International freight transport services

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The Productivity Commission has completed its inquiry into international freight transport and presented its final report and recommendations to the Government. The final report, summary material, government response, submissions and evaluation reports are available below.

Thanks to all those who met with us or made a submission to inform our inquiry!

International freight transport services

Timeline

  • Our brief
    1 April 2011
  • Issues paper
    13 July 2011
  • Submissions closed 31 August 2011
  • Draft report
    12 January 2012
  • Submissions closed 27 February 2012
  • Final report
    24 April 2012
  • Evaluation
    May 2012
  • Government response
    December 2012

The inquiry

In 2011, New Zealand exporters and importers were spending about $5 billion on freight each year. The Government asked the Productivity Commission to look at whether these costs could be lowered and the services improved. Our brief asked us to identify the:

  • Factors influencing the accessibility and efficiency of international freight transport services available to New Zealand firms; and
  • 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.

The inquiry was instigated to help ensure that New Zealand has the best regulatory framework and the right incentives to achieve best practice across the industry, to help drive improvements in infrastructure investment, innovation and supply-chain coordination.


Key findings

The international freight services sector is performing well, but there is scope for improvement which would help lift New Zealand’s living standards. 

Chair of the Productivity Commission, Murray Sherwin, talks about some of the key findings from our final report in the following short video:


Key recommendations

Our final report makes a number of recommendations for improvement including:

  • Ports could enhance their abilities to meet the future freight needs of the country if  improvements were made to the governance framework for council-controlled port companies by:
    • clarifying the purpose of those companies by bringing them 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.
  • There is scope for a significant lift in workplace productivity at a number of ports. The benefits of high-productivity workplaces include higher real wages, better working conditions, higher levels of job satisfaction, and more competitive and profitable businesses. Most New Zealand port companies, their employees and unions have some work to do to fully achieve these benefits.
  • Current exemptions for shipping companies from the Commerce Act should be removed so that normal competition laws apply. This change would outlaw any agreements between shipping lines that fix prices and/or limit capacity unless the Commerce Commission judges that their public benefits outweigh any anti-competitive detriments.
  • To better coordinate investment in freight infrastructure, greater use should be made of ‘facilitated discussion’ models, such as the Upper North Island Freight Plan. These are based on information sharing and relationship building but do not bind the participants to particular outcomes. They avoid the trap of excessive central direction which carries a high risk of error, and exposure of the Government to financial risk.
  • The government has an important role in gathering and disseminating freight information. More information on freight in New Zealand – collected and made available on a regular basis – would have considerable value and help freight organisations make better individual and joint decisions. It would also help stakeholders monitor performance, and policy-makers design and evaluate policies and regulations.

Find out more in the final report and summary materials:

Government response

In December 2012, the Government issued their response to the inquiry.

In response to our findings, the Government agreed in full, or agreed in principle, to 14 of the 26 inquiry recommendations. Of the remainder, the Government considered 1 recommendation reflected current practice; 2 were for local authorities to consider; and the remaining 9 were the subject of ongoing reforms or further policy review work.

The Government has acted on our recommendation to remove the exemption of international shipping lines from the competition provisions of the Commerce Act. The exemption permits shipping companies to collaborate to set cargo rates and quantities, potentially to the detriment of competition and choice for New Zealand exporters and importers. There are now provisions in the Commerce (Cartels and Other Matters) Amendment Bill to remove the exemption. The Bill is awaiting its second and third readings in Parliament. Shipping lines would nevertheless – as in other sectors and industries – be able to seek an ‘authorisation’ from the Commerce Commission for collaborative arrangements that have benefits for the public that likely outweigh the detriments. The Bill also proposes a ‘clearance’ regime to allow applicants to test with the Commission whether a proposed collaboration would raise competition issues.


Evaluation

An independent evaluation of the Commission’s performance has been undertaken and the results from the expert review, focus group and participant survey together with a summary are available below.