21 October 2009

It’s not about rail – it’s about freight

Government has recently made comments that rail is going to have to pay its way and the financial viability of branch lines is being evaluated. However the decisions about the future of rail are about much more than whether lines are economic or not – its about how New Zealand wants to deliver it freight in the future.

In a report recently issued by the NZ Institute for the Study of Competition and Regulation it was suggested that only about half the current rail network is economically viable – about 1500-200 kms of the 4000 kms. With the Government’s focus on productivity it is not surprising to see that rail is being subjected to the value for money test.

Treasury’s issues paper for the Infrastructure Plan acknowledges that rail will continue to be an important part of New Zealand’s transport infrastructure, but it says that many parts of the network will remain under-utilised and uneconomic.

But the starting point is not about rail and the economics of specific rail lines – its about the freight that will need to be carried by a combination of road, rail and coastal shipping. New Zealand needs a freight network that serves the economy into the future, serves society’s wider needs, and has minimal impact on the environment.

Currently roads carry about 70% of our freight, and rail and coastal shipping about 15% each.
In the future it is forecast that total freight will increase some 70% over the next 25 years. The forecasts are that road freight will double in some regions, and increase by 50% in others, rail freight will increase by 70%, and sea freight will double.

The previous Government proposed lifting rail’s share from 15% to 25%, and coastal shipping from 15% to 30% by 2040. This would significantly reduce the share of freight carried by road and will offset some of the projected growth.

We have to ask the question what is the type of freight network we want in the future? Are we happy to let road freight take its natural growth path? Do we want rail and coastal shipping to take a greater share? If we do, how should we do this and is it really feasible to encourage a shift from away from road? We need to think through the interdependancy of road, rail and sea, and how to make the most of their respective strengths. For rail,  freight needs to comfortably co-exist alongside passenger transport, and thought needs to be given to the relationships between the  trunk lines, dedicated lines for industries and tourism, and the relatively underutilised branch lines. As a network each interacts with the other.

Addressing these questions is a wider question than just one of economic value. Moving freight from road to rail and sea reduces green-house gas emissions, reduces fuel usage, and improves safety, and rail  and sea freight services have a lower land use space impact than roads. When rail is closed down and the land sold, it is lost for all time. It is difficult to predict what and where new industries will develop and what the freight demands will be over a long time frame. New Zealand needs to preserve options for the future economy –not just today’s economy.

This is not to say that some components of the rail network should not close down – it requires a wider consideration of issues than just the economic issues, and of the wider freight network. A wider analysis will enable valid decisions to be made on the rail freight network and the best place for new rail investments and no investment.

Ultimately one of the tools to enable a fuller evaluation of these issues is some form of consistent pricing of transport across road, rail and coastal shipping. To help us make decisions about  the most “economically” viable network we need to price these transport modes on an equal footing. That is a longer game but needs to be initiated to enable smarter investment decisions to be made in the future.

Ultimately New Zealand needs a freight transport network that serves our future economy, at the best price, and with least impact on the environment. This will not be achieved by considering the financial feasibility of individual rail lines.

Commentary by:
Tim Davin BE (CIVIL), MPP, FIPENZ
Director of Public Policy
IPENZ, Institution of Professional Engineers New Zealand
Ph 04 473 2027
Mobile: 027 204 9536

For more information contact:
Tim Davin BE (CIVIL), MPP, FIPENZ
Director of Public Policy
IPENZ, Institution of Professional Engineers New Zealand
Ph 04 473 2027, mobile 027 204 9536