New Zealand renationalises its rail network.

This is a good example of how little attention Australia pays to New Zealand in the news; in the dying days of Helen Clark's Labour government KiwiRail, New Zealand's national rail service, was brought back into public ownership. The first I heard of this was reading the Centre for Independent Studies website.

Here you can read their analysis of the economic and ideological issues that come into play with this decision: http://www.cis.org.au/issue_analysis/IA115/IA115.pdf

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A year on from the renationalisation, it is time to examine the fallout from the purchase. KiwiRail cost the government $690 million. This is more in real terms for a lesser asset than the $400 million the government sold NZ Rail for in 1993. Treasury recently valued the real sale value of the asset at $369 million. This represents a financial loss of $320 million to the taxpayer for a poorly performing, depreciating and rundown asset.

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But repurchasing the network with the intention of keeping it in public hands for no appreciable gain allows only one substantial conclusion to be drawn—this purchase was driven by ideology, an ideology that government ownership and operation of rail is inherently more desirable and more efficient than private ownership operation. Short-term political expediency may also have driven the purchase process. The government went into the last election with the campaign slogan of ‘Kiwibank, Kiwisaver, KiwiRail—keep it Kiwi, Vote Labour,’ leveraging off the idea of positive public ownership of assets. The difficulty with this idea, however, is that organisations such as the World Bank consider that ‘privatisation is now so widespread that it is hard to fnd countries not using this approach: North Korea, Cuba and perhaps Myanmar make up the shrunken universe of the resistant.’ Paradoxically, the buyback was in the words of Michael Cullen, ‘an ideological burp.’

The article also mentions that Victoria's franchise solution for privatisation of the rail network was actually an attempt to discourage problems that had developed in other countries experiments with private rail services.

When will the world wake up to the fact that rigid-hull dirigibles are the safest and cheapest mode of long distance transport possible?

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LamontCranston's picture

hrm.

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But repurchasing the network with the intention of keeping it in public hands for no appreciable gain allows only one substantial conclusion to be drawn

Public control and management of its operations?
The CIS quotes are simply argument from majority and juvenilities.

I need only look at Victoria.
The Country & Regional train operator V/Line was privatised in 1999 along with the Melbourne city trains and trams, following the operators collapse in the early/mid 2000s it returned to government control and while nothing to brag about has been working well enough.
The Melbourne trains and trams however are another story. After trying something for 10 years and getting abysmal results and no forseeable cost savings - Lynn Kosky is on record admitting it has not saved one cent and by now the myki mess, contract tendering process, rebranding the trains & trams, etc all equel a substantial monetary loss for Victoria - do you do it again?
"Yes" says the Brumby government.
No doubt the Centre for Independent Studies would argue it must be continued and generate a lot of hot air to support their claim.
I think its clear who is the one really arguing from blinded ideology.

Tigger_'s picture

The CIS argues that those

The CIS argues that those areas where trains enjoy a competitive advantage, such as hauling coal, are probably already at peak levels of profitability. Whereas for other purposes the market has likely chosen road or air transport, but the government fancies that somehow it can persuade the market otherwise in spite of all evidence and experience to the contrary. So with this in mind when the NZ rail system was sold to private operators it was with a stipulation that it had to maintain services that are inherently unprofitable, and it was this that resulted in the requirement of continued public subsidy for the rail system. So rather than the outcome being a failure of the free market, it is another example of government induced market distortion.

There is one thing I disagree with the CIS on; that NZ's railway is inherently unprofitable for most services.

New Zealand has something of an advantage with rail over a country like Australia in that a single long line can reach most of the country, unlike Australia where civilisation circumnavigates the outer rim of the continent, while its most economically productive activities like agriculture and mining which are served well by rail, happen to be deep inland.

As you can see the passenger rail no longer goes to Dunedin or Invercargill, The Southerner service did until 2002, when it was finally canceled.

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The service ran at a financial loss and had been supported by government subsidies until these were abolished for all long distance passenger trains in 1989. New Zealand Rail changed the seating configuration of the coaches by replacing the very generous seat pitch three abreast configuration with a more standard four abreast with reduced (but still generous compared to bus) seat pitch. The full service buffet car was replaced with a buffet servery. Both measures reduced costs significantly, but the service was challenged by the increasing number of low-cost shuttle bus services, particularly between Christchurch and Dunedin, which were significantly cheaper than the train. Nonetheless, the Southerner still operated seven days a week, with one service running each way.

I'm guessing that there was confusion in the business model, demanded by government fiat naturally, was it meant to be a tourist train? Or was it meant to be a commuter service for daily usage by the locals? That it ran seven days a week suggests the latter. So it was very likely too expensive for regular commuting, but would've been a viable tourist train except services were oversupplied, and probably two days per week would've been quite profitable for a high margin market.

The upshot is that because they didn't determine what its best function was, they ended up with no train service at all.

Ironic given that it probably would've been a fairly easy sell to the tourist market given the views of the countryside and Dunedin railway station itself:

LamontCranston's picture

Quote:Whereas for other

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Whereas for other purposes the market has likely chosen road or air transport, but the government fancies that somehow it can persuade the market otherwise in spite of all evidence and experience to the contrary.

after how much government support and money for road and air?

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So with this in mind when the NZ rail system was sold to private operators it was with a stipulation that it had to maintain services that are inherently unprofitable, and it was this that resulted in the requirement of continued public subsidy for the rail system.

Not unprofitable for the people catching them.
New Zealand has something of an advantage with rail over a country like Australia in that a single long line can reach most of the country, unlike Australia where civilisation circumnavigates the outer rim of the continent, while its most economically productive activities like agriculture and mining which are served well by rail, happen to be deep inland.
Straight line from Melbourne to Sydney to Brisbane, with state services then radating out from the capital city stops, doing a u-turn at Melbourne you then continue to Adelaide and Perth, again straight line.
Not sure what map you've been looking at.
A bus from Christchurch to Dunedin to Invercargill couldn't have been too comfortable looking at the length on that map, I suspect the train was a locomotive hauling carriages and slow enough that a bus could compete. Electrifiying the line or introducing faster DMUs would have competed. And have you checked how often it ran, I'm guessing it was just twice a day.
oh here we go:

Exactly as I predicted.
But yes tourist trains on a line are always great providing you can get the rolling stock up to scratch, and safety is observed when restoring a disused railway.
Your wikipedia article reports that bits of it are now used for tourism, and funnily enough

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With rising petrol prices and demand for travel, especially to and from Invercargill, there is now some talk of reinstating the Southerner, if enough interest can be generated.

This is a prime opportunity to capture the market.
Work should be carried out on the track immediately to make up for 7 years of disuse and to allow faster trains to operate - then new fast Diesel Multiple Units must be purchased, I demand operating speeds somewhere in the range of 150 to 200 km/h!

Tigger_'s picture

Central planning incoherence

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Straight line from Melbourne to Sydney to Brisbane, with state services then radating out from the capital city stops, doing a u-turn at Melbourne you then continue to Adelaide and Perth, again straight line.
Not sure what map you've been looking at.

A straight line indeed. And what about Cairns? Darwin? Mt Isa?

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And have you checked how often it ran, I'm guessing it was just twice a day.

Once a day, twice a day? Certainly no more frequently than that. So how many services should there be a day? On the hour every hour?

Given the population of the South Island it is clear that it is just not viable. Here are the populations of the major South Island centres along the eastern coast:

Picton: 2,928
Christchurch: 368,900
Timaru: 27,200
Oamaru: 12,950
Dunedin: 122,900
Invercargill: 51,600

How many daily commuters are you going to have in a best case scenario? A few hundred? I'm betting that the Southerner was mostly empty for most of its services. And since there were so few users those that did make the journey had to be clustered into one or two services a day when it would've been more convenient for most people to just drive when it suited them.

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Work should be carried out on the track immediately to make up for 7 years of disuse and to allow faster trains to operate - then new fast Diesel Multiple Units must be purchased, I demand operating speeds somewhere in the range of 150 to 200 km/h!

To get nobody from nowhere to nowhere even faster at even greater expense!

So here we have what could've been a viable tourist line's prospects ruined by political demands that it instead be a commuter line. As for speed, a tourist line should be amiable and leisurely, not so fast the scenery is a blur.

LamontCranston's picture

Quote:And what about Cairns?

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And what about Cairns? Darwin? Mt Isa?

Once the highspeed interstate train terminates at Brisbane, you would then alight to a QueenslandRail train going to Cairns or Mt Isa. For Darwin you would get off at Adelaide and catch The Ghan.
Same as today really except there'd be one train service operating between the south and east coast cities instead of four, offering direct services, and it'd be substanially faster.
Perhaps if the demand was substantial enough you could see it expanded.

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To get nobody from nowhere to nowhere even faster at even greater expense!
So here we have what could've been a viable tourist line's prospects ruined by political demands that it instead be a commuter line. As for speed, a tourist line should be amiable and leisurely, not so fast the scenery is a blur.

Did you not read?

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With rising petrol prices and demand for travel, especially to and from Invercargill, there is now some talk of reinstating the Southerner, if enough interest can be generated.

And those city figures are similar for Victorian lines the V/Locity operates on - thats 160km/h, whats the populations of the locations QueenslandRails Tiltrain services - also 160km/h.

Tigger_'s picture

Modest prospects

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Once the highspeed interstate train terminates at Brisbane, you would then alight to a QueenslandRail train going to Cairns or Mt Isa. For Darwin you would get off at Adelaide and catch The Ghan.

So if you want to go from Brisbane to Darwin, just simply catch the train to Sydney, then Melbourne, then Adelaide, then Alice Springs, then Darwin.

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With rising petrol prices and demand for travel, especially to and from Invercargill, there is now some talk of reinstating the Southerner, if enough interest can be generated.

So, 1. unfortunately petrol prices aren't rising anymore, and 2. 'if' enough interest can be generated to turn the idea into something more than idle talk. Fuel is only one cost factor, the big problem with rail is that it needs a relatively high number of support staff compared to bus just to start the operation, and so you need a lot of services and a lot of consumers to justify the cost of so many staff. Perhaps a modest service between Dunedin and Invercargill would be viable if the staff overhead could be minimised.

LamontCranston's picture

willfully ignorant.

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So if you want to go from Brisbane to Darwin, just simply catch the train to Sydney, then Melbourne, then Adelaide, then Alice Springs, then Darwin.

Thats what you currently have to do.

I haven't been talking about new railways, but about upgrading the existing railways to handle faster trains and introducing faster trains to operate on the improved tracks.
Now if you want to start discussing new railways well keep in mind the increased price of that and if there is demand and cost/benefit (plane versus train for Melbourne/Sydney/Brisbane) to warrent it.

Tigger_'s picture

Surprising

What really surprises me about this map is that there is a train to Canberra. Why? Since there can't be much demand for it, and politicians and high ranking public servants refuse to use public transport.

LamontCranston's picture

We'll add that to the

We'll add that to the highspeed rail.

LamontCranston's picture

Since you want a tourist train

Auckland, Christchurch, etc could begin introducing trams or lightrail by first building a small tourist tramline operating vintage rolling stock. Just a simple circular route around or straight line through old well preserved portion(s).
Once its up and running, extensions could be built for regular passenger services.

Tigger_'s picture

Proof of what I said

In contrast to the Southerner, which died from having a convoluted business model imposed upon it, the Tranzalpine Express running from Christchurch to Greymouth, a town of only 10,000 so there were never any illusions about it being a commuter train.

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The TranzAlpine Express is a passenger train operated by Tranz Scenic in the South Island of New Zealand. This trip is often regarded to be one of the world's great train journeys for the scenery through which it passes, (see famous trains). The journey is 223 kilometres (139 mi) one-way, taking about four and a half hours. There are 19 tunnels and four viaducts, with the Staircase being 73 metres high.
The train has become increasingly popular, and carried 204,000 passengers in the financial year ending 2007.

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In 1988, the train won a Tourism New Zealand Award and was voted as one of the top 10 "short" train journeys in the world.

And it is still running today, and it was in no need of rescuing with a government bailout or appropriation.

Also the journey is 223km, taking 4.5 hours, which is an average of 50km/h, so you don't need speed either.