More open and efficient transport markets are important

Efficient and well-functioning markets produce significant benefits for society. Well-functioning markets allocate resources to their most valued use and in doing so facilitate competition. They promote the best use of scarce resources such as land, labour and capital in a manner that maximises output and the welfare of citizens.

Key components of well-functioning markets include[1]

  • ease of market entry and exit – free entry and exit enables markets to function efficiently, while barriers to entry reduce competition and efficiency
  • absence of significant monopoly power – the presence of a significant monopoly power in a market reduces competition and pressure for efficiency and innovation, resulting in reduced levels of choice and price protection
  • price signals – timely and accurate price information enables appropriate supply responses from businesses and demands responses from purchasers, leading to better-quality products and services at the lowest possible prices
  • absence of externalities – all of the costs and benefits of goods or services provided are fully captured within the market
  • widespread availability of information – all parties in the market (businesses and consumers) need to be well informed if they are to make the most effective decisions.

The Ministry’s role in creating 'more open and efficient transport markets'

For the Ministry, this intermediate outcome primarily relates to its work in the areas of aviation, maritime and public transport. Much of the Ministry’s other land transport work falls under the ‘Improved planning and investment in infrastructure and services’ intermediate outcome.

The Ministry has an important role in advising government on opportunities to improve the efficiency and competitiveness of our domestic and international transport markets. To do that, we need a strong understanding of how different transport markets work and how firms operate within them. This is particularly important in instances where a firm may have a near monopoly on providing transport infrastructure or services for an area.

The Ministry improves access to international markets through the international air services agreements it negotiates on behalf of the government. These agreements enhance New Zealand’s attractiveness as a tourist destination and provide new capacity for time-sensitive freight exports.

Information is an important component of open and efficient markets. The information the Ministry can provide to transport operators and users can help them make more informed transport decisions. The Ministry has access to a range of information across the transport portfolio. It is bringing together the information in new ways and making it available to transport operators and the public to enable better decision-making.

To improve the openness and efficiency of transport markets the Ministry will:

  • reduce or remove barriers to entry to domestic or international markets
  • provide the transport sector with access to more informed transport information.

Open and efficient transport markets - Ministry impacts and actions

The Ministry’s intended impacts in this area over the next three years, and the projects and activities that will deliver them, include the following:

Impact 2: Reduced or removed barriers to entry to domestic or international transport markets

The Ministry will develop a programme to engage more closely with non-government stakeholders in the transport system to strengthen its understanding of how transport markets operate ‘on the ground’ and identify opportunities to further enhance the efficiency of those markets.

The Ministry will advance negotiations, including negotiations with 10 South American and Asian states, for new or amended air services agreements. The expected result of these negotiations will be increased numbers of international flights to New Zealand. This will lift tourist numbers and provide additional export capacity in departing aircraft for time-sensitive exports.

Domestically, the government agreed in late 2011 to implement a new public transport operating model to encourage patronage growth and less reliance on public subsidies. The Ministry will prepare the necessary legislation to repeal the Public Transport Management Act and give effect to the new operating model in the Land Transport Management Act.

To maximise our effectiveness at international transport forums, we will develop a New Zealand strategy for transport engagement with the:

  • International Transport Forum
  • International Civil Aviation Organization (ICAO)
  • International Maritime Organization
  • Asia Pacific Economic Cooperation (APEC) Transport Working Group.

    This will provide a strong voice for New Zealand’s preferred positions and minimise any negative impacts from the decisions taken by these institutions.

    The Ministry considers the world has opportunities to achieve a better and more efficient air transport system. It is important that New Zealand participates in the collective discussions, which are beginning to emerge globally, that are focusing on modernising the current system of air services agreements.

    The Ministry will actively participate in the international fora where these discussions are occurring including ICAO, APEC and the ICAO 5th Worldwide Air Transport Conference in 2013.

    New Zealand will host the APEC Transport Working Group meeting in March 2014. This will focus on trade liberalisation and facilitation in the transport sector, economic and technical assistance, and capacity building. Important goals for the Working Group are to develop systems that ensure safe, secure and efficient movement of people and goods throughout the Asia-Pacific region.

    Impact 3: Transport sector has increased information available to it

    Through our Freight Information Gathering System, the Ministry will provide quarterly information on freight container movements through New Zealand’s ports. We will also continue to monitor the container productivity of New Zealand ports and publish quarterly information on it.

    Building on recently established Ministry information on port productivity and freight movements, we will facilitate discussions with major industry players to establish a shared view of future freight services. This will help the New Zealand Transport Agency, ports and industry to have clear information on transport demand, performance and development intentions on which to base their investment decisions. We will respond to the Productivity Commission’s Freight Study, and test current settings to develop a better understanding of the likely shape of future domestic and international transport demand.

    The first National Freight Demands Study was undertaken in 2008. Given the changes that have occurred in the international economy since then, we will update the data underpinning the freight projections to provide a more accurate assessment of future demand, and opportunities for substituting freight modes. Alongside this, we will review the resilience, environmental impact and efficiency of international shipping services to New Zealand.

     

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    1 Melody, William H., Liberalising Telecommunication Markets: A Framework for Assessment