Gareth Hughes

Smart money backing rail

by Gareth Hughes

speedy train

Rail has a bright future both here and overseas. Here’s why:

Recent press from overseas saw Australian trucking magnate, Lindsay Fox, publicly support a campaign to move more freight by rail. In a rare show of non-partisan honesty, Fox said, “’I'm talking against myself when I’m talking about putting things on rail. We’re only here for a short time…I’d certainly like to see some of these things [done] that are in the interests of the nation.”

In the same week, the world’s richest man, Warren Buffett, announced an investment of $US34 billion in rail. Buffet said, “Our country’s future prosperity depends on its having an efficient and well-maintained rail system.”

Our own Minister of Transport has remained sceptical about rail’s likely future. Joyce has retreated from a key target in the New Zealand Transport Strategy to grow rail’s share of the freight task from 18 to 25% by 2040. He’s funded the bare minimum of essential investment to keep the network operational. And he’s placed an unfair expectation on rail that “all investments in the national rail network [will] provide a commercial rate of return.” (Investments in roads have no such similar requirement.)

But the last two investments the Government has made in rail have been stunning successes.

Last year, the Government subsidised the building of a rail siding at Tangiwai to enable forest products to travel by rail rather than road to the Port of Wellington. An investment of just over $1 million spread over three years is yielding cost savings to Government of $16 million and benefits to the nation of $9 million. 3,000 trucks/year are being taken off our roads as a result of this subsidy.

Another investment of just under $1 million to build log transfer yards in Marton, Wanganui, and Masterton will realise a $90 million return to the nation over the 30-year life of the project. By year four of operations, 9,000 trucks/year will no longer be barrelling down our roads.

These two small investments yield benefit cost ratios of 99 — an arbitrary number due to the fact they have negative costs. The 99 means they’re investment no-brainers, the likes of which even the Road Transport Forum couldn’t stop. (They tried.)

Rail in New Zealand has been mismanaged in the past and, under private ownership, run down to the point of collapse. Joyce is right to approach any new investment with scepticism. But he also needs to understand the tremendous potential for economic benefit from the right investment in the right places. Without a modern rail network, we’ll never be able to tap these investment no-brainers that are everywhere there are trucks moving freight in large numbers. Perhaps this is why Mainfreight, New Zealand’s largest trucking firm, is backing the future of rail in this country too.