Post by GordonPost by Rich80105Post by CrashPost by Rich80105Post by CrashPost by Rich80105https://business.scoop.co.nz/2024/06/26/the-trucking-industry-wants-the-government-to-close-down-its-more-efficient-rival-rail/
This was written before the indications now that the government has
decided to replace the existing Kiwirail ships with ones about the
same size as the existing ships - what a waste of an opportunity! The
earthquake risks required substantial work at both terminals, and the
larger ships that were already on order would have worked very well -
but no NAct1st just had to stop them at a cost of many millions of
dollars - and are now giving us lower service on our most important
road link - just to pander to the trucking industry.
Shame - putting their mates before the country . . .
Complete and utter nonsense as usual. Rail is state-owned solely
because in an economy with low population in a small area, rail
transport cannot generate economies of scale to be profitable (and
never has been). Populous countries such as India and China are where
rail is sustainable, not NZ. With rail transport, goods to be shipped
must be trans-shipped at least twice (ie loaded and unloaded at least
3 times) versus once with goods sent by road.
https://www.nzherald.co.nz/nz/why-nz-needs-to-invest-properly-in-rail-and-ferry-infrastructure-for-the-public-good-bryce-edwards-political-roundup/NKNOGOD5VZASZMIMDDSFCVWJMM/
and
https://www.interest.co.nz/public-policy/128602/brendon-harre-makes-case-taking-minimum-viable-design-approach-could-have
and
https://business.scoop.co.nz/2024/06/26/the-trucking-industry-wants-the-government-to-close-down-its-more-efficient-rival-rail/
The claim that rail cannot be profitable is often made but seldom
justified.
It is not a claim. Rail transport in NZ has been a Government
department, an SOE, privately owned and repurchased by the Government.
It has never been profitable, even when protected by a cartage limit
of 150km or less for goods not sent be rail.
Post by Rich80105We know of course that running down NZ Rail when National
sold it of was hugely profitable, but that is merely an example of an
asset being bought at less than real value and then allowed to run
down as it was managed for short term profit. But we have seen
recently that storms can make rail easier to restore after a major
climate event - Gisborne and north of Auckland; but a bigger problem
is that statements of that sort are made without any equivalent
calculation of the profit delivered by Roads. Rail is much more
resilient than roads to heavy transport - many truckers are aware that
current charges are too low for the heavier loads (over about 40
tons), and that road maintenance is significantly higher on roads used
by heavy trucks, or city routes used by busses. We also tend to ignore
coastal shipping - with the rail ferries being partly legitimately
seen as part of State Highway 1, or part of our Rail system, or part
of our Coastal Shipping services. We also need to look at total costs
by both local and national government - that is becoming clearer as
our new government is putting more costs on local areas, and the mix
of road and rail restoration between Napier and Gisborne will be
interesting to watch.
Post by CrashThe article omits to mention that transport taxes (including RUCs and
petrol taxes) are used to pay subsidies for public transport
(including rail in Wellington) amongst several other non-roading
entities. Use Google to find out where the NZTA spends NLTF funds.
NZTA has responsibilities for Transport, not just Roads - why would
they not spend money to reduce excessive traffic trying to travel to
and from Wellington to the Hutt Valley and Wairarapa and the Coast
from Johnsonville to Waikanae.
Because the money is sourced entirely from taxes on road transport.
Indirectly, therefore, it could be said that road taxes fund rail
subsidies.
Post by Rich80105I have been surprised at how little earthquake risk has been mentioned
- there was considerable work done investigating a ferry terminal near
Cape Campbell, which would have shortened the sea trip considerably -
but the Kaikoura earthquakes have been seen as making that too risky;
I understand earthquake considerations were also part of the move from
the current ferry position (which creates difficulties for cruise
liners and other large vessels) further north to Kaiwharawhara. The
existing ferry terminal used by Bluebridge is very constrained and
makes transport from the rail terminal more difficult.
If you want to claim that one mode of transport is unprofitable, it
would be good to see some evidence, such as return on capital, for all
modes - you will quickly realise that this information is not
available . . .
There is no point in me taking the time required for detailed research
that you will ignore because it does not match your ideological bias.
Been there, done that, not going to be sucked in again.
I challenge you to find any credible evidence that rail was profitable
(purely on the basis of revenue and expenses) while government-owned
(including as an SOE). If you can do this I will take you seriously
enough to cite my contentions.
You can ask all you want, but my point is that those that do not like
rail make those claims, but are never prepared to either support those
claims with actual numbers, or give corresponding calculations with
respect to Roads. We know that the current Government is planning more
Roads of National Party significance (perhaps that should be NAct1st
significance now), but never has there been any published analysis of
the return on capital arising from either any single project or all
roading activities.
If we step back and accept that any country needs transport for goods and
services we can then put the options on the table and start a discussion as
to the mix, if any we should use.
History has dictated that we have railways as turcks as we now then today,
did not exist as the trains powered by steam were hauling all that coal,
among other items across the country.
The different types of transport have developed differently - Air is
the only one that is almost all privately owned (albeit with
occasional bail-outs!). The economics of large road projects are
relatively simple - arrange the finance, get a good design and get it
done with ongoing systems to ensure that it is built to agreed
standards. Each step is important, but the big issues are getting
each step at the lowest possible price while not sacrificing quality.
The Kaikoura highway recover from the earthquake had to be done
quickly, so it was financed using government money (at a lower rate
than can be provided by any other New Zealand organisation, it was
managed by Engineers who were on site to monitor work as it was done
while planning the next step (urgent completion was a factor there).
Suppliers were sourced competitively - as much because they did not
know what they would need for later stages, but competitive
purchasing did keep costs low. Contractors were hired for each stage
so there was competitive tendering, and the knowledge that good
service may assist future contracts.
Compare with a PPP - a single provider of finance at a higher rate
than government needs to pay. A single supplier of both labour and
materials based on a single price with escalation clauses, in some
cases with part of the cost being met by future tolls. That cuts out
flexibility, but also limits the number of tenderers, and with a big
contract, there are inevitably variations that will get fought for an
increased price - through the courts if necessary.
Most contracts are somewhere in between - but the Kapiti expressway
had an additional difficulty in that the consortium was structures in
such a way that the tenderers could effectively shut down their
organisation and walk away at any point - it made it difficult to gain
the trust of sub-contractors, who had seen a spate of building
contracts being closed down with subbies losing both payment for work
done and a big fight for getting their working tools back.
In some countries, PPP will be accounted for by the government as an
asset as work progresses, with the cost of say future tolls not
allowed for until later - in effect the true costs gets hidden for
years; the UK Tories found themselves having to wear disappointment in
some projects as they were in government for long enough for the true
cost to be identified - Thames Water is an example of how it can all
go wrong - we should prefer the Scottish Water model that delivers
water at a significantly lower cost through a better and more
appropriate structure. Here is New Zealand the government accounting
rules require future commitments to be included as a cost (discounted
appropriately for time) in the government accounts, so our governments
cannot hide from those future commitments, but that economic reality
may not be well comprehended by those that see other governments only
having to account for these contracts as they have to make payments.
All of the above consideration apply to all governments, regardless of
which parties are involved, so the economics are more important than
the politics.
Rail offers some advantages over roads - for most routes the lines are
more stable than many of the roads; certainly the metal rails are
longer lasting than asphalt, and can take heavier loads without
significant additional deterioration. Rail takes traffic away from
congested routes, but does suit some items better than others.