Part 2: About the transport sector

Overview of the Auditor-General’s work in the transport sector.

This Part outlines:

The main entities in the transport sector

The central government part of the transport sector includes:

  • two government departments (the Ministry of Transport and New Zealand Police);
  • four Crown entities − the New Zealand Transport Agency (NZTA), the Civil Aviation Authority of New Zealand (including the Aviation Security Service), Maritime New Zealand, and the Accident Compensation Corporation;
  • three State-owned enterprises (SOEs) − Airways New Zealand, the New Zealand Railways Corporation (trading as KiwiRail), and the Meteorological Service of New Zealand Limited;
  • one Crown-established trust − the Road Safety Trust; and
  • one independent Crown entity − the Transport Accident Investigation Commission.

The transport sector’s importance to the economy means that other agencies are involved, including:

  • the Treasury, including the National Infrastructure Unit (NIU) and Crown Ownership Monitoring Unit;
  • the Ministry of Economic Development;
  • the Ministry for the Environment; and
  • the New Zealand Productivity Commission.

Local authorities play an important role. They own and manage transport infrastructure (including local roads and bridges), write local transport policy, and provide public transport services.

Private and public (central and local government) interests own and invest in aviation infrastructure and air services. Local authorities own most of the country’s ports.

Private companies − logistics firms, freight forwarders, public transport service providers, and tourism operators − use and provide transport.

Funding the transport sector

The National Land Transport Fund is the main mechanism for funding land transport projects and activities in the National Land Transport Programme (NLTP). The Crown and road users fund the NLTP (see Figure 1).1 NZTA assigns NLTP funding, which is used only for land transport investments and services. The NLTP funds:

  • the full cost of the State highway system and the New Zealand Police’s road safety activities; and
  • about half the cost of local roads.

The NLTP provides subsidies for public transport.

Figure 1
National Land Transport Programme funding flows

Figure 1: National Land Transport Programme funding flows.

The other major funder of land transport is local government. Local authorities receive funding, through the NLTP, to maintain, renew, and improve local roads and passenger transport infrastructure. Through the NLTP, local authorities receive about half the cost of maintenance programmes and improvement projects. Local government rates, borrowings, and other revenue pay for those costs.

Transport assets

Transport infrastructure:

  • allows freight to move to, from, and around the country; and
  • supports the country’s social and economic performance, including its tourism industry.

This country’s transport assets – including roads, railways, airports, and ports − are worth more than $80 billion.

The road network

The Government funds and owns the 11,000 kilometres of state highways, 13% of the entire road network. State highways handle nearly half of all vehicle kilometres and are valued at about $25 billion.

NZTA has been reviewing how highways are valued. In 2010, we recommended that NZTA keep reviewing its valuation methods to ensure that they stay in line with internationally accepted methods.

NZTA has a current focus on Roads of National Significance (RoNS). Seven highways around the five largest population centres have been identified as RoNS.2 All seven RoNS projects should be substantially completed by 2020.

Local authorities own and manage the local road network, which covers about 83,000 kilometres. In 2010, the local road network was valued at about $35 billion.3

The rail network

KiwiRail owns and manages the rail network, rail freight services, and long-distance passenger services. It has statutory responsibility for managing access to, and safety on, the rail corridor. Commercial revenue, borrowings, subsidies, and equity from its government shareholder fund KiwiRail’s operations. KiwiRail has commercial revenue (excluding grants and subsidies) of more than $500 million a year.4

Regional councils, ratepayers, and NZTA subsidise passenger rail services in Auckland and Wellington.

There are 4000 kilometres of railways. In June 2011, KiwiRail assets were valued at $13.3 billion.


The country has 14 exporting ports and a few other ports that service trade or fishing vessels. Local authorities largely own most ports. Ports have more than $3.5 billion of assets.


The country has 41 airports with paved runways and 80 unpaved airports.5 Local authorities own many airports. The Crown holds shares in four airports and is a joint-venture partner in six regional airports. There are some privately owned airports and military airports.

Managing transport assets

The Government wants the country’s infrastructure to help to lift economic growth, with higher productivity and better management of Crown assets. The NIU sees continued investment in the transport network and replacement of aged assets as a way to improve productivity, gross domestic product, and road safety.

The main asset management and building projects that public sector entities are delivering include: RoNS, KiwiRail’s Turnaround Plan (TAP), the Treasury’s Capital Asset Management Project (CAM), and local authorities’ LTPs.

Examining entities’ asset management plans, systems, and practices is an important part of our annual and performance audit work.

Transport priorities for central government

Government policy aims to achieve an effective, efficient, safe, secure, and accessible transport system that supports economic growth to deliver more prosperity, security, and opportunities.

To deliver on its transport objectives, the Government is focusing on:

1. Economic growth and productivity

The Government sees transport as being crucial to economic growth and values the transport system as providing connections, both domestically and internationally, for communities and for business and to meet the travel needs of international tourists.

2. Value for money

The Government seeks assurance that the sector, especially the parts managed by central and local government, is delivering appropriate infrastructure and services at the best price.

3. Road safety

The Government’s 10-year Safer Journeys strategy, released in 2010, aims for “a safe road system increasingly free of death and serious injury”.6

At a more detailed level, the Government has had a focus on investing in the RoNS and TAP (a 10-year programme to create a sustainable rail business).

Transport priorities for local government

Local authorities’ priorities include more efficient, integrated, reliable, and connected transport networks, road safety, and reducing the effect of transport on the environment.

Local government, through its representative body, Local Government New Zealand, has prioritised better promotion of its infrastructure interests in its 2011/12 work programme. It is concerned that prioritising state highways over local infrastructure may make the transport network less effective.

Auckland Council has prioritised transport infrastructure in its Spatial Plan, which sets out proposed projects to transform transport and other services in Auckland. Auckland’s LTP clearly sets out the doubts about funding sources and affordability.

On 15 February 2012, Auckland Council’s LTP Statement of Proposal was adopted for consultation. We issued an unmodified audit opinion on the LTP. However, the opinion included an emphasis of matter highlighting the significance of the uncertainties associated with funding transport projects:

Significant forecasting assumptions associated with funding for the City Rail Link project

Without modifying my opinion, I draw your attention to the significant forecasting assumptions on page 87 of volume three of the LTP Statement of Proposal that note the significant level of uncertainty associated with:

  • central government funding $1.2 billion of the proposed City Rail Link project; and
  • alternative funding sources to raise $377 million, from particular types of user charges or regional taxes, many of which would require legislative change.

The main risks to the City Rail Link project are that central government will not agree to provide direct funding nor enable the Auckland Council to access alternative funding sources.

If the above forecasting assumptions are proven to be materially incorrect, Auckland Council will need to review the project as part of the LTP 2015-25.

Transport priorities for other public entities

Commercial considerations and stakeholders’ wider expectations and dependencies drive other public entities involved in providing the transport services (such as SOEs, council-controlled organisations, ports, and airports).

The Treasury’s Crown Ownership Monitoring Unit monitors SOEs for shareholding Ministers. The Government has signalled that it expects SOEs to improve performance by focusing on how they run their businesses and how they compare with their private sector counterparts.

Some initiatives focus on providing better public services generally:

  • The NIU leads the CAM regime to improve practice and performance. CAM is focused on capital-intensive departments and Crown entities, including NZTA. The CAM framework has a focus on better capital planning and is based on international best practice.
  • The State Services Commission has carried out a Performance Improvement Framework review of NZTA. NZTA has a focus on providing, and being able to show that it is providing, improved value for money for the services that it provides. By June 2012, Maritime New Zealand and the Civil Aviation Authority of New Zealand will have funding reviews to help put them onto sustainable funding paths and ensure that they deliver better value for money.

1: See NZTA (2009) National Land Transport Programme 2009-2012, available at

2: The RoNS are listed at There are maps of the RoNS in NZTA (2009) National Land Transport Programme 2009-2012, page 13, available at

3: Estimated from local authority annual reports.

4: National Infrastructure Unit data, available at

5: National Infrastructure Unit (2010),

6: Ministry of Transport (2010), Safer Journeys, available at

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