Good for Northlanders – but how about the rest of taxpayers?

Hosannas for one of the latest handouts from the so-called Provincial Growth Fund – a $94.8m “investment” to bring up to operational standard a 54km section of the Northland rail line – were muted, not surprisingly.

NZ’s state-owned KiwiRail, which racked up a $235m loss in the 2018 year, and a $197m loss the year before that, looks as if it will be saddled with yet more loss-making services – but Deputy PM Winston Peters justifies the investment on the grounds the rail line to Whangarei would otherwise become “unsafe” and have to close within 5 years.

Peters reckons closure would be unfair to the people of Northland. “That’s why the government is addressing decades of under-investment and neglect in the rail line, to support the future growth of rail in Northland”.

He makes no argument any government adviser (such as Treasury) has offered a sound business case for the spend-up. The KiwiRail board would probably have other priorities if it had been asked.

Thanks to NZ First, the coalition has earmarked more than $1bn to plough into NZ’s rail system, “so rail can play its proper role in reducing road congestion and emissions across our transport system”.

The state-owned enterprise hasn’t been profitable for years, despite the billions   poured into the system by the long-suffering taxpayer over the last decade.

In what is a pure political gambit, Peters and his mate Shane Jones justify throwing taxpayer money into the Northland line on the grounds it will bring the track out of managed decline and preserve future investment opportunities.

Without the $94m, Northland, they say, would be cut off from rail services most other regions have. There would be significant benefits for Northland’s economy as a result of upgrading the line, in their view.

The fact is because the rail network does not generate sufficient cash to cover the level of required investment, a large proportion of the accounting value must be written off each year. That’s why it has become such a burden on the taxpayer, and will continue to be.

Far more important to the rail network than the Northland line is the interisland link which will require massive investment as the SOE replaces its three ageing Cook Strait ferries with two new, larger, purpose-built rail ferries. Interislander’s current fleet, comprising the Kaitaki, Kaiarahi and the Aratere, is due to be replaced by 2024 at the latest.

KiwiRail after a two-year consultation process decided rail-enabled ferries were the most cost effective, efficient and best in the long-term.

The decision represents a shift by KiwiRail, which in the past dismissed rail ferries as “very rare and really expensive”.

On the funding for the Northland project the ministers contend it will see about 54 kilometres of the 181 kilometre track replaced or upgraded; tens of thousands of sleepers replaced, tens of thousands of cubic metres of ballast added; aging bridges replaced; overdue maintenance work on tunnels carried out; ditches cleared and embankments stabilised.

“We are investing more than a billion dollars to get NZ’s rail system back on track, so rail can play its proper role in reducing road congestion and emissions across our transport system,” Peters said.

For his part Shane Jones believes the $94.8m Provincial Growth Fund investment will also help improve freight services on the line and have direct benefits for Northland’s economy.

“The maintenance work will make the line more resilient to weather events and freight services more timely and reliable.Not only does it set the right conditions for KiwiRail to grow its freight business, wherever possible KiwiRail will be using Northland-based contractors to carry out work. It will look to Northland first if they recruit more track staff, as well as sourcing materials in Northland. This initiative will see many millions of dollars being injected into Northland, helping stimulate the region’s economic growth.”

Meanwhile  Peters, as Minister for State-Owned Enterprises, along with Finance Minister Robertson have named Brian Corban as Chair of KiwiRail Holdings Limited and the NZ Railways Corporation (NZRC).

Corban steps up from his previous role as deputy chair of the KiwiRail Board. He has been acting chair since the resignation of Greg Miller who became CEO.

Now 73 Corban has experience in leading Crown companies through restructuring and deregulatory changes having been chair of Genesis Energy, chair of Radio NZ, and the foundation chair of TVNZ.

Corban first served as deputy chair of NZ Railways Corporation and KiwiRail in 2008, when it was in transition back to Crown ownership.

He says he is “delighted to have the opportunity to lead KiwiRail during a period of transformation for New Zealand rail”.

Point of Order says good luck with that.

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