Coastal shippers say road users are effectively subsidised by $1.5 billion a year, a claim disputed by the Government.

The NZ Shipping Federation says state highway users are paying only 40 per cent of the full costs of providing roading infrastructure.

The claim is based on a report commissioned by the NZ Transport Agency and undertaken by Rockpoint Corporate Finance.

But Transport Minister Steven Joyce disputed the figure, saying road user charges alone rake in $2.8 billion annually.

"We operate a pay-as-you-go system. It's just not correct to say there's any form of subsidy. It would be a wonderful thing if other modes [of transport] could pay for their infrastructure revenues out of current year revenues."

Shipping Federation executive director Sam Buckle said "artificial" road pricing "creates a competitive advantage for trucks, contributes to congestion and emissions and denies taxpayers billions of dollars in much-needed revenue".

The current transport pricing model did not meet the Government's aims of cutting subsidies in the sector.

"It has said it wants the transport sector to operate commercially and for modal choice to be determined by the market. It has also said it wants to extract better returns from state-owned assets. Well, it is time to seriously debate the way we manage and price road use - because the current model doesn't meet any of these expectations," he said. The report was commissioned last year under the last Government's "Sea Change" strategic initiative which aimed at increasing the proportion of freight carried by the coastal shipping industry.

A $30 million seeding fund to encourage coastal shipping start-ups was ditched when the new Government came to power.

Joyce said there was no future in pushing shipping into a "subsidy mode". He said it was fair that coastal shipping operated on a level playing field with rail as they competed in a similar market.

"I don't think there's any future for the country by widening subsidies to different modes."

The report says that 15 per cent of all freight movements within New Zealand is carried by about 15 large ships around the coastline with a greater market share in specialist bulk trades and interisland services.

Coastal shipping offered several advantages over road and rail including lower unit prices and reduced negative consequences with less congestion, fewer accidents and lower emissions, Rockpoint said.

"At present coastal shipping accounts for less than 3 per cent of the general freight market and much of this is opportunistically provided by international ships operating on scheduled services as opposed to dedicated domestic operators."

On roads, the report finds between $14.8 billion and $18.9 billion willbe spent improving the highway network, with an average of between $1.5 billion and $1.9 billion a year.

"There is however a noticeable reduction in the funding commitment for the development of alternative modes of transport, in particular coastal shipping."

Rail operations are affected by the age, design and poor condition of the country's rail infrastructure. Over the next five years the Government is pouring $1.5 billion into the rail network.

A third of bridges are more than 80 years old and the network will require continued subsidisation to maintain operating standards and meet growing customer demands, the report says.

Coastal shipping, by contrast, targeted a commercial return on infrastructure and was required to meet commercially established port charges.

MARKET SHARE
Percentage of freight:
* Trucks: 92 per cent
* Rail: 6 per cent
* Coastal shipping: 2 per cent