and are more supportive of the policy development process undertaken. This is a good example of how we have turned stakeholder views around by 180 degrees from some quite sharp criticism.

The transport sector collaborates on a number of initiatives and the Ministry continues to work with Maritime New Zealand, the Civil Aviation Authority and the NZ Transport Agency where applicable in sharing capability and expertise across corporate services.

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Shared services

In line with the government’s priority to deliver Better Public Services, we have been looking at innovative ways to improve the services we deliver to New Zealanders. This includes sharing business functions where it is practical to do so, including Communications, Human Resources, Risk Assurance, and Ministerial Services.

As the programme has progressed new initiatives have been included such as Information and Communication Technology, Information Management, Finance and Procurement.

Greater collaboration brings us increased opportunities for learning and development and access to wider pools of knowledge and expertise. For agencies, this means undertaking initiatives that otherwise may be uneconomic to do in isolation. For stakeholders, this will translate to one experience with the transport sector, regardless of which agency they interact with.

The initial phase of the programme has resulted in a number of small scale successes. Infrastructure collaborations, expertise and resource sharing, and greater informal networks have been established across the agencies. A strong culture of collaboration is emerging. Encouraging a sector rather than agency perspective also provides the framework for future collaborative initiatives to take place.

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Transport Domain Plan

The Domain Plan is a cross-agency project, co-led by the Ministry and Statistics New Zealand. The Domain Plan project aims to develop a shared understanding of the strengths, gaps, overlaps and deficiencies of transport information and statistics throughout the sector. We will then develop a plan to ensure that these knowledge needs are met. Partners in this project include:

  • Civil Aviation Authority
  • NZ Transport Agency
  • Maritime New Zealand
  • Transport Accident Investigation Commission
  • KiwiRail
  • Treasury
  • Local Government New Zealand
  • NZ Automobile Association.

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Creating a research hub

We have worked with the NZ Transport Agency to review our transport research, and concluded that there was an overall lack of co-ordination between interested entities across the sphere of transport sector research.

The Ministry and the NZ Transport Agency are now establishing a Transport Sector Research Hub.

The hub will:

  • improve communication, co-ordination and collaboration in transport sector research where interests align
  • shape, inform and direct a national transport research conversation linked to whole of government priorities
  • improve access to New Zealand transport research being undertaken, and to international centres of transport research
  • drive and demonstrate value for money from the
  • collective transport research spend.

The hub will be multi-modal and multi-disciplinary with the capability to accommodate satellite hubs for particular niche areas of research.

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Developing a passenger demand model

We have established a work programme to improve our understanding of the demand for transport and increase our capability in modelling and forecasting transport demand. The work programme involves close partnerships with other government agencies; developing and testing models and establishing interagency transport modelling groups.

The programme consists of five work-streams: Aviation, Maritime, Land–Road, Land-Rail, and Land-Active Modes.

The Ministry has developed two national forecasting models for aviation. One model projects domestic air travel and the other projects short-term international departures by New Zealand residents. We have also commissioned demand forecasting modelling for input into the Government Policy Statement on Land Transport, which included projections for passenger demand by private vehicles, public transport, and active modes.

This work closely links to our Future Demand scenario planning work, and will quantify the scenarios that are developed.

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Working internationally

In addition to having a strategic leadership role in New Zealand’s transport sector, the Ministry works on an international stage. In May 2014, New Zealand assumed the Presidency of the International Transport Forum.

This Forum is part of the Organisation for Economic Co- operation and Development and is a strategic think tank for transport policy.

We are working with a range of other countries to lift the value of the Forum. The focus has been on increasing opportunities to share insights from experience, and research and expertise between countries.

After assuming the Presidency, we began planning for the Forum’s Annual Summit which will be held in Leipzig, Germany, in May 2015. The Presidency has provided us with the opportunity to shape the theme of this Summit to one of greatest value to New Zealand. The theme will be ‘International Transport, Trade and Tourism’.

New Zealand’s meaningful participation in the Asia Pacific Economic Co-ordination (APEC) forum is an ongoing foreign policy imperative. The Ministry hosted a successful 39th APEC Transportation Working Meeting in Christchurch from 31 March - 4 April 2014. Around 220 delegates and speakers attended this meeting. The main theme was transport resilience, and delegates had the opportunity to learn how local aviation, maritime and land infrastructure coped in the aftermath of the Canterbury earthquakes.

The Ministry attended the 38th Transportation Working Meeting in July 2013, and will attend the 40th meeting in August 2014.

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Setting a long-term vision for the transport sector

The Ministry works across the transport system, with responsibility to ensure all modes - land, sea, air and rail - continue to meet New Zealand’s needs.

The Ministry has appointed four Strategy Directors to lead work developing our vision for the transport sector. The Strategy Directors are focusing on the following work programmes:

Economic development and transport

This project aims to improve our understanding of what different futures for the New Zealand economy may look like over the coming decades, and explores the relationship between transport and economics. The project team is working with the Ministry of Business, Innovation and Employment, the Treasury and the NZ Transport Agency to consider the impact these different potential economic futures could have on our transport investment and infrastructure.

Future demand

This project looks at possibilities for future travel demand in New Zealand. The Future demand project is exploring factors causing change in travel demand, to better understand the uncertainties that lie ahead. Better understanding will inform the ongoing development of New Zealand’s transport systems, and allow the Ministry to provide robust advice on investment decisions for transport infrastructure.

The project is engaging a wide cross-section of stakeholders in a scenario planning exercise to consider plausible alternatives for the future of society and mobility in New Zealand.

Future funding

This project is leading work designed to promote informed and critical thinking about future land transport funding and revenue gathering.

We are looking at three critical questions:

  • what frameworks should New Zealand use to decide the quantum of the annual investment in the land transport system
  • what are the pros and cons of the different tools used to collect revenue
  • what risks are there to the hypothecation system and how shouldwe respond to those risks?

Analytical framework

This paper will present a framework for the Ministry of Transport’s analytical work, reflecting its openness to markets, approach to planning and investment, intervention logic, and the communication of these messages. The framework will link the Ministry’s high-level objective to its more detailed work, and will guide Ministry staff in thinking about and analysing the transport sector, helping us to determine which more detailed areas to focus on and inform stakeholders how the Ministry approaches its analyticalwork.

I am proud of what we have achieved over the past year and look forward to the next year as we continue to stretch ourselves towards our Greatest Imaginable Challenge and to positively influence the future of the transport sector.

Martin Matthews
Chief Executive, Ministry of Transport

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