Monday, September 15, 2008

Cullen struggles to justify rail purchase

Dr Cullen, according to a government press release (not election campaigning of course!), says that the purchase of Toll Rail was essential because "With rising fuel prices and growing awareness of the threat of climate change, the restoration of New Zealand’s rail system is now an economic necessity".

Yet rail customers weren't willing to buy it, which makes it rather a curious claim. Economic necessity? Hardly.

Furthermore, he bizarrely thinks that because Toll said the railway business was worth a lot of money, it must have been!:

“Toll believed, however, it was worth over $1 billion. As the government had to take national interest factors into account and as the existing owners of the track itself, we were always going to have to pay more than commercial rail operators who did not have an interest in keeping services open. In the end roughly half of the price the Crown paid was to buy Toll out of its long term monopoly right."

Well I can say my car is worth $100,000, but it doesn't mean it is - it means if you believe it, I'm ripping you off. If Toll believed that, why didn't it sell Toll Rail to someone who would pay it? Why sell to the government? It was a bluff, a standard commercial negotiating technique, which Dr Cullen is either too stupid to see, or was being willfully blind because he wanted to buy it, at any price (and could threaten to force a sale).

He admits he was willing to pay more than a commercial operator because he wants to keep services open that effectively can only be kept open at a loss.

The waffle ends with:

"Having KiwiRail in Kiwi hands will allow us to protect rail services for provincial economies, move more freight off roads and onto tracks, and help make our economy a truly sustainable one"

Protect them? So provincial economics need rail to move logs, milk, coal and containers, at a loss? So the loss of revenue from less road user charges will be saved in maintenance costs? Was the economy truly sustainable when it was illegal to ship freight more than 150km by road?

KiwiRail is going to be a huge success for our economy. Really? So after paying over a billion dollars to buy it back and upgrade the lines and trains, will it return dividends that will pay that back and some? No, of course not. It's smoke and mirrors, it is faith not facts, it is worshipping the same altar of religion of rail that the Greens bow down at.

It's bad economics and complete nonsense. Toll took Dr Cullen, the Labour/NZ First/United Future/Jim Anderton government to the cleaners, and flogged off an unprofitable business for a fortune. Now Dr Cullen is spouting out rubbish about the gains this "investment" will bring.

My challenge is simple to the government- produce an independent economic appraisal of the net economic return from the renationalisation of Toll Rail. I dare you.


Anonymous said...

By the same logic, Dr. Cullen should reinstate all the Canterbury branch lines.

dan said...