Mythbusting – Rail in NZ

ŠĒ• Liberty Scott

The Labour party and other train spotters would have you believe a whole load of nonsense about rail in New Zealand that is frankly all motherhood and apple pie fantasies.

Liberty Scott bursts those bubbles:

Here’s a good summary¬†I wrote before...

1. Rail network shrinked due to privatisation. Wrong. Almost all line closures were under state ownership when rail had a statutory monopoly on long haul freight!  The track network length has barely changed in 20 years.

2.¬†Rail stopped being viable after free market reforms. Wrong, it stopped being consistently financially viable by 1945. It had short pockets of profitability since then. The early 1970s saw it drift from profitability to losses, which weren’t recovered until 1983 after debts had been written off and it started being paid by government to run commuter rail services in Auckland and Wellington under contract (and a host of unprofitable freight lines, such as the Otago Central Railway).

3. Track Maintenance was run down after privatisation. Wrong, it was already being run down in public ownership, track was run down more, but sleeper replacement under private ownership increased.

4.¬†Rail is worth a lot as an asset.¬†Wrong. The NZ$12 billion book value of rail that was on the Treasury accounts was a nonsense, equating it to all other SOEs combined (e.g. 3 power companies, Transpower, NZ Post) which all make profits. Most of the value is based on a replacement cost if it was built today, which of course would never be done. I’d argue it is probably worth 4% of that at best.¬†¬† It’s worth noting that this has only been partly fixed as of late.

5.¬†Rail only needed rescuing after privatisation.¬†Wrong. It has been rescued several times before. It has long had serious economic viability issues.¬†¬† In recent history it was bailed out in 1982 (all debts cancelled, and the operation commercialised), 1990 (had the debt of the North Island Main Trunk line electrification written off as a “Think Big” debt, then NZ$350 million, and another $1 billion wiped off to pay for the restructuring to make it viable).

6.¬†Rail is good to reduce accidents, congestion and environmental problems¬†Wrong. “the optimal level of externalities is not zero ‚Äď at some point it becomes more expensive to lower them than the welfare created by their further abatement” Rail related deaths are only slightly lower than truck related. No evidence that rail reduces congestion. Sea freight is twice as fuel efficient than rail, but little interest in that mode.¬† Indeed Greens actively oppose international ships carrying domestic freight along the coast to placate their unionist mates.

Like I said before, the presentation basically says that rail is not as fuel efficient as is quoted, and that only 30% of the current network handles 70% of the freight. It suggests concentrating on the main trunk, and lines to the Bay of Plenty and the West Coast

  • In Vino Veritas

    None of this comes as a surprise to me, NZ rail has always been a cot case (and a bottomless pit into which vast amounts of taxpayer funding has dissappeared). It’s always funny how the Socialists rewrite, or attempt to rewrite¬†history to suit themselves.A similar sort of analysis on Telecom, Air NZ, BNZ etc would be usefull since for eg, most forget that when the BNZ failed, it was 51% owned by the Governement!

  • ConwayCaptain

    Sea Freight is the most economical way to transporting freight round NZ.  In olden times USS, Northern zSteam, etc had a v large coastal fleet.

    This has disappeared because various Govts have let in foreign owned ships with lower coasr who pay no tax, ACC etc etc in on the coast.

    NZ at the end of the longest supply line in the world needs a viable merchant flett, not answerable to the board rooms of Copenhagen, Tokyo, Singapore etc.

    We now have v few NZ ships and if Maerask etc decided to up sticks and move out we would be in the SHIT.

    • DangerMice

      Back in the 90s I worked for a trans-tasman & nz coastal shipping company. We used NZ crews and predictably never turned a profit and went bust. Hard to compete with the foreign ships.

  • ConwayCaptain

    Bet you when they need a new ferry and they will soon they will get it built in China.  That will be a DISASTER

    • gazzaw

      CC, it will be interesting to see how much tendering they will seek for a new ferry. The European shipyards are all looking for new business many of which are subsidised by their own governments. Several yards as you would know have a hell of a lot of expertise in ferry construction.

  • Mediaan

    Hmmm. Crap tactics WO. Not good enough.

    Okay, you are a lover of oil company power and a believer in roads. Okay, this means you wave your crucifix and the garlic every time anyone says the word “rail”. Vroom vroom. You hate railway.

    But to avoid referring to the paper on which these arguments are based, and to quote it instead as the work of alleged libertarian Liberty Scott … Sleazy.

    So when I looked at the reason for this strange tactic, what did I find?

    A

    • Mediaan

      To continue.

      I found a much criticised paper from a Dave Heatley at some obscure Victoria Uni institute called The Institute for the Study of Competition and Regulation. Funded by, not sure who.

      So why avoid attributing these arguments to their real author?

    • http://libertyscott.blogspot.com Liberty Scott

      Since when was wanting the rail network to simply be a profitable core where it does what it is good at without costing taxpayers “anti-rail”.¬† What sort of bizarre condition is it for otherwise sane adults to have an emotional attachment to different modes of transport?¬† Railways are good at certain things, politicians think they are good at a lot more than that – but nobody who uses them is willing to pay enough to reflect that (but willing to pay more than enough to cover the costs of roads).¬†

      However, in a world where people with such emotional attachments believe everything against their feelings is a conspiracy funded by vested interests, it is difficult to find where reason can even start to respond.

  • Dutyfree

    If I recall correctly, the weird value for rail comes from the alternative use methodology they used to value the land they own. They valued the land under the tracks at the value of adjacent land, so next to a diary farm, dairy farm value, next to a shopping mall, shopping mall value etc.

  • ConwayCaptain

    In the next day I will report on the History of SCONZ as I was there from 74 until its demise.

  • Polish_pride

    Most probably valid Рa few points are wrong 
    Congestion – the difference is¬†very evident in Wellington when the trains aren’t running but Liberty Scott perhaps lives in Auckland and doesn’t account for anything south of the Bombays.
    The asset value is probably accurate as this includes the value of the land that rail operates on accross the entire country (think about that for a second). It is not based on profitability.

    • Paddles83

      PP
      You are wrong about congestion in Wellington when the trains aren’t running, I travel in ¬†& out from the kapiti Coast everyday by car simply because you don’t know when the trains will or wont be running and the road traffic is fine.

      • Polish_pride

        I live on the other side and¬†it makes a¬†big difference there¬†- possibly with the traffic lights…. vs kapiti having a straight run ?
          

      • http://unsolicitedious.wordpress.com/ Unsolicitedious

        I’ve lived on both sides and both have had pretty big traffic issues in peak times. Mana has come along way & the bottlenecks along SH1 seem to have reduced as a result. Hutt – the lights have a lot to blame.¬†

        In terms of rail – I had minimal issues when I was commuting. Found it really reliable on the whole. Main reason for car – free parking & convenience when working odd hours. But even then used to train one way & bike the other so have never really understood the commuting dramas…except for the J’ville line before that got improved (but even then the issues seemed minimal).

        School holidays seem to provoke the biggest change in congestion…term times road & rail is packed (so hubby tells me).

    • http://libertyscott.blogspot.com Liberty Scott

      ¬†Wrong, spent most of my life living in Wellington.¬† A Treasury study in 1993 concluded that if the rail network closed entirely, the only location that would have a demonstrable issue with congestion is the Ngauranga Gorge.¬† I didn’t argue that Wellington’s commuter rail system be shut down, besides a fortune has been spent on upgrading it with new trains, it can sustainably last for some years and unlike the Auckland network, the fares cover around half of the operating costs (and if you closed the Johnsonville line more liek two-thirds).¬† Most rail land has only two logical buyers, it’s hemmed in by those property owners, few are likely to buy a 10m wide sliver of land that snakes it way across countryside with occasional road access, the most valuable land sits near the Port of Auckland and Wellington.

  • Guest

    If calls are being made for Doug Graham to hand back his knighhood for misrepresentation – where are the same calls being made for Michael Cullen????

    • gazzaw

      Why did the Nats not only give him a knighthood but also a very comfy seat on the gravy train as chairman of Kiwibank? Why the need to buy Cullens’s silence or is it just good old trans-party backscratching?¬†¬†

  • Allyson

     After a hard days work kiwis just want a reliable prompt means to get home to their families.  The Left need to realise the potential for massive support from a railway workers trade union is just not there any more and it is time to move on.

  • http://unsolicitedious.wordpress.com/ Unsolicitedious

    I think rail’s demise started primarily under Muldoon. But when it started is irrelevant; consecutive governments have failed to properly invest in rail, education (think school buildings left to just rot post closures) & health and have instead chosen to invest in bureaucracy. DHBs spring to mind as being a classic example of academics having too much free will.

    Question is where to from here? Few would argue that rail has a place in our economy long term, but how do we recover from the loss we incurred when we (well Labour not me РI didnt vote for them!) bought it back from Toll? 

    Seems to me that there that arguing & playing the blame game takes precedence over find long term solutions so that our tax dollars are guaranteed to provide the services we actually need. 

    Rail is great in theory but currently is not that reliable so people prefer cars. Then there is the fact that not everyone finishes work on ‘train schedule’ so they prefer to drive so as to spend less time away from home.

    And then there is the fact that many would love to commute via cycling and while you can, the larger cities often dont cater for cyclists and the cycle vs car battle just becomes too risky.

    As for freight – boats arent a solution in terms of being a viable alternative to trucks as the whole reason why trucks keep getting used is because people want their freight yesterday.

    Re Wellington congestion Рthis only eases in school holidays & those in the southern suburbs couldnt care less about rail. 

  • Ricardo

    When the 50 mile competition rule was in place we used to ship the company’s product by rail, or by coastal shipping for long interisland freights. The theft and pilfering was beyond belief, any shipment arriving complete was a major exception. It wasn’t until sealed containers became available and common that these thieves were thwarted and losses in transit made almost nil. Changing to road transport became the freighter of choice as so much double handling was eliminated completely, and the driver had to account for any broken container seal. Result was faster shipping and no losses. Great eh! Says a lot about the old style unionists eh!

    • nasska

      It’s a wonder how firms survived the breakages & pillaging that occurred when Railways had the monopoly on long haul freight.¬† One instance I recall easily was, as a truck driver, being sent to Wellington rail yards to pick up a load of toilet pans consigned from Auckland. No palletising, they were loaded into a covered wagon & protected with wood straw.

      Out of 120 despatched two arrived undamaged.

      • http://unsolicitedious.wordpress.com/ Unsolicitedious

        Good grief – suppose there is a bonus to the micro managing there is now! These days they are all palletised & shrink wrapped so most of the time none would be damaged (unless a loader dropped the pallet!).

  • Johnbronkhorst

    I asked the manager of a large NZ company why he didn’t use rail (as I was trying to sell him a new form of container). He said…”because it take twice as long as road transport and is 3 times the price”!!!!

    • http://unsolicitedious.wordpress.com/ Unsolicitedious

      Really? That does seem odd. Mainfreight – largest transport/logistics company in NZ has spent millions of dollars moving their depots to railway yards and now has them in all the major cities. There is no way they would have done this if the cost benefit analysis didnt stack up.

      Rail emits 4 times less carbon than trucks, arrives in the yards around similar times to the linehaul & costs half as much Рprimarily due to less handling (e.g. Wgtn to Dunedin is more direct due to no handling in CHCH). 

      Perhaps your guy is using the wrong the transport company or not dealing with Kiwirail direct!

  • Johnny T

    I get it, you are anti-rail.
    Reality is though that Auckland will continue to increase in population, and there is no way that spending money on roads will completely cater for that.

    • http://unsolicitedious.wordpress.com/ Unsolicitedious

      Unless they keep putting up the Road User Charges…..apparently it’s all the truckies fault!

    • http://libertyscott.blogspot.com Liberty Scott

      Why will spending money on a system focused on taking people to where 12% of jobs are (Auckland CBD) make much of a difference?¬† Why does an increase in population instantly mean more peak commuting?¬† Auckland’s road network has ample capacity between peaks and if priced properly then demand can be managed, and buses could operate far more freely – and it would be good for the environment.¬†¬† However, far better to spend literally billions on a network where the users don’t come close to paying half the cost of operating the vehicles on it, let alone the cost of buying the trains and the infrastructure they run on.

  • TayheiNotts

    The Tauranga – Hamilton line is so busy that Railways had to build an extra passing lane, just north of Waharoa.
    A friend shifted to Kiwitahi and noticed that there are about three very noisy trains each hour, through the night.

  • Vikingonmars

    Talking about pubic transport, this was seen on one.
      http://screencast.com/t/Q8jkPKkky
    And yep it ‘s just what it appears to be.

  • BR

    Trains are a fast and economical form of transport, if the only alternative is a horse drawn carriage.

    Bill.

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