29 September 2009

Kiwirail's illiterate and foolish fanatics

The NZ Herald report that the government expects Kiwirail to be financially self sustaining is a relief rather than a joy. It's the bare minimum I should hope for.

Meanwhile, the Labour Party, which destroyed $330 million of taxpayers wealth by buying this ailing business, after already letting it off the hook for not paying all track access charges that were owed, is desperately wanting you to pay more of your money to subsidise the freight movements of businesses. Labour can't give a single good reason why the users of rail freight deserve privileged treatment, and besides which, farmers are NOT dependent on Kiwirail. Fertiliser can go by road, and the milk that goes by rail is for Fonterra.

The economically illiterate lobby group "Campaign for Better Transport", which is largely aligned to the Green Party in terms of policies, goes further.

It is a relentless assault on the English language, that combines illiteracy of the language and punctuation with economic illiteracy and a strong hint of paranoid conspiracy theories. It is so damned ignorant that it is no surprise it isn't taken seriously by transport policy makers. I know, since I used to be one.

For starters, who can take seriously the following failures at English:

"Steven Joyce has come out swinging today against Kiwirail, as he says it will loose $1 million per day." Loose what??

"the Campaign For Better Transport (CBT) is questioning the Ministers figures" How many Ministers?

"Recently Joyce said KiwiRail was worth around $360 million dollars which we all know is unbelieveable" Unbelieveable? No, this preteen English standard is unbelievable.

"If I was a business owner I certainly would not put Steven Joyce incharge of quotations, Reeves said." incharge? Another new word. Comma missing too.

"In recent months is has become clear" is what?

"some unusal right wing groups have been producing reports with unusal facts and figures against Kiwirail" unusal? How creative, another new unusual word.

"yet it moves over 15% of the countries freight" What are all the countries?

"the nations rail network" Again, what are the other nations?

"The Campaign For Better Transport would like the Minister of Transport like" Like, whatever?

Poor Jon Reeves, he obviously did so badly at English at school (and CBT doesn't do spell checking) but wait, there's more. He can't even get his facts right.

He claims it is "ridiculous" to value Kiwirail at $360 million. Why? Because he puts forward the ludicrous implication that it be valued at replacement cost. As if anyone would pay replacement cost for it. As if Telecom, or any power lines company could be sold at replacement cost. Jon, it is called a "sunk cost". Money has been put into Kiwirail's assets that can never be recovered. You're no market analyst or businessman. By implication, Toll Rail was stupid to sell it at such a low cost and the sharemarket so badly wrong at undervaluing it, except for one point. It is worth $360 million because that's the value it might generate either in net revenues over time, and by implication, if sold on the open market.

Oh the Kaimai Tunnel? It is 8.879 km long, not 9.5 km long. Doesn't take much to check that fact, but then you're as good with facts as you are with spelling and grammar.

You wouldn't put Steven Joyce in charge of quotations if you were a business owner? Well he was a business owner, he was a millionaire at age 38 thanks to a business he set up at age 21. I don't think he really could give a damn what you think about his business acumen. Do you?

You claim that unusal (sic) right wing groups have been producing unusal (sic) facts and figures against Kiwirail. Who are these? What evidence do you have that the trucking lobby has been "working hard" on him, when he rejected their call to abolish road user charges?

You say "The Minister is throwing $8.8 billion dollars at roads so trucks can take away rail freight business", which is a complete non sequitur. The money for roads came from road users, who pay for road maintenance and capital expenditure, and besides, most roads don't compete with railways. Besides it isn't $8.8 billion a year yet you then say "giving Kiwirail only $90 million per year yet it moves over 15% of the countries freight"(sic). The money Kiwirail gets does NOT come from rail users, but from taxpayers. The link is illogical. Coastal shipping moves a fair proportion of freight but gets no subsidy, so what?

I might suggest that besides getting some literate spokespeople, the CBT might start having even a paucity of knowledge about economics and how the transport system is funded and financed, and throw away the paranoid conspiracy theories.

A better approach would be to read this article by Luke Malpass from the Centre for Independent Studies where he says:

"the present Government has only one policy option - the reform, rationalisation and resale of KiwiRail. The difficult reality is that many of the unprofitable lines must be closed while the Government prepares to sell off separate parts of rail to interested parties in the private sector. The rail system needs to shrink substantially to become viable in the long term. Only then will taxpayers be insulated from further political expediency and foolishness.

Without such bold action, rail is going to continue to be a drag on the economy and a constant cost for taxpayers, who have already spent a billion dollars on the business in the past year."


scrubone said...

Has anyone actually done the sums to work out the cost of maintaining the rail network vs the cost of closing it down and moving everything to coastal chipping and road? It seems that with all our cities bar Hamilton with ports there is little point in paying so much to maintain a rail network.

Libertyscott said...

No, but closing it down wouldn't make sense either. The right approach, which WAS being adopted by private owners, is to run it into the ground, and replace assets that are commercially worth replacing. Most lines are cash positive, but as bridges and tracks need replacing it isn't worth it, so it makes sense to run trains till that point. The lines that can fund replacement have a brighter future. Rail can work in New Zealand, albeit much curtailed, the question is whether the Nats have the courage to take the step to let lines close.

Anonymous said...

The campaign for better transport certainly have their limitations, I for one am not interested in seeing a grammar appraisal of their member's work

There seems to be a few let's say "urban myths" doing the rounds about the purchase of the rail system. As I recall, the previous government felt it had to upgrade the lines to a reasonable standard. The problem was, the taxpayer by increasing the productivity of the rail system would be effectively subsidizing a private company, an untenable position, surely you agree? No government would ever seen to let a rail system be seen to be closed down through neglect, it's never going to happen. There has to be a point where the said government is going to put it's hands in it's pockets and pull out cash. Just look at the Tasmanian government rescuing the very rundown Tasmanian system, beggared belief really.

All parties knew that the governmment was paying too much(on the face of things). The government pursued the "Vendor" concerned for nearly 12 months and I understand that negotiations were rigorous to say the least. None-the-less, the sale was made before the horrific financial events of last October which devalued nearly all businesses. Had it been purchased after this time it could no doubt have been bought for far less. I'm reasonably confident that it was no more than a "good" price for the vendor at that time.

I note your comments on Mr Joyce. I'm a self-made millionaire too, but this doesn't make me a good minister of transport nor does it mean that either of us can ignore the wishes of those less fortunate than us. Mr Joyce has to steer the middle ground between insisting on KiwiRail standing on it's own 2 feet and "social responsibilities". If he doesn't I doubt if he will keep his job.

Moving on, I think that Mr Braid made an excellent point in his interview posted on the ZB website today that there should be more business professionals on the KiwiRail board. This is the kind of constructive criticism that is of value. http://www.radionz.co.nz/news/stories/2009/09/29/1245c8b0c046

Now for Mr Allpass, my limited research seem to suggest that he was a BA(with honours admittedly) who is Sydney based. Those of us in the business community don't really take someone with that kind of resume too seriously I'm afraid.
If I was in Mr Joyce's shoes I would be cursing the said Mr Allpass, such comments will place the minister's actions under closer scrutiny. Mr Allpass should look to Mr Braid's comments.

Perhaps it's time Mr Scott for you examine Local Government's involvement in many of the Tinpot ports around the country?

Libertyscott said...

Anonymous: My point was that if someone is so appallingly incapable of communicating, and such a bastardisation of English is allowed to be put in the public domain, it is difficult to take CBT as being credible. By the way the possessive of it, is not "it's", it is "its".

Note, the taxpayer could have left the rail network in private hands and then a series of lines would have been closed, to Gisborne and Northland at first. Then the owners would replace and renew the lines worth keeping. Tasmania's railways really are a basket case though as you said.

It didn't need to be purchased.

My point on Mr Joyce is that the CBT spokesman said he didn't trust the figures on value, when he put out an absurd basis for calculating value.

What social responsibilities are there in owning a railway? Most customers are freight customers, why are their businesses more important than non rail users? Commuter rail services are already protected and subsidised so these don't count.

You make a fair point on the ports, regional councils should be required to sell these, and there would be some consolidation. The future of Taranaki and Bluff (excluding alumina for the latter) have to be fairly bleak, and Wellington (besides interisland traffic) is in much the same position.

Anonymous said...

I would question how much of the $90m is going towards 1)urban transport as the major user of the line in wellington and auckland is metro passenger and they are I believe treated as a marginal user from a track perspective, and 2)would question the additional costs of maintaining the main trunk from Auckland to Christchurch to a 100kph passenger standard for two trains a day when freight runs at 80kph (Max) 3) what is the % of network capacity currently being used by freight customers, if as is being suggested the current freight customers pay for 100% of the network cost then put simply they will be priced onto roads ( coastal shipping is a non starter for 99% of freight )should we not look at the potential future freight when we have some new locos and more wagons then the cost of network access is spread over more freight , 4) clearly some regional lines gisborne, northland for instance are being retained for who's knows what purpose lets identify the cost of keeping these open and have some visibility of that subsidy, address these 4 issues and rail may have a future

Anonymous said...

a train can carry more goods more efficiently than any other form of transport, that is fact, rail use will go up as fuel prices increase because of scarcity, business will not be able to send small amounts of bulk goods in lots on trucks, and if there is no railway because you all want dismantle then you will be screwed.

So think in the long term in I were you mothball the lines yes, but don't sell infrastructure or track bed because 15 or 20 years from now the world will be a different place.