New Zealand’s fuel tax-based transport funding model is “fundamentally broken” and a new system based on actual road usage, time of day, and vehicle type is urgently needed.
That’s according to free market think tank The New Zealand Initiative which has put out a new report arguing for comprehensive transport funding reform.
The report, Driving Change: How Road Pricing Can Improve Our Roads, authored by Dr Matthew Birchall, proposes a “Smart Road User Charges” (Smart RUC) system.
It says the current model is “outdated and unfair” and a new Smart RUC system would offer an “innovative solution” through a distance-based road pricing. It would charge vehicles based on distance travelled, time of day, location, and vehicle type and weight.
“This is not just about raising revenue,” Birchall says. “It’s about creating a more efficient, sustainable, and fair transport system for all New Zealanders.”
Two payment options would be available: an automated “pay-as-you-drive” (PAYD) system and a pre-purchase RUC license.
“This flexible approach ensures fair contribution from all road users while accommodating different preferences,” the report says.
“Smart RUC addresses two critical issues in New Zealand’s transport network: congestion and road maintenance. To manage congestion, Smart RUC implements variable pricing based on time of day and location.
“This reduces traffic in urban areas during peak hours. Commuters save time, and decreased traffic leads to lower emissions and improved air quality,” the report argues.
“For road maintenance, Smart RUC provides a stable and sustainable funding source. Charges are directly linked to road use, generating revenue for infrastructure improvements.”
The report examines several successful road pricing schemes from around the world. Singapore’s Electronic Road Pricing (ERP) system has “effectively managed” congestion since 1975, it says.
Meanwhile, Stockholm’s congestion charging scheme gained public support through “effective public engagement and demonstrable benefits”.
“These examples demonstrate that Smart RUC can lead to smoother traffic, reduced travel times, and improved urban mobility.
“They also provide valuable implementation lessons for New Zealand, emphasising the importance of clear communication and measurable outcomes.”
Billy Clemens, policy and advocacy lead for road freight body Transporting New Zealand, says the trucking sector welcomes the report’s ideas on road pricing.
“Increasing levels of congestion and the declining state of our roading network are disrupting the supply chain and restricting economic growth.
“It also makes achieving safety and emissions improvements difficult. We need innovative policy solutions that make our roading network function better for everyone,” Clemens says.
*Click here for a report summary.
