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Dr Cullen: A new era in the rail industry

October 1 is the beginning of a new era in the rail industry.

Today, the New Zealand Railways Corporation acquires the shares in KiwiRail and a new management team begins work with the board on charting a course for the future.

It’s no coincidence that the event is being marked here in a freight distribution centre because this is where the emphasis needs to be.

Rail’s ability to work with its customers will be crucial to the success the new organization achieves.

I’m also pleased that we can be here in the Mainfreight distribution centre because Bruce (Plested) and Don Braid have supported the case for Government ownership of the rail business as well as the rail network.

They’ve had the vision to see that rail has an increasingly important role to play in the New Zealand economy. They also understand that road and rail need to be seen as complementing one another rather than competing.

A modern and efficient rail network enhances their business rather than competing with it. Unfortunately, for the better part of a decade, the rail industry hasn’t been able to pull its weight.

Under-investment in both the network and rolling stock has impacted on the industry’s ability to provide the kind of service that Mainfreight and other customers have been looking for.

The separation between rail operations and infrastructure management prevented an integrated rail industry developing.

The recent National Freight Demand Study forecast predicts an overall freight volume increase of 75 percent over the next 25 years. While modal share is predicted to remain relatively constant, the sheer increase in freight volumes makes rail’s role in the transport mix extremely important.

Each week day more than 700 freight trains run across the country. On a typical midweek day 140 haul their share of an annual pay load of 14 million tones over an average distance of 283 km - about the distance from Wellington to Hawera.

Trucks, while they haul more, have a more local role, and carry their goods on average shorter distances than the railway. The overall rail market share, taking into account weight and distance, is 18 percent.

Rail is especially important to export industries, carrying more than two million tonnes of coal a year for export as well as nearly another two million internally or imported. It carries substantial quantities of dairy exports, and as well strong flows of bulk milk – not just the major flow from farms in the Manawatu and Hawkes Bay to Hawera, but also between dairy factories, inter-island, and even milk for towns.

The dairy industry’s competitiveness is enhanced by rail’s ability to carry large flows cheaply.

Rail also carries many thousands of containers a week both for export and for import. It carries the export steel produced at Glenbrook, and many of the inputs to the process too. And it carries logs, paper, and timber products, especially in the Bay of Plenty.

Rail carries half of everything that goes to and from Tauranga port.

It would be a mistake to think rail only exists for major customers. It still carries a myriad of other commodities, like supermarket goods, cars, fish, wool, meat, fruit and vegetables, grain, frozen goods, reinforcing steel, fibreboard, cement, and fertilizer.

For long distances especially, the economy of the country is woven around rail.

Rail in recent years has had restricted resources of wagons and locomotives to work with. It has thus focused on larger flows and trainload traffic. With more investment, it could not only carry more bulk goods, but also increase its role in wagon load traffic, through its network of cargo hubs, and private sidings.

There may be opportunities to increase the numbers of both hubs and sidings to capture yet more traffic.

It’s important to acknowledge that rail is very much a team effort. KiwiRail provides the rolling stock that hauls goods around the country. ONTRACK is the entity that provides and maintains the rail infrastructure.

Reliable infrastructure is critical to rail freight being delivered on time and to the safe and timely running of commuter and long distance passenger services. ONTRACK has already made significant progress, particularly on the Auckland urban rail upgrade and on some freight routes such as the Midland line in the South Island.

Ferry services sometimes don’t appear to be an obvious fit with rail, but two of the three ferries have rail capacity and are critical to operating on the important Auckland-Christchurch freight corridor. In this respect, they act as a rail bridge across Cook Strait.

Because we have a rail network, we are in the fortunate position of taking advantage of the opportunities provided by an under-utilised rail corridor. With modest investment, it can complement the roading network by hauling the heaviest long distance freight, and in the cities it can carry urban commuters who are abandoning their cars.

I was interested to learn this week that traffic flows on the Auckland Harbour Bridge were down by more than 10 percent for two months in a row compared with the same months last year. That says we can get people out of cars and onto public transport.

When the Rail Development Group reported back to the Government with its findings on rail’s needs, it recommended that more than $1 billion be spent over five years on the replacement of locomotives, rehabilitation of key parts of the network, upgrading information technology and creating freight hubs.

I am delighted today to announce that as a first instalment, the Government has committed $121 million for rail industry improvements in the current fiscal year over and above previously forecast spending.

The KiwiRail Board will be expected to report to Ministers early next year on their view on their investment and funding needs for the business going forward so that Ministers can take recommendations to Cabinet for the remainder of the five year capital programme.

I can hear the cries that investment in rail is a black hole for Government spending. The answer to this is to make some comparisons between spending on road rail. The rail network is 4000 km long and provides nation-wide freight and passenger services.

The further $121 million I have announced today is virtually small change compared with the projected cost of Wellington’s Transmission Gully and Auckland’s Waterview tunnel.

I’ve looked back over the years since 1993 when New Zealand Railways Corporation was sold. In that time, more than $14 billion has been spent on the state highway network – and remember we are talking here only about state highways – not local roads.

Contrast this with just over $2 billion spent by Government on rail. That spending has all been by the Labour-led Government and would be a contender for the most significant investment in rail since the days of Sir Julius Vogel.

It includes the initial $200 million the Government committed to network improvements when it re-purchased the rail infrastructure, the $1 billion committed to upgrading and electrifying the Auckland suburban network, the $500 million committed to upgrading and re-equipping the Wellington urban network and the $80 million of initial funding to KiwiRail to maintain rolling stock.

It’s also important to recognize the Government’s contribution to such projects as the repair of the Nuhaka bridge in the Hawkes Bay and building a new bridge at Matata in the Bay of Plenty.

Given the energy challenge we face in coming years, the so-called black hole of rail funding looks more like a pot-hole that urgently needs filling.

In 1908 our predecessors built the North Island Main Trunk line because they had a vision for a much more populous New Zealand and for opening up the North Island to settlement and economic development.

The Main Trunk justified the faith of the settlers for more than 50 years, before the rise of road and air transport – helped by cheap oil prices – diminished its role as a carrier of both freight and passengers.

Today we have to come to terms with a new set of circumstances – the emerging reality of Peak Oil and the impact rising fuel prices have on our economy. Rail’s energy efficiency has a new relevance and a new importance.

If our predecessors had been swayed by the argument that rail no longer has a place in the transport mix, we wouldn’t be having today’s debate. The option would have been lost.

We would be struggling to accommodate an extra million-plus road trips that would be necessary to move the freight currently carried on rail.


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