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All aboard KiwiRail

Written By: - Date published: 12:10 pm, July 1st, 2008 - 40 comments
Categories: economy, Environment, labour - Tags:

Today marks the launch of KiwiRail. It’s great to have rail back in Kiwi hands, after a decade of asset-stripping. Now comes the task of building up the network so it can provide cheap and clean transport. Businesses are keen to take more freight off the road in the face of skyrocketing fuel prices and long-distance car travel is also getting out of reach for many; KiwiRail will provide an alternative.

For me, the Labour-led Governments’ biggest achievements have been in work rights (ERA, record low unemployment and minimum wage up 9 times in 8 years etc), tackling child poverty (Working for Families, doctors’ fees, 20Free etc) and in building the infrastructure for a sustainable, fair society the Cullen Fund, Kiwibank, Kiwisaver, and, now, KiwiRail. This kind of visionary work is something we only ever see from a leftwing government.

Meanwhile, National has shown how out of touch it is (with economics, the environment, and public opinion) with its pathetic Crosby/Textor line about Cullen buying a ‘train set’.

All the polls and all the conversations I’ve had show that Kiwis recognise that a well-run train service should be the backbone of our transport network. They know this will happen now the trains are back in public ownership.

40 comments on “All aboard KiwiRail ”

  1. Billy 1

    All the polls and all the conversations I’ve had show that Kiwis recognise that a well-run train service should be the backbone of our transport network. They know this will happen now the trains are back in public ownership.

    Why will it happen when the trains are in public ownership? That is certainly not what happened the last time the governemnt owned it.

  2. Billy, well it was much better than it is now, and it could have been done much better if it had been run as a commericial organisation, rather than also being used for job creation.

    Fact is, NZRail was a well-run SOE when it was privitised and asset-stripped. It could be something great by now but a decade of private ownership has redcued it to a shadow of its former self. Now, we can rebuild and do better than before.

    I’m going to write to Bolger and suggest that wee Kiwi soft-toy as official mascot

  3. insider 3

    Yes same old faces on the gravy train again…

    Wonder how much we spent coming up ith that highly original name?

    Wonder also if we’ll find out how much we actually paid for it?

    creepy capcha all Economy

  4. Liam Rutherford 4

    I agree what a smart purchase. It really does show a government that is switched on. The rail service in New Zealand has been a joke since it was sold. This has been a prime example of what can happen if we let the market control what happens.

    I also love the irony of Jim Bolger Kiwirail, i wish him all the best.

    This is going to be great for shifting trucks off the road, and in the future could provide a sensible and cost effective mode of public transport.

  5. Billy 5

    How’s that investment in Air NZ going?

  6. Patrick 6

    Well, given that we still have a national airline, I’d say it’s going pretty well thanks Billy.

  7. gobsmacked 7

    Liam, yes, the irony is wonderful.

    John Key: “The 1990’s don’t matter, old news, never happened, move on, I wasn’t here, ignore the old faces behind me, National are Fresh and New”, etc.

    Jim Bolger: “Hello, everyone, remember me?”

    JK: “Oh, crap …”

  8. Well, Billy, the public has recieved over a quarter of a billion dollars in dividends since the purchase, allowing the govt to buy things that otherwise would have had to be paid for out of tax and, more importantly, we still have an NZ based airline, meaning that we still have flights to smaller regional centres – flights that a less profitable than other routes and would have been the first to be cut if AirNZ had been absorbed into Singapore Airlines.

    Oh and I believe there’s a paper profit on the shares currently too (and it was much bigger before oil rpices took off) but who cares if we’ve got a paper profit of $5 million of $500 million? They’re not up for sale so the value at any one time is only notional.

  9. Lew 9

    The other thing we have is a competitive domestic airline market. You think Pacific Blue would have launched their $39 flight promotion if they’d been the only credible player in town? Think again.

    L

  10. mike 10

    Will nanny sell pies on the trains or just healthy choices with pie’s once a month if the public behave?

    http://www.stuff.co.nz/dominionpost/4602703a23918.html

  11. mike – what does the pie possess in the sentence you’ve written?

    Also, is not selling obesity causing foods the worst thing you can think of that the Government has done in 9 years? And does that really outweigh:

    “work rights (ERA, record low unemployment and minimum wage up 9 times in 8 years etc), tackling child poverty (Working for Families, doctors’ fees, 20Free etc) and in building the infrastructure for a sustainable, fair society the Cullen Fund, Kiwibank, Kiwisaver, and, now, KiwiRail.” and all the rest?

  12. Tane 12

    “pie’s”???

    Sounds like mike could’a done with a bit more learnin’ and a little less pie eatin’ at school.

  13. Steve:”All the polls” so the reccommendation to buy back the trains was made by the governments PR consultants not treasury ?

    [no, the polls after the decision to buy back. And the two aren’t mutually exclusive anyway. Clutching Bryan, clutching. SP]

  14. mike 14

    “Kiwibank, Kiwisaver, and, now, KiwiRail”

    Man I can’t wait for National to change the tacky names of these next year – it makes me cringe. One of Labours many consultants must have advised them that the Kiwi brand is a winner.

  15. bill brown 15

    What do you suggest:

    overseas-capitalist-asset-stripperbank, overseas-capitalist-asset-strippersaver and overseas-capitalist-asset-stripperrail?

  16. gobsmacked 16

    As every third word that John Key uses is “Kiwi”, I wouldn’t get your hopes up, Mike.

    HardWorkingKiwiRail? KiwiFamilySaver? KiwiMumsAndDadsBank?

  17. lprent 17

    Steve:

    …more importantly, we still have an NZ based airline, meaning that we still have flights to smaller regional centres – flights that a less profitable than other routes and would have been the first to be cut if AirNZ had been absorbed into Singapore Airlines.

    More importantly we have a locally based air-freight business. I couldn’t give a damn about passenger traffic, but that air-freight is critical for a number of key export businesses. Some of those are very dependent on having air-freight available at quite specific times.

    Looking at how air-freight lacks continuity elsewhere in the free market, I’m damn glad that the government decided this was strategic. The economic value of the business to NZ business and economy goes far beyond its share price or dividends.

  18. andy 18

    Man I can’t wait for National to change the tacky names of these next year – it makes me cringe. One of Labours many consultants must have advised them that the Kiwi brand is a winner.

    Is that a crosby/textor NZ sucks line?

    Nationalism may be cheesy (oops!) but positivity about your country regardless is quite a nice trait.

  19. Steve: “For me, the Labour-led Governments’ biggest achievements have been….(Working for Families, doctors’ fees, 20Free etc)”

    Yes, all very well, but at the cost of 8 years of declining productivity.

    “The Outcomes of Income Transfers by Australian economist Mark Harrison, estimated that a transfer worth an extra dollar to low-income households could result in an efficiency cost (a loss of national income) at least as high as $2.30 because incentives for productive activity are blunted. Income redistribution is justified to help the genuinely needy, but it inevitably comes at a cost to growth and the risk of welfare dependency.”

    Hmm, s0 we spend $2.30 to get a dollar back. KiwiRail is beginning to look like a bargain.

  20. Steve: “a well-run train service should be the backbone of our transport network.”

    Now I know this quote is for passenger rail services not freight but it is interesting all the same:

    “government transit spending per passenger mile is nearly $0.95, while all government spending on roadways is less than $0.04. Some bias. Transit spending is 25 times highway spending. This does not consider the fact that roads carry a large share of the nation’s freight. Transit carries none.”

  21. Felix 21

    Does anyone even bother to read Bryan Spondre’s comments anymore?

    [lprent: I did because I was interested in a link on productivity. Oh well meaningless charts]

  22. lprent 22

    Bryan:
    How about getting your productivity charts relevant to a useful debate.

    Firstly the detailed graph only shows 6 years not 8 years.

    Secondly the data is so badly sourced as to be unusable. The first question I wanted to know was did it include the whole of the potential working population. Because any productivity measurements just looking at the in-work population are ludicrous as they don’t look at the whole economy. The stated source for these graphs was “Statistics NZ”. That is crap – what figures? Which tables? It could be the change in productivity for people with mental handicaps for all that I know.

    Thirdly. I regard this as another example of how to lie with numbers.

    It is something you frequently bring up with Steve. I think I’m going to pay more attention to these numbers you bring up.

    If you don’t have sources on these charts then they’re really just pissing in the wind for all of the use they are for your side of the argument.

  23. Matthew Pilott 23

    I still read them Bryan’s comments! There’s even the odd one I agree with. Not so here though…

    Bryan, those figures don’t really mean anything for relative cost of transport. Firstly, there’s no source so I can’t tell if it’s even in NZ, I suspect they’re american.

    Second, there’s a comment that says ‘transit carries none’ (transit being an odd (US?) term for public transport) in regards to freight. Is this trying to imply there’s one set of rails for freight trains and another for passenger trains? Or a poorly constructed comment?

    Lastly, you make your all-too-common mistake of looking at something from a market-only perspective, and since the market is an abject failure to internalise its problems, it’s not a useful measure.

    Not a very useful criticism of mass-transit!

  24. Rob 24

    Well Michael Cullen has got his Train set back that labour agreed to sell with National when National was last in Government for 900 million what a bargain not!!
    But wait there’s more he had to rush through an SOP paper today because he forgot all about the poor workers superannuation funds being protected. However not one comment from a union official imagine the Hue and cry if it was National doing this. All it illustrates is that Cullen isn’t capable of doing commercial agreements and the New Zealand Public should never have had to pay so much for so little.

  25. Pita 25

    “How?s that investment in Air NZ going?”

    Good question, the Government owns 82% of Air New Zealand which it purchased at $890 million and whose revised profit forecast still shows a profit of $200 million before tax.

    Kiwirail cost one billion, and will cost much more with no forseeable profit…great comparison, great investment!

  26. Draco TB 26

    Now I know this quote…

    Yes, I can see how a quote about somewhere in the USA applies here…

    /sarcasm

    The economic value of the business to NZ business and economy goes far beyond its share price or dividends.

    This is true of almost all of the SoEs sold. All they needed was a little restructuring and they would have been good either running at break even or at a profit. Hell, Telecom was running at a significant profit in 1985 ($272m) even with all the bad decisions that were being made.

  27. Phil 27

    BB,

    “stripperbank” “strippersaver” “stripperrail”

    I’m so there!

  28. coge 28

    Steve, you claim NZ rail was a well run SOE.
    How can that be when at one stage it was losing 1m a day on average? The facts were, at the time it HAD to be sold.

  29. Matthew:”and since the market is an abject failure to internalise its problems”

    What does this phrase mean ? Why is the market an abject failure to internalise it’s problems ?

    lprent: The Labour Government points to the income redistribution of WFF as a major achievement. My concern is that this has done nothing to increase the wealth generating capacity of the country and simply gives the highly skilled more reason to leave ( as the migration numbers indicate they are).

    To quote Treasury “New Zealand ranks 22nd among the 30 OECD nations
    in terms of labour productivity and this matches the ranking on GDP per
    capita, despite having the fifth highest utilisation of labour in the OECD.”

    “New Zealand’s annual labour productivity growth (5-year moving average)
    slowed from almost 2% in 2003 to around 1% in 2006, the lowest among
    this group of comparators.”

    So as SP is always reminding us unemployment has dropped significantly however all these extra employed people aren’t producing particularly well.

  30. insider 30

    HC said owning rail was a crucial to reducing New Zealand’s carbon footprint.

    The billion or so paid for rail would have funded our kyoto liability.

    So I wonder exactly how much carbon buying rail will save and how much that works out to per tonne? I suspect it will be far more than the $15-$50 per tonne cost of carbon being used in most calculations.

    Sounds like biofuels where consumers will pay more than $100m in additional fuel costs to save something like $17m in carbon.

  31. insider: “HC said owning rail was a crucial to reducing New Zealand’s carbon footprint.”

    Presumably to reduce our carbon foot print using rail means:

    a) completing electrification of the rail network
    b) building additional electrical generation to supply the rail ( or perhaps putting the alum. smelter out of business with the ETS)
    c) subsidising the rail network to the point where it is cheaper than diesel powered trucking ( or restricting trucking via legislation)

  32. Paul Williams 32

    I travel most days by train to and from work. I also tend to take my daugther to childcare by train too. Sydney’s network is significant, not as big as London’s but still pretty wide. There’s been quite a few problems of late, including fatal derailments, however trains still provide transport for a significant number of the city’s workers. I was impressed, when last in Akl, with the Akl network. It’s clearly not large enough and needs double tracking but it’s got to be the way to go. I hope NZ can soon boast a rail system suitable to the population’s need and it’s pretty obvious that wasn’t going to happen under the previous arrangements.

    Re Bolger. I have to say I was anything but a fan during his tenure as PM but he’s clearly become one of NZ leading statemen since.

  33. Will the engines and carriages be painted Liarbour red with the air brushed photo of Miss Clark appearing on each of them?

    Toot toot Helen.

    [lprent: I’ve popped a few of the more irritating misspellings into the moderation stack. I’m tired of reading people bitching about them. Looks like you found one.]

  34. insider 34

    Yes Bryan perhaps back to the old 40mile trucking rule of the 60s/70s?

    More the point, where are the cost/benefit analyses of the ability of rail to deliver such reductions in co2?

  35. lprent 35

    Bryan:

    My concern is that this has done nothing to increase the wealth generating capacity of the country and simply gives the highly skilled more reason to leave ( as the migration numbers indicate they are).

    The migration I’m not really concerned about. It is something that I’ve seen quite a few times before and including the chicken little reactions. Specifically it always happens when aussie has their cyclic mining boom.

    You have to understand that I really don’t give a shit about short-term transient things except where they do impact what I’m interested in. I’m interested in long-term trends. The reason I picked on your productivity figures was because you were saying that the delta was down. What I was interested in was if that was across the whole population, ie including beneficiaries, pensioners, etc.

    The biggest hassle we have is how to get a diminishing workforce to pay for a larger pensioner population over the next 30 years. That is the artefact of the muldoon years. Immigration is unlikely to be able to sustain it long term because the rate of growth in world population is diminishing as affluence levels rise worldwide.

    If the current people in the workforce were paying for the shortfall in their superannuation then they should increase taxes and increase payments into the ‘Cullen’ fund massively.

    An alternate route is to increase local birth rates. The best way to to attack the economic costs of having children – ie WFF.

    However people in NZ seem more intent on having a taxcut and to cut things that alleviate their liabilities. That is effectively trying to shift their debt on to future generations – exactly the same way that Muldoon did. The standard right argument is that increased productivity released from taxcuts would take care of the future liability. But that is irresponsible because a few minutes calculation shows the risk levels involved are incredibly high that you don’t get any productivity increases.

    Besides when you’re looking at how to pay for liabilities you act conservatively, and work how to pay it from known income. If you get a productivity gain then you count it into profit. To do anything else is to go bust as often as an entrepreneur.

    Anyway, I’ve meandered, so I’m heading off for food.

  36. lprent: “The biggest hassle we have is how to get a diminishing workforce to pay for a larger pensioner population over the next 30 years.”

    Agreed and I can see how WFF reduces the financial barrier to reproduction. The wealthier members of society (who probably have fewer children because of the time investment required to earn more) are paying the poorer to breed as an assurance policy for their old age.

    I am less convinced that the increase in migration to Australia is just cyclical. Migration to Australia is linked to Australia having a GDP growth advantage over New Zealand. The RBNZ is forecasting that Australia will have a GDP growth advantage over New Zealand for several more years therefore we are unlikely ( as SP has suggested) to have seen the peak of migration to Australia.

    Furthermore in the May 2008 year 63% of migrants to Australia were between the ages of 15-44. If we don’t do something to improve productivity and growth we are danger of becoming a breeding ground for Australian workers.

  37. Lipper 37

    The Train Set purchase is not only ill-advised, but the price paid is

    a very long way above normal commercial consideration.

    So the Government admits it has paid a premium.

    My question (s) is simple?

    Why did they have to buy it for so much money?

    What is the EBITDA ratio?

    Not like Toll could have taken it with them. The best thing that can

    happen to any railways in the World, is for them to have their tracks

    removed, and levelled for a heavy duty road surface. That way trucks,

    and other heavy units can fully utilise all the land taken up in the infrastructure properly.

    Rather than have a train every 10 minutes, just imagine how much more efficient the countrys logistic would be?

  38. Swampy 38

    What we know about this deal is that it carries a significant load of political baggage along with it. On the same day as the Government announced KiwiRail, they rushed out a secretive announcement of an immediate rise in Road User Charges for trucking firms.

    This follows a predictable pattern which goes something like this:

    1. Labour sees an opportunity for their Government to dominate or control a sector of the marketplace.
    2. Labour sets about, by whatever means possible, getting to that position. (Re)nationalise, bureacratise, whatever.
    3. Cue ritual flogging of private sector providers in that sector.
    4. Having weakened the competition, State control is assured.

    In this case, a multi step approach. Toll could have operated the rail tracks themselves. But the government buys those back giving them a means to back Toll into a corner. As long as the Government was unreasonable about the Track Access Charge they could always force Toll to come to the sale table. Then they buy back Toll and call it Kiwi Rail, a name loaded with political symbolism. Now they have the means to flog the private trucking firms. Why else would you raise the price of RUCs on the same day except to pay for the political largesse that is writ large all over this deal?

    This pattern has been followed heaps of times in all major areas where the Labour Government wants to run some part of the economy or market themselves. Telecommunications, electricity, health, education, you name it. This is an underhand road to communism. Would you accept it if it was spelt out like that? That is why I am waiting for the change of government at the election when Labour loses. Because no matter how much spin or hype can be generated, Labour has managed only to cement up a few thousand votes of the Rail Union employees and their families which will make virtually no difference to their abysmal poll ratings. And so it should be if we want to live in a free country where people recognise that the price of that freedom is small government which does not meddle and interfere unreasonably in the marketplace or seek to nationalise it all into the State.

  39. gobsmacked 39

    Those who see the bigger picture take a different view – a New Zealand to be proud of, as seen from the UK:

    http://www.guardian.co.uk/commentisfree/2008/jul/03/newzealand.transport

    (insert famous Robert Burns quotation here)

  40. Swampy 40

    “Steve Pierson
    July 1, 2008 at 12:18 pm

    Billy, well it was much better than it is now, and it could have been done much better if it had been run as a commericial organisation, rather than also being used for job creation.

    Fact is, NZRail was a well-run SOE when it was privitised and asset-stripped. It could be something great by now but a decade of private ownership has redcued it to a shadow of its former self. Now, we can rebuild and do better than before.”

    ================================================================

    Fact is, it was not commercial for the same reason it is not going to be commercial now. Labour wants the rail network to be restored to a freight monopoly dominance position again. They haven’t actually stated such a policy yet, but it is in line with their trend in other sectors where they are gradually moving in that direction.

    If Labour were by some total statistical aberration to win the next election, I would expect to see moves to renationalise Contact Energy and Telecom happening in the next term. Labour has already got Telecom on the ropes using the LLU and caused a big loss of value to the business.

    The SOE model is really a smokescreen because it was originally intended to get these businesses ready for privatisation. They are not really that independent at all as long as they remain in government ownership. There have been some changes already to the SOE model and there will be more to bring them more under the control of the relevant Minister.

    NZRail was not a well run SOE. It could not make a commercial profit, even after a billion dollars of debt was written off.

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