New Zealand’s Treasury has published a report which floats the possibility of closing all but one section of the country’s rail freight network.
KiwiRail undertook a nine-month review of its business to try and identify opportunities to reduce costs associated with the operation of its freight network.
The subsequent report suggested that “as a result of the high fixed costs and interdependence of revenue between the different network segments, it is challenging to reduce costs as fast or to the same extent as a reduction in revenue.”
This gave KiwiRail two options:
• to retain most of the freight network and rationalise unprofitable services and some lines on the fringes of the network, or
• to close most or all of the freight network, with the option of retaining the upper north island section only (Auckland to Hamilton to Tauranga) as this part of the network carries the most freight volumes and covers most of its costs.
While KiwiRail naturally wants funding to continue, the Treasury believes there is a net economic cost of continuing to fund rail at the levels required. It is therefore requesting a more comprehensive study be undertaken so the implications of closure can be better understood and to enable the Government to make the most informed choice possible.
The comprehensive study should be public, and at arms’ length from the Government. The Treasury has therefore recommended a one-year funding commitment for KiwiRail whilst this process is undertaken.
However, the Treasury continued that, in the event that closure or partial closure is not pursued, Treasury supports a three-year funding commitment for KiwiRail on the basis that it needs certainty to manage its business.
So it sounds as though a decision has been delayed, but things don’t look rosy for a large part of New Zealand’s railway network.