What price to relieve the gridlock? A non-technical guide to the road pricing implementation debate, NZIER public discussion paper 2019/2

20 September 2019

By Chris Nixon

The roading system in New Zealand is essential and its economic importance is clear. At any time of the day or night you might see different activities associated with construction, tourism, services, manufacturing and agriculture.This takes on new significance as we decarbonise the economy.

Road transport is important not only because the annual resources used dwarf other transport modes, but because it also connects other transport modes. The contribution to the growth of the New Zealand economy of transport is not only vital for moving goods around but it is also a substantial GDP contributor. Total sales of road transport industry activity to the rest of the economy is around $8.3 billion. The share of GDP is roughly 1.5% or $3.5 billion (March year 2016).

In this brief paper, we will examine:

  • The characteristics of the road network (size of the network and impacts of the status quo)
  • The basic economic approach to road pricing (it’s about how deep the road is, how wide it is, and the consequences of using the road)
  • How others have approached road pricing
  • The implications of introducing road pricing approaches (including implementation, pricing methods, effects and impacts, and traps to be avoided) and
  • Present some conclusions.

Each year NZIER devotes resources to undertake and make freely available economic research and thinking aimed at promoting a better understanding of New Zealand’s important economic challenges. This paper was funded as part of this public good research programme.