International freight transport services

New Zealand’s international freight services have scope for improvement which would help lift New Zealand’s living standards, the Productivity Commission says.

In its draft international freight transport services report released today, the recently established Commission has made a number of recommendations aimed at improving international freight services following extensive research, analysis and engagement.

Commission Chair Murray Sherwin says, “Trade matters a great deal for New Zealand’s standard of living. Freight costs are built into the prices New Zealanders pay for everyday imported goods and the returns exporters receive for their goods.”

In total, we pay about $5 billion a year for freight costs – that’s around 2.7 per cent of New Zealand’s GDP in 2010.

Costs as a percentage of freight value fell in the 20 years to 2009 but are now beginning to rise again.

Mr Sherwin said the Commission’s report covered both air and sea transport systems, with a focus on their accessibility and efficiency and the effectiveness of the competition regimes that regulate freight.

The Commission’s draft recommendations and findings include:

  • Some current exemptions for shipping companies from the Commerce Act should be removed so that normal competition laws apply to address any anti-competitive behaviour.
     
  • Some inquiry submitters favoured more government-led coordination of the sector, particularly for planning and investment decisions. However, the Commission believes this could be better achieved through sharing of reliable information to inform individual decision-making rather than centralised planning.
     
  • Improvements to the governance framework for council-controlled ports and airports could be made by:
    • Clarifying the purpose of those companies by bringing it into line with the statutory objective for state-owned enterprises
       
    • Precluding councillors and council staff from being directors of port and airport companies; and
       
    • Establishing a monitoring function to create independent comparative performance information for port owners to consider. This information should further strengthen ownership disciplines and port performance.
       
  • The time taken to complete export and import requirements compares well with other countries but is behind international best practice.
     
  • The Commission has also made an assessment of work practices at ports, including potential ways to improve them.

Mr Sherwin said the governance arrangements for publicly owned companies, which dominate parts of the transport sector, need to be particularly strong because such companies are, in effect, spending the public’s money and face fewer performance disciplines than comparable privately-owned firms.

The Commission invites further feedback on its findings in the draft report until 27 February. For a copy of the draft report, including information on making a submission, visit www.productivity.govt.nz

The final report will be presented to the Government on 1 April 2012.