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Hi Tobynator,
I'm in NZ too, so know where you're coming from - we seem to have particularly complex shipping options here with urban & rural, different islands etc.  I had to use the weight-based shipping module, as mentioned by Basara.  Yours might be different and will depend on number and type of products but to give you an idea, I created two locations in System/Localization/Locations, one for rural, one for urban.   Then in Extension/Shipping turn on the "default_weight" module.  In there, under Additional Settings, you can specify the pricing for each of those locations based on the unit of weight you've got set for the cart (somewhere under System/Settings).  I set mine to Kgs, so under Additional Settings, I have 1:5.00,2:7.50  for urban  - this means 1kg is charged $5, 2kgs is $7.50.  For Rural I used 1:8.00,2:12.00.  Then you specify the weight of each product in Catalog/Products.  It might work out OK for your products but in my case I had to "make up" weights so that multiples of the product would still fit into the pricing structure for the cost bracket in Additional Settings (mentioned above).  If you have a lot of products, you might need to use Excel first to help get all the pricing & weight options sorted.  Cheers, Rich.

Hello Rich - thanks for that info. I am setting up 4 zones for North and South Island and urban and rural for each. I have now set up the zones in the locations - how do I tell the weight based shipping module to use the different zones? If I have the zone South Island Rural (SIR) would I write SIR=1:5.00,2:7.50 and then a semicolon to start the next zones pricing?

Hello.
The Weight Based Shipping shipping method allows you to add different per Locations rates based on weight.
Create several NZ location withs different zones

Thanks, that is just what I needed to know, very quick and helpful reply 

Hello Kiwi
I have the same problem as you and have just started another post on the same subject - then I found your post.
I hope someone out there can help us.

Is there a way to add shipping options that the customer can select according to their location and is then calculated by weight?
I am based in New Zealand and the courier company that I want to use offers different prices for North Island and South Island deliveries as well as a surcharge for Rural delivery. The charges are based on a parcel up to 5 kg, so I would like the program to calculate the freight in 5kg lots.
Any help would be appreciated.

Is there a way to add shipping options that the customer can select according to their location and is then calculated by weight?
I am based in New Zealand and the courier company that I want to use offers different prices for North Island and South Island deliveries as well as a surcharge for Rural delivery. The charges are based on a parcel up to 5 kg, so I would like the program to calculate the freight in 5kg lots.
Any help would be appreciated.