New Zealand Railways Corporation

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