1 July 2008 Speech Notes

New Zealand’s rail back in New Zealand hands

Speech at KiwiRail launch event, Wellington Railway Station

Good morning. I am very pleased to be here at Wellington Station on the first day of operation for KiwiRail – an important day for our nation’s economy.
15 years ago New Zealand became the first country in the world to fully privatise its rail operation as a single entity. Our great experiment of privatisation was carried out under two governments – one Labour and one National – and there is no point today in revisiting the political debates of those years.

I think it is fair to say, however, that the failure to develop a strong, efficient rail system is for many New Zealanders the enduring symbol of what went wrong with privatisation.

For a decade after its sale, there were stories of financial scandal, of asset-stripping, and of neglect. In recent years, Toll Holdings has worked hard to turn this around, but in the end all have acknowledged that it is not possible to run an effective rail network in New Zealand without significant financial support from the New Zealand taxpayer.

Confronted with the urgent need for major investments in rail infrastructure, the government had two fundamental questions to address.
First, is it in New Zealand’s interests to have a strong rail system? For the Labour-led government, the answer is an unequivocal ‘yes.’

As the Prime Minister has outlined, rail’s ability to make our transport sector more sustainable and more efficient is huge. We also know how important rail is to regional economies. And we know that moving freight off road and onto rail and also coastal shipping will make our highways safer and cheaper to maintain.

The truth is that New Zealand must have a strong, thriving rail network if we are going to live up to our full economic and environmental potential.
And having answered that question, the government was forced to confront another. If the government is going to have to pay for the investments in rail that we must have, are we willing to do so in a way that essentially subsidises the profits of a private overseas firm? This is not a short-term question –

Toll had a monopoly right to the operation of the rail system through to 2070. It is a question whose answer would impact several generations of taxpayers.
And for the Labour-led government, the answer had to be ‘no.’ We refused to accept that New Zealand taxpayers should indefinitely subsidise a private, foreign operation and then not make sure that the investment would deliver social and economic returns for New Zealand.

We knew that with a rail system owned by all New Zealanders, we would finally be in a position to make sure that rail system worked in the interest of all New Zealanders.

The government has been heartened by the enthusiastic response the buy-back of the rail system has received. New Zealanders – especially those in provincial New Zealand – know that rail has a vital role to play in our future and know that public ownership is the right way to go.

Some of this enthusiasm has been criticised as nostalgic, linked to some belief in the glory days of rail. But to me, the only nostalgic view in this debate is the one that sees State Owed Enterprises as unable to be highly successful economic forces. The truth is that our SOEs are performing very well and I have every confidence that whatever the final structure of the new rail system it will be a huge success.

And I am very pleased that the man who has in recent years played a major role in the SOE success story, former Prime Minister Jim Bolger, has agreed to guide our integrated rail system as chairman. Jim, we are very lucky to have someone with your skills and your dedication to New Zealand on board with us.
Thank you.

ENDS

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