The most significant recent development in transport policy is the Government’s decision to reschedule the Roads of National Significance (RoNS) programme. The sheer scale of the proposed projects makes them neither affordable nor practical to build within the next three to five years.
The funding gap was already clear from the Infrastructure Commission’s analysis. Delivering the full package of proposed land transport spending would require fuel tax and road user charges to rise by around 70% (and then continue rising with inflation). A petrol tax increase of nearly 57 cents per litre (including GST) is politically toxic — no government could expect to survive it. Something had to give.
Even if road users nationwide could somehow be forced to pay more, there is simply not enough construction capacity to simultaneously deliver multiple large highway projects across several regions.
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| Deficit between user fees and planned land transport spending |
From the late 1970s through to the 1990s, New Zealand typically had one — or at most two — major road projects underway in its most populous regions at any one time. In the late 1990s, for example, Auckland’s biggest project was the Northern Motorway extension from Albany (Greville Road) through to Silverdale/Orewa. This steady, measured approach kept skilled people and equipment reasonably utilised and helped control costs.
Spending increases at the time were carefully managed so they did not overwhelm the sector’s ability to recruit staff and secure plant. That disciplined approach stands in stark contrast to today’s stop-start political cycles.
Construction capacity is not just a national numbers game. It is highly regional and specialised. Every region needs a baseline level of capacity for routine maintenance, renewals, and emergency response (clearing slips, rebuilding after storms, etc.). For large projects, it makes sense to sequence them so that one flows into the next, preserving expertise and minimising mobilisation/demobilisation costs. Certain skills and equipment — particularly tunnelling — are especially scarce in New Zealand. Running multiple major tunnelling projects concurrently would be inefficient, but so would long gaps between them. The current major tunnel project, Auckland’s City Rail Link, is now largely complete. The next significant one is likely to be the 850-metre Dome Valley tunnel on the Warkworth to Te Hana motorway — the largest road tunnel since Waterview. It is prudent to avoid starting another large tunnelling project in the upper North Island until this one is well advanced.
So what has the Government done?
It has rescheduled the RoNS programme, which was really the only realistic option politically. Raising national fuel tax and Road User Charges so that drivers in Southland subsidise roads in Auckland and Wellington is neither fair nor efficient. Tolling can help at the margins, but it typically recovers only 10–15% of construction costs. While useful, tolling is nowhere near enough to fund these projects — and it can divert some traffic back onto older routes, diluting the intended benefits.
The infographic below summarises the outcome of that rescheduling. The first page shows projects now under construction, including Roads of Regional Significance and other priority works.
There is a solid spread of projects across Northland, Auckland, Waikato, Bay of Plenty, Hawke’s Bay, Manawatū, Wellington, Canterbury, and Otago. These are the schemes we know will proceed. By far the largest is the Warkworth to Te Hana section of SH1, which alone accounts for 26% of the distance from Warkworth to Whangarei.
The remainder of the RoNS programme remains unfunded for now. This includes the extension north of the Christchurch Northern Motorway, the Hope Bypass near Nelson, upgrades to SH1 in Wellington, and the balance of the Northland expressway — including the long-awaited bypass of the Brynderwyn Hills (which is already in pre-implementation and likely to follow Warkworth to Te Hana).
This situation is the predictable result of excessive political ambition, ongoing budgetary indiscipline in other areas of government spending, and a funding system that lacks rigorous discipline on costs and project scope.
It would be optimistic to expect the politics around these projects to disappear with a change of government. The other side of politics has shown little concern about cost blowouts on the City Rail Link, and appears relaxed about the $1 billion earmarked for a new rail branch line to the Port of Marsden Point.
That Marsden Point branch line stands out as a genuine boondoggle — right up there with the worst of any RoNS project. Its Benefit-Cost Ratio was massaged from a dire 0.32 to a more politically acceptable 1.19 under the Ardern Government through heroic assumptions about massive freight transfers to rail. Making the project even remotely credible would require another $1.3 billion to upgrade the North Auckland Line. Some might call this economic alchemy; most would simply call it a government-commissioned business case. Notably, it was Winston Peters who helped create these circumstances — one of the more expensive “costs” of that coalition agreement to the taxpayer.
It would be refreshing to see a consistent willingness across the political spectrum to reject boondoggles, regardless of mode. However, that currently seems unlikely.
Background
I understand why the Key Government launched the Roads of National Significance (RoNS) programme. For the previous two decades, the land transport funding system had struggled to deliver large, transformative road projects.
New Zealand has long funded roads on a fundamentally different basis from energy, telecommunications, aviation, and port infrastructure. While those sectors moved toward commercial models in the 1990s, land transport has continued to rely almost entirely on the cashflow from motoring taxes. With few exceptions (mainly legacy toll roads such as the Auckland Harbour Bridge and Lyttelton Tunnel), the system operates on a pure Pay-As-You-Go (PAYGO) basis.
Under PAYGO, new capital projects are funded from existing road users — whether or not those users will ever benefit from the new infrastructure. Future users pay the same charges, but their contributions are spread across further new projects and ongoing maintenance of the existing network. PAYGO works reasonably well for maintenance, renewals, and smaller-to-medium projects, but it is poorly suited to large capital investments. Funding capacity is limited by annual cashflow, making it difficult to finance major projects that take many years to build.
While there has been some increase in borrowing (via PPPs or Crown loans) against future revenue, it remains the exception rather than the rule. Roads are still managed as a government function rather than a commercial business.
The RoNS programme was a pragmatic workaround. It directed a significant portion of available cashflow toward a small number of big projects, bypassing a system that was otherwise well-tuned for maintenance, renewals, and high-value projects under $100 million. Large projects only proceeded if they offered exceptional benefits. Many of the successful ones — such as much of Auckland’s SH20 and SH18, the Albany to Puhoi extension of SH1, and large sections of the Waikato Expressway — clearly met that test.
By explicitly listing specific mega-projects, the National Land Transport Programme was reoriented to prioritise them. However, this approach came with real risks.
The two big issues with the RoNS are:
- Displacement of higher-value projects: Lower-profile but collectively more beneficial initiatives were deferred or cancelled. The Melling Interchange, for example, should have been built 10–15 years earlier.
- Weaker cost control: Politically prominent projects often faced greater cost escalation. Officials and contractors, wary of cancellation, tended to apply less rigour to commercial risk management and scope control.
That said, few people today would argue against key RoNS projects such as Transmission Gully. Even the Puhoi to Warkworth section — once derided as the “Holiday Highway” — is now widely seen as worthwhile.
Completing the Waikato Expressway has saved lives and dramatically improved connectivity from the Waikato and Bay of Plenty to Auckland. Importantly, the RoNS programme would never have been necessary had the Clark Government not dismantled two critical elements of the more independent, professional funding system established by the previous National and Labour governments.
Why did it go wrong?
From 1996, Transfund operated as an independent Crown entity responsible for land transport funding. It was financed entirely from what is now the National Land Transport Fund — revenue raised directly from motoring taxes. Its job was to spend that money in ways that maximised value for the road users who had paid it. In effect, it functioned as a proxy user-pays system.
The Transfund Board was required to deliver a safe and efficient roading network. This naturally led it to prioritise maintenance, renewals, and resilience first, then fund only the highest-value improvements. It was never intended as the final destination of transport funding reform, but rather as a stepping stone toward a more complete user-pays model.
Transfund’s main constraint was the level of motoring taxes set by Parliament (in practice, the Government of the day). It advised Ministers on what could realistically be delivered at different tax rates. When first established, the revenue from those taxes was sufficient to cover maintenance and renewals while still allowing new capital projects with a minimum benefit-cost ratio (BCR) of 4:1.
That was a deliberately high threshold, yet at the time there was no shortage of projects that comfortably cleared it.
Merge funder and provider
This arm’s-length funding model was dismantled in two stages. First, Transfund was merged with the Land Transport Safety Authority, which had responsibility for the motor vehicle and driver licensing registers, commercial vehicle operator licensing, and land transport safety programmes.
Second, the resulting entity — Land Transport New Zealand — was merged with Transit New Zealand, the state highway manager. The New Zealand Transport Agency (NZTA) was born: an organisation that was simultaneously the primary funder of land transport, its largest single recipient (as state highway owner and operator), a safety regulator, and the administrator of key licensing systems. “Chinese walls” were established in an attempt to preserve the independence of funding decisions. In practice, it was always going to be difficult for an agency whose board and chief executive were also responsible for building and managing the state highway network to avoid favouring its own projects over those of local authorities.
I remember Transport Minister Maurice Williamson in the mid-to-late 1990s openly welcoming the separation. He was “glad” when people lobbied him to build a particular road, because he could reply: “It’s not up to me — it’s up to Transfund to decide how best to spend the money on the roads.” The principle was simple and sound: professional, evidence-based funding decisions would deliver better outcomes for road users than politicians picking high-profile winners.
Enabling political direction of funding
One of the more damaging changes in New Zealand’s transport funding framework was the introduction of the Government Policy Statement (GPS). Setting aside the clumsy decision to appropriate a widely understood acronym, the Clark Government effectively dismantled Transfund’s operational independence. In its place, Ministers gained the power to direct spending: defining funding categories, setting allocation levels, and leaving NZTA to manage delivery. This structure inherently allows Ministers to prioritise politically favoured projects, including Roads of National Significance.
The results have been underwhelming. Successive governments of both major parties have channelled funds into large, high-profile projects while maintenance and smaller, high-value capital works have been squeezed. Under National, this meant big motorway projects. Under Labour, it meant heavy emphasis on rail, public transport, and cycleways — often accompanied by years of expensive planning and design work on schemes such as Auckland Light Rail and Let’s Get Wellington Moving, with little to show for the expenditure.
Politicians are rarely effective at picking infrastructure winners. We saw this clearly in the 1990s when decisions on airport terminal developments were taken out of political hands, finally delivering Wellington an airport terminal fit for purpose rather than a leaky 1920s relic. No one would suggest politicians should dictate the location of mobile phone towers, yet the trend toward greater political interference in infrastructure has re-emerged strongly in recent years.
The long-running saga over replacement of the Cook Strait rail ferries is a textbook example. A commercial operator has been prevented from making a straightforward business decision (i.e. not having rail enabled ferries) because politicians insist on vessels that users are unwilling to pay for at the price required — hence the need for taxpayer subsidies. That's a different argument though.
So what should happen?
While a more fundamental reform of New Zealand’s land transport funding is ultimately needed, a practical interim step would be to restore genuine transparency around the merits of individual projects. This would allow genuinely high-value initiatives to be advanced on their own terms. Once the National Land Transport Fund (NLTF) is exhausted on its core priorities, any additional Crown funding from general taxation could then be directed transparently to whatever other projects Ministers deem worthwhile.
The next Government Policy Statement (GPS 2027–2030) should be the last. It should focus squarely on delivering an efficient, productive, and safer land transport system. Clear targets and funding criteria should be set for improving network productivity, reducing congestion, enhancing trip reliability (including resilience to disruptions), and cutting serious deaths and injuries on our roads.Any Roads of National Significance (RoNS) or other major projects that sit above this baseline should be funded separately through Crown grants or loans raised specifically for those purposes. Some, such as the Hawke’s Bay Expressway upgrade, already stack up as relatively strong value-for-money investments on their own merits.
To support this approach, NZTA (and its successor state highway manager) should develop corridor plans for all State Highways. Similarly, local road controlling authorities should prepare plans for their major arterial corridors. These plans would identify the key challenges on each corridor — whether safety black spots, capacity constraints, or resilience gaps — and set out a prioritised pipeline of interventions across short, medium, and long-term horizons.Longer-term projects would provide the justification for early land acquisition, consenting, and design work. Shorter-term fixes could be advanced quickly to deliver immediate user benefits. The result would be greater certainty for the construction sector, better cost control through a steady pipeline of work, and more disciplined prioritisation overall. Some corridors would require little beyond routine maintenance and renewals; others would need substantial, staged upgrades.
For example, a corridor plan for SH1 from Auckland through Northland would sequence improvements to the Whangarei area based on actual user demand, safety data, and network performance. The solution might not be a full expressway the entire way, but a series of targeted, high-return interventions. Investment decisions would flow from evidence rather than political whim. If a future government wanted to accelerate large-scale upgrades, it could do so — but it would need to top up funding transparently from general taxation, without cannibalising the core NLTF programme. This model would also create a much clearer picture of future spending needs, borrowing requirements, and the balance between road user revenue and expenditure on the network.
Wouldn’t this be more honest, more transparent, and ultimately more effective? It would deliver a steadier flow of work for the sector, ensure road users receive the benefits of continuous renewal and improvement, and create a far closer link between the people who pay for roads and the roads they actually receive.
Next up: What about the choices made for rescheduling projects?
