New Zealand’s railway to close?

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Photo: David Oakley/ CC BY-SA 3.0 NZ.

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.

10 COMMENTS

  1. No doubt Prebble is plotting to acquire it.
    A better deal would be to sell Treasury – who produce nothing – and retain Rail.

  2. Sounds like short-sighted accountants pushing this idea. Most countries are expanding their rail networks as they are the most efficient method of moving freight…

  3. Privatisation was going to save rail! Instead it gutted it to such a degree that it is worthless and run down! Only option is that we the taxpayer have to ‘invest’ again in what was a public asset!

  4. Why does NZ repeat the mistakes other nations went through? Because this supposedly educated economist is simply not aware of the Beeching axe. He’s never heard of it…

  5. New Zealand must have strange accountants appointed by their government. In 2000 they withdrew all their jet combat aircraft and their Air Force is now logistics and maritime patrol only.

    • Well do you expect a small underpopulated country isolated at the end of the world to be generally broad-minded and well-informed?

      • Agreed. They were ageing A-4 Skyhawks, which were due to be replaced by F-16s in 1999. However the incoming Labour government cancelled the order in 2001 and in so doing, removed all air combat capability from the RNZAF.

  6. Treasury should ask the Tasmanian Government why they have chosen to reinvest in their rail system, which carries much less freight than NZ’s, after privatisation failed there too.

  7. If Kiwi rail upped their prices by about 35%and stopped giving Fonterra and Mercury Energy cheap as rates and every other blood sucking Business that screw them down on rates ,Which Kiwi rail allow ,And priced themselves to back their services ,maybe ,just maybe they would start to break even ,or make a profitt,We would then perhaps not having this headline conversation.And jobs would be safe .

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