Departmental Survey Of S.L Freight Costs

Press, Volume CVI, Issue 31164, 14 September 1966, Page 10

Departmental Survey Of S.L Freight Costs

The relative unattractiveness of South Island locations in terms of the cost of freight to national markets was considerable, said a report released by the Minister of Industries and Commerce (Mr Marshall)

The justification for any form of assistance to offset the measured freight disadvantage, he said, would be to encourage regional development.

Though the assistance would have to be extended over a period for worthwhile effect to be derived from it. it would be nevertheless essentially an interim measure.

Mr Marshal was releasing the findings of the Industries and Commerce Department after a mathematical analysis of figures provided by South Island manufacturers in a freight-cost investigation. The survey showed that it was 30 per cent more expensive for a South Island establishment to distribute its products to the national market than it would be if that establishment were in the south of the North Island.

“As would be expected, the southern North Island is the most advantageous in each -cases, because of its central location,” said the report. Extent of Problem

“Although the present study relates to inter-island freights, the relative disadvantage as locations for development of areas removed from the centres of population is a problem that affects New Zealand as a whole. “The balanced regional development of New Zealand is today complicated by the counter-attraction of the larger centres against the smaller ones.

“The disadvantage discussed, in relation to the South Island, arises equally for the smaller centres in both islands, in opposition to the four main centres. “The South Island itself is not a single region, but a number of regions having individual characteristics and distinguished by their relative advantages and disadvantages.

“This is, of course, true of New Zealand as a whole. The question seen in its full dimension, is thus not merely one of imbalance between the two islands. It has implications for each individual region.” Disadvantages Assessed The report said that from the survey it was possible to measure the disadvantage of a South Island location as being on average about 27 per cent in freight costs. This disadvantage increased to about 33 per cent for sales from the Otago region, which had the smallest home market and was most heavily dependent on coastal shipping. The report said that about a third of the firms surveyed considered that inwards freight costs affected the profitability of marketing nationally. These would be the firms drawing significant proportions of their raw materials from the North Island. But about three-quarters of the firms surveyed claimed a disadvantage arising from outward freight costs. In other words, only a small proportion of those surveyed sought only regional markets, or did not experience competition in the distribution of their products. Effect of Change “An over-all reduction of freight rates would of course reduce freight costs,” said the report.

“Such a change, however, would not necessarily reduce the relative freight disadvantage of South Island manufacturers compared with North Island manufacturers selling to the national market. A change of this nature might well benefit the North Island more than the South. “A reduction of inter-island freight rates, while making it cheaper for South Island manufacturers to sell in the North Island, would also

make South Island selling cheaper for North Island manufacturers. “South Island industry would thus be exposed to greater competition from industries located in the larger industrial concentrations. “A possible outcome might be an acceleration of the tendency for industries to locate on or near the larger markets, thus accentuating rather than alleviating the difficulties referred to by the Canterbury Manufacturers’ Association in attracting and retaining industries.” The report said that from the figures obtained in the survey it emerged that freight costs to national markets compared favourably for industries located in the South Island only when the finished product had a low stowage factor, i.e., when the product was dense. This circumstance was likely to be rare, especially for manufactured goods. Extent Of Survey In the survey, questionnaires were sent to 189 South Island manufacturing firms which were thought to sell extensively in the North Island. Of the 189 firms. 156 replied. Forty-nine of these replies said that it was not possible, for various reasons, to fill in the questionnaire. The sample covered by the survey was estimated to be about 34.5 per cent of total South Island secondary industry. Commenting on the report, Mr Marshall said that it was in New Zealand's long-term interests to have balanced growth, not only between the North and South Islands, but also in the various regions of both islands.