Subscribe to RSSGovt To Put Capital Into KiwiRail
Transport minister Steven Joyce confirmed today the the government will “front up with some capital” for KiwiRail.
“We’d be doing this cautiously because this is taxpayers’ money, ” he told the Australasian Rail Association’s second annual conference.
He added: ”Before we part with any more public money, we need to see sound business cases that clearly demonstrate how services will be improved and revenue will flow from those improvements.”
For the past several months, KiwiRail has been working on a Turnaround Plan which is being reviewed currently at great depth and length by officials from the Ministry of Transport and the Treasury, and various outside advisors. That turnaround may take 10 years.
“The plan aims to see the KiwiRail Group become, within ten years, a sustainable freight-based business that is able to fund its ongoing operating and capital expenditure from customer-generated revenue.”
The minister called it a “challenging goal.”
And he had a number of messages for various stakeholders and advocates.
Referring to subsidies for Wellington and Auckland commuter rail, he said a lot of money was being spent improving infrastructure.
“But neither Auckland or Wellington are currently paying the actual amounts required to maintain and renew their share of the network.
“By that I mean they’re not paying enough to enable KiwiRail to maintain the tracks and ensure services are reliable.
“Because of this, we are in the ironical situation where, here in Wellington, KiwiRail is constantly bagged because of its run down and sometimes unreliable services but no one has yet been prepared to fund the full amount to have the network adequately maintained.
“Well - for a KiwiRail Turnaround Plan to work, all customers, including those regions that provide metro passenger services, and their co-funder NZTA, will need to stand up. The metro operations will have to meet the actual fair costs for the renewal and maintenance of the networks that they use going forward.
“And discussions on that responsibility will start shortly.”
He said rail advocates, wanting to save some regional lines, needed to get real.
“Rail advocates are passionate about rail and I understand and support that.
“However, if we are to successfully turn KiwiRail around and make it a strong positive contributor to the New Zealand economy, we all need to be realistic about what can be made to work and what can’t. And the reality is that there are a few of our smaller lines that literally are not used at all or are used very rarely.
“The cost of maintaining these lines is significant and that spending is a drain on the rest of the company.”
He said KiwiRail’s big freight customers would have to pay more.
“The current reality is that because of historical arrangements some freight is currently being carried on Kiwirail at prices approaching a marginal cost basis.
“Those arrangements will have to be altered to ensure that Kiwirail can meet the reasonable costs of track maintenance and renewals from the freight they carry. That is urgent, and I understand Kiwirail is already having talks with customers about that.
“It’s not about pricing uneconomically. It is quite possible for rail to be significantly cheaper than other modes for the types of freight it is most suited to carry; and cover its own costs. And that is what will be necessary.”
But as well as carrying freight at a fair price, Kiwirail will need to carry a lot more of it. Rail is a high fixed cost business. Low revenues and high fixed costs is not a recipe for financial success - I think we can all understand that.
To KiwiRail staff and unions, for a turnaround to work, KiwiRail will need to significantly improve productivity.
“That means being open to a range of possible approaches that can improve efficiency and reduce waste of resources. And that of course is no different to what’s been happening in businesses and organisations all around the country as we look to ride out the economic storm.”
The minister said he wanted to stress “that this government does see a future for rail.
“Getting into a debate on rail verses road versus coastal shipping is not what will get the country where we need it to go.
“Its not about which one you like the most. The reality is we need to have all three transport modes working to complement each other, and have their level of usage determined by their relative costs and convenience, and therefore suitability for the myriad of different types of freight carried on them.
“ The best way to achieve this and ensure all three modes are used appropriately is to ensure that each is priced at a level that reflects their costs so that freight-forwarders, exporters and importers all have clear choices.”
10 Comments
Yeah yeah, so when will RUCs be increased so trucking companies pay their fair share of road damage?
This was how Bush ran Amtrack into the ground, demanding that it make a profit, and giving it money in the form of loans.
Argh. Steven Joyce has the ability to fuck up my delight at everything. When has he ever used words like “some capital” or “cautiously, because this is taxpayers’ money” when talking about roads?
His double standard is so agressive it belongs into two alternate realities.
Part of the solution could be regions taking a share holding in the rail network to share the cost burden. It may see provincial lines remain open if the area they cover had a vested interest in them. And Auckland and Wellington would then be covering more of the upgrades. Ironically a regional petrol tax could be a go here to fund it.
Regional petrol taxes are dead under this government.
And with the GPS changes less money is now going into local roads, and more into state highways (which already had 100% Crown funding before) - so regions and local governments are scrambling to balance their transport budgets compared to some years before. Where are they going to get extra money for rail then?
Not forgetting that these funds for local roads will be even further stretched due to the damage done by the over-sized trucks.
This is nothing to do with being ‘fair’ it’s all about running rail into the ground, death by a thousand cuts.
Look the guy was locked into this way of thinking way before he became minister of transport and it’s not going to change. This is what we are stuck with, the consolation is he wont be around for ever and when he’s gone NZ will move towards a bright new future - well at least out of the 1980s which is where his thinking seems to be firmly rooted. The man is a dinosaur and i don’t see any chance of him becoming more enlightened.
“The metro operations will have to meet the actual fair costs for the renewal and maintenance of the networks that they use going forward.” Excellent statement Joyce. So when are you going to apply this logic to roads???
At least he’s not openly saying rail isn’t economic and we are going to shut every line that isn’t making a profit right now… And it seems that the freight rail system is probably going to get it’s biggest injection of cash since Think Big…
The double standard is very annoying though…
Sigh. I feel like I’m in an echo chamber.
Joyce said
**”“But neither Auckland or Wellington are currently paying the actual amounts required to maintain and renew their share of the network.
“By that I mean they’re not paying enough to enable KiwiRail to maintain the tracks and ensure services are reliable.
“Because of this, we are in the ironical situation where, here in Wellington, KiwiRail is constantly bagged because of its run down and sometimes unreliable services but no one has yet been prepared to fund the full amount to have the network adequately maintained.
“Well – for a KiwiRail Turnaround Plan to work, all customers, including those regions that provide metro passenger services, and their co-funder NZTA, will need to stand up. The metro operations will have to meet the actual fair costs for the renewal and maintenance of the networks that they use going forward.
“And discussions on that responsibility will start shortly.””**
So, yep, I fully expect him to sit down with the Roading Transport Forum and have the exact same conversation.
Yeah right.
I’ve read the full text from the Beehive website - unfortunately Mr Joyce couldn’t help getting the Metro side of KiwiRail mixed up with the business side of KiwiRail during his speech. This of course was only when it suited him, to tell NZ how much money that the government was investing in KiwiRail - ahem!