Tuesday, 4 December 2007

Don't save rail

There's talk that after buying back the rail track some years back for the princely sum of one dollar -- yes Virginia, excluding salvage value that was all the country's extensive network of steel tracks were worth -- the Government might now also buy back the whole operation from rail operator Toll Holdings. Herald story here.

The threat to buy comes about through negotiations over the "track access fee" -- that's the toll Toll pays to use the Government's track -- and in what looks like a backroom bid to have the whole operation renationalised, the Government has been playing hardball. They want to charge more; Toll wants its subsidy increased.

Whether the operation is nationalised or not, the taxpayer loses either way. We're already paying to subsidise a failing operation, renationalising it won't stop it losing money. Renationalising rail will make the socialists in cabinet feel good, but it won't change for a second the transparent fact that, as Liberty Scott points out, "it's a dud investment. Something socialists are good at finding."

There's a point to make here that should by now be obvious to all but the most braindead socialist, but which even supporters of privatisation seem to have overlooked. The argument used when the NZ Rail dinosaur was hocked off was that private business would run rail more efficiently. This was given as the justification at the time for all the morally necessary privatisations done in the late eighties and early nineties, but in truth efficiency was only ever one part of the economic story; only one of the strings in the privatisation bow.

The full economic argument included the urgent necessity to find out what these industries were really worth -- something only able to be established by private ownership in an open market. In the case of rail, the real value of the rail network was found to be abut a dollar. Without the ongoing subsidy courtesy of the taxpayer (ie., money down the drain), looks like the rail operations might be worth about the same. Hardly what you'd call "vital infrastructure" -- more an expensive, arthritic and completely futile waste of precious resources.

Liberty Scott has more analyis here. And No Right Turn keeps the red flag flying.


  1. The sad thing is, I think some of it IS viable, but the weight of keeping vast sections of the network going to stroke political egos doesn't help. If the investment and effort was put into the 3 or 4 lines that are worth it, then it could sustain itself.

    Might help if the highways were privatised too, but it is only likely to make a small difference.

  2. What assumptions do you make about the price of oil?

  3. The same made by people who have or have thought about pouring millions of dollars of their own money into it - rail's fuel efficiency is not universal and is insufficient to justify investing in duplicate bespoke infrastructure in many cases.

  4. I worked on rail projects overseas. For the most part passenger rail is impossibly expensive and can't survive in the absence of massive subsidy and restrictions imposed upon alternative transport modes. Nevertheless it is a hugely lucrative business to be in if you are an infrastructure provider or, in some cases, the operator. If you are in the correct position you can bilch billions of dolars of taxpayer money out of self-indulgent fools who want to build monuments and train-sets for themselves.

    Rail has utility in moving certain low-value bulk ores and similar cargo- usually non-time sensitive. Its usefulness declines as soon as it needs to operate with several intermodals and intermediate stops. Rail can sometimes be useful in super-highly population dense areas where for historic or geographic reasons other transport modes are restricted or do not exist (there are only two non-sibsidied passenger railroads I am aware of that are profitable, the rest are dogs).

    Face it. This is essentially a 200 years old technology with all the drawbacks that entails. It is hugely expensive and not economic for most present applications. There are better, individualised, personalised alternatives which are far superior. Ever heard of the car, the truck, the motorcycle.....?


  5. "Nevertheless it is a hugely lucrative business to be in if you are an infrastructure provider or, in some cases, the operator."

    Exactly. The real business of rail is not transport, it's farming subsidies.

  6. PC

    Yes, you are correct. It's a rort.

    It's the same with pretty much all public transport everywhere. Rorts; big, bigger and biggest. Buses and busways are another example of a scheme to bilch funds. These scams all rely on the idiotic nature of bureaucrats and elected officials. It can't be over-stated how lucrative they are for the providers/operators and also consultants.


  7. The free and frank view of TranzRail before Labour started meddling was that there are basically 5 freight lines worth keeping for now. Auckland-Wellington, Hamilton-Tauranga-Kawerau-Murupara, Oringi-Palmerston North-Stratford, Picton-Lyttelton-Dunedin-Invercargill and Canterbury-West Coast coal mines. Of them, maybe half may be worth it in the long term.

    Frankly anyone living near most of the other lines is probably in "spot the train" mode for freight.


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