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Inquiry to shine light on freight practices

Inquiry to shine light on freight practices
The Productivity Commission is calling for public submissions as it launches an inquiry into the international freight transport sector.

The freight sector is coming under the scrutiny of a public inquiry[Photo credit]

With international freight volumes showing strong growth and rising oil prices putting pressure on exporters and importers, the Productivity Commission is calling for public submissions as it launches an inquiry into the international freight transport sector.

At the Government's request, the independent crown entity will release its draft recommendations for improving the productivity of freight transport services in December and report back in April 2012. Public submissions close on August 31.

“New Zealand exporters and importers currently spend about $5 billion on freight each year. We’re looking at whether these costs can be lowered and the services improved," says chairman Murray Sherwin.

According to the commission, the potential benefits of improved performance are major.

International commercial cargo ships make around 3300 calls each year at New Zealand ports. Most commercial flights to and from the country also carry freight, to the extent that the busiest airport, Auckland, is our second-largest “port” in terms of value of international freight.

International evidence suggests  a 10 percent reduction in transport costs could lead to a 1 to 2 percent increase in trade, or about $1.25 billion worth of extra imports and exports each year. Reducing transport times for both imports and exports by one day would yield an estimated $670m benefit every year.

“We live in the most remote developed country in the world and the way we get our products to and from international markets is critical to our success,” Sherwin says.

“Better performance in freight transport should result in lower prices for imported goods, higher profits for exporting industries, and quicker freight turnaround, benefiting importers, exporters, employees and consumers."

Today the commission released an issues paper as the first step in the process, outlining its approach and highlighting key concerns.

Key high-level questions for the inquiry are:

•    what are the factors influencing the accessibility and efficiency of international freight transport services available to New Zealand firms?

•    are there opportunities for changes in New Zealand’s infrastructure and regulatory regimes that could increase the accessibility and efficiency of international freight transport services for New Zealand firms?

It will look at all aspects of the freight supply chain, from regulation, ownership and competition to logistics and market trends. That includes local authority ownership of ports, and the impact of council ownership on efficiency. It also asks whether ports need to be more collaborative and innovative to improve performance, which is lagging behind that of some other countries.

The commission, which has been operating since April, has also been instructed to pay particular attention to:

•    the effects of New Zealand’s distance from overseas markets and reliance on overseas providers of international freight transport services

•    the costs, efficiency, productivity level and growth of all components of New Zealand’s international freight services supply chain, with international comparisons

•    the effectiveness of current regulatory regimes (including those in the Civil Aviation Act 1990 and Shipping Act 1987) and the potential costs and benefits of alternative regulatory arrangements, with international comparisons.