KiwiRail Lambasted By Analyst With Poor Grasp Of Facts

I’m sure it is just a wind up by the Herald, but the opinion piece by Luke Malpass  today is astonishing for its total lack of supporting evidence.

What does a billion dollars mean to you? It is a huge amount of money, an amount so vast that most us cannot quite comprehend how much it is. This is how much KiwiRail has cost the taxpayer – so far.

The majority of the billion dollar figure is to make up for the complete lack of maintenance over the last two decades when rail was owned by private companies with short term profit objectives.

KiwiRail operates by government subsidy, and like all subsidies it is dispersed across all of society thinly enough not to be noticed too much. Some of it comes from Auckland and Wellington ratepayers, most of it from the entire country’s taxpayers…Maybe when people realise how much extra hard-earned cash they have to part with to sustain rail, they will appreciate what an expensive indulgence KiwiRail is and thus scrutinise it more critically.

Well, yes.  Luke doesn’t bother to mention the actual figures involved though. So no mention of the fact that up to 40% of local rates are spent on roads. The typical ratepayer spends about $700 a year subsidising local roads.  The same ratepayer spends about $182 a year on public transport capital and operating subsidies.

However, given the affordability and widespread access to cars in New Zealand, expensive fares for few services will see commuters voting with their feet and pressing down on the accelerator rather than stepping on to the carriage.

Who says cars are affordable?  The operating and depreciation costs of a car can run into the thousands of dollars every year.  Add to that the cost of parking and the fact that cars benefit from ratepayer subsidies to a far greater degree than public transport does. Its no wonder that until recently, cars have been the only option available for many.

Luke clearly dwells in Wellington, as he is oblivious to the fact that in Auckland rail is enjoying unprecedented popularity – 14.3% more trips in March this year than last year, almost a million trips.

However, there is always the risk that as long as rail is in public hands (or private ownership with the wrong regulatory framework and incentives), political imperatives can override sensible decision making or prevent commercially sensible decisions.Short-termism and vague, woolly social goals could ride roughshod over the only aim rail should have: providing the best service to its customers at the lowest price.

He is right about this. This has been the problem in the past.

The approaching Budget will reveal the extent of government support, especially capital injections for KiwiRail over the next few years. The $1 billion already spent on KiwiRail was a lot of money, so the question is whether consumers and taxpayers are prepared to pay a bigger price in the future.

Correct. Other questions are why is so much being spent subsidising the trucking industry which competes against rail? If the price of diesel reaches $3 or $4 a litre, will trucks represent the most economic method of shifting freight around the country?

It would be more useful if Luke would put some effort into analysing the $10bn the Government will be spending over the next 10 years on roading projects.  The majority of this is a direct subsidy to the trucking industry to pay for the Roads of National (Party) Significance.

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