Thanks Kiwirail

October 11th, 2012 at 8:21 am by David Farrar

Herald reports:

The Government ended the last financial year to June 30 with a of $9.2 billion – about half of what it was last year – but up from the $8.4 billion shortfall that was signalled in the May Budget.

The Treasury said the tax take was slightly higher than forecast and the Government’s core expenses were lower than forecast.

The write-off in the value of KiwRail by $1.4b on June 27 was not factored into the May Budget forecasts.

Excluding $1.9b in Christchurch earthquake costs, the operating balance would have been $7.3b, compared with $9.3b in the previous year, the Government said.

Tax revenues over forecast and crown expenses under forecast is where we want to be. The underlying deficit of $7.3 billion is $1,1 billion better than forecast. There are three years to hopefully get rid of it and get back into surplus.

The writeoff just confirms how badly the last Government got conned by Toll, in buying it. They still call it the sale of the century. Rail is viable when there is enough population to utilise the tracks frequently enough to cover the capital and maintenance.

That means some services such as Wellington metro trains are viable, as they are utilised scores of times a day.

But take the main North Island trunk. There is now only one passenger trip a day on it (used to be four). Sure you have some freight also, but it is not enough to be viable.

English said excluding the one-off effects of the KiwRail writedown, the books were better than forecast.

Tax revenue increased by $3.5b from the previous year and core government expenses fell by $1.4b.

Good. To have an actual decrease in expenses (not just a slowing in the increase) is quite an achievement. A necessary one. Recall we were facing a permanent structural deficit, which only ends in disaster.

Tags: ,

32 Responses to “Thanks Kiwirail”

  1. Carlos (683 comments) says:

    An even bigger thanks goes to superannuation and welfare.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  2. Steve Wrathall (284 comments) says:

    “…main North Island trunk. There is now only one passenger trip a day…” What about all those Kiwis who “rose up” a few years ago and demanded the govt keep this service. Surely they’re using it? Aren’t they?

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  3. YesWeDid (1,048 comments) says:

    Nice attempt to frame the deficit discussion in terms of Kiwirail DPF.

    Getting back into surplus is a reasonable goal but if we decimate our manufacturers and exporters in the process then what will we have achieved?

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  4. tvb (4,430 comments) says:

    Rail in New Zealand is a series huge bail outs. You can make anything work if you are prepared to pour millions into it. That is the story of rail in New Zealand. Yet people still want it. Let them pay a surtax to finance it then, the rest of us will use our cars. Rip up the tracks and have a dedicated trucking route.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  5. david c (254 comments) says:

    Translation: “Hey apart from that thing that was bad, these numbers are looking great!”

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  6. Monty (978 comments) says:

    And then to hear that wanker David Parker get on the radio and spout about how Labour ran surpluses every year for nine years (after been given a great set of books by Shipley). The arse forgot to mention that Labour drove the tradeables into recession in 2005, and the 2008 PREFU had structural deficits for as far as the eye could see.

    Cullen spent like a drunken sailor with a bevvy of whores.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  7. anonymouse (717 comments) says:

    Sure you have some freight also, but it is not enough to be viable.

    David, Passenger rail in NZ has never been lucrative enough to underwrite the network, (even Wellington’s commuter rail would not survive without a subsidy from NZTA via the regional council)

    Freight is what underpins the entire network, always has been, Passenger income was only 13% of KR income in 2010/2011.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  8. Griff (7,808 comments) says:

    Leftys and choochoos We should just buy them a model train set say in a small warehouse and every time they get the urge to waste more of our money on the stupid things let them play in it for a week. Len chuga chuga Brown could get his own keys

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  9. Colville (2,272 comments) says:

    The trainset will workout in time.
    We do need to truck goods to rail and use rail for longhaul.
    Logs are a easy one. Why have log trucks driving to ports?

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  10. swan (665 comments) says:

    “YesWeDid (795) Says:
    October 11th, 2012 at 8:31 am
    Nice attempt to frame the deficit discussion in terms of Kiwirail DPF.

    Getting back into surplus is a reasonable goal but if we decimate our manufacturers and exporters in the process then what will we have achieved?”

    You do realise that deficit spending will tend to increase pressure on inflation and the dollar right? Withdrawing fiscal stimulus is about the best thing that can be done for our exporters. It will tend to lower the dollar, all else being equal.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  11. Mr Nobody NZ (391 comments) says:

    “The Kiwirail writeoff just confirms how badly the last Government got conned by Toll, in buying it.”

    Sorry David, Toll didn’t con the Government of anything, rather the then Government wanted to acquire the railways because it suited their ideology in fact Toll had been saying to the Government that the Railways weren’t viable (in their current configuration) since 2003 and were attempting in good faith the negotiate a solution that would work for all parties.

    Toll simply negotiated the best possible price to sell what they considered to be a valuable part of their NZ operation.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  12. Cunningham (844 comments) says:

    YesWeDid (795) Says:

    October 11th, 2012 at 8:31 am
    ‘Nice attempt to frame the deficit discussion in terms of Kiwirail DPF.

    Getting back into surplus is a reasonable goal but if we decimate our manufacturers and exporters in the process then what will we have achieved?’

    What do you suggest then YesWeDo? Print ourselves out of trouble? Dropping the exchange rate should be done by running the government finances responsibly. Export and manufacturing will come right but you cannto just wave a magic wand and make everything OK. Have you ever thought that maybe demand globally has actually dropped and that is a major reason why our exports aren’t doing that well???

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  13. Griff (7,808 comments) says:

    colville
    We tried that years ago.

    Load on truck take to destination unload.
    Double handling
    Load on truck take to train station unload, load on train take to nearest station unload, load on truck take to destination unload.
    Costs.
    One truck two fork hoists three men.
    or
    Two trucks one train four fork hoists two depots eight men..

    Damage and shrinkage more on trains plus time factor increases considerably

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  14. KiwiGreg (3,255 comments) says:

    “That means some services such as Wellington metro trains are viable, as they are utilised scores of times a day.”

    No it’s not. Every person who gets on those trains is being subsidised by their countrymen.

    @ Colville, yeah right. Maybe some sort of law prohibiting trucks going more than 100 miles might work?

    Rail doesn’t work in NZ except some limited high bulk point to point services. It’s a simple case of geography and economics.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  15. KiwiGreg (3,255 comments) says:

    Oh and the deficit is a bloody disgrace.

    Most depressing thing in the office yesterday was the comment “This is probably the best government we will have for the foreseeable future”. And it probably is but it’s a dreadful government, full of tax and spend vigour and nationalisation of formerly private assets and without a shred of principle to guide it.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  16. Paulus (2,632 comments) says:

    Only Sale of the Century to Toll – can still hear the champagne bottles opening – Labour/NZ got taken to the cleaners.
    Well done Cullen and Clark.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  17. Colville (2,272 comments) says:

    I live in Palmy Nth I was told there are 388 private forests between 20 and 100 Ha in the Manawatu.
    I have 60 Ha. Thats 40,000 tonnes. That is 1000 truck and trailers.
    Or around 20 trains.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  18. Cunningham (844 comments) says:

    Kiwigreg, mate I think you need some prozac or something. Yes they could cut more spending but at the end of the day there is no point having dramatic policies if you are on the opposition benches. It is just a FACT OF LIFE when it comes to politics in NZ. You need to just get over it!

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  19. tom hunter (4,894 comments) says:

    But ….. but …..

    …. it’s an asset!

    The trainset will workout in time.

    Linus: He’ll come here because I have the most sincere pumpkin patch and he respects sincerity.

    Sally Brown: Do you really think he will come?

    Linus: Tonight the Great Pumpkin will rise out of the pumpkin patch. He flies through the air and brings toys to all the children of the world.

    Sally Brown: That’s a good story.

    Linus: You don’t believe the story of the Great Pumpkin? I thought little girls always believed everything that was told to them. I thought little girls were innocent and trusting.

    Sally Brown: Welcome to the 20th century!

    Or the 21st. As Charlie would say: Good grief!

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  20. RRM (9,933 comments) says:

    LOL, the North Island Main Trunk has NEVER been about passenger services. It’s ALWAYS been about multi- multi- thousands of tonnes of freight at a time, slowly but surely plugging away towards their destination. Probably not very good if you’re trying to courier one-off packages of consumer garbage to Trademe consumers within 24 hours of clicking “BUY NOW”, but for real industries with real quantities of freight it seems to work alright.

    The fact that you can fit a token passenger train or two into the schedule has only ever been a fringe spin-off.. (Although I do recall an old NZR promo filmreel from the 1960s about how the Northerner would now get you from Wgtn to Akl in “only” 12 hours, thanks to the performance and refuelling range of the exciting new DF-class streamlined diesel locomotives.)

    Oh and the only person I’ve ever heard refer to this as the “Sale of the Century” is DPF. That joke never gets old huh?

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  21. KiwiGreg (3,255 comments) says:

    @ colville does the train line run up to your forest? If not you’re using trucks.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  22. KiwiGreg (3,255 comments) says:

    @ cunningham don’t get me wrong. I KNOW Labour/Green/Maori will be worse, but not by much.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  23. Viking2 (11,488 comments) says:

    If we want to help NZ exporters we need trade posts in many more countries and plenty of interaction between them and business in NZ. spend 200 million a year in that space and watch it go.

    Kiwi exporters especially small producers either don’t have the know how, sophistication or sometimes the time or the funding to get into export. ( We attempt to fix that but it got canned because it was poorly structured and the inevitable happened. But we can do this better. It pisses me to see the film industry drivelled all over and we don’t look to setting up a decent bunch of servers and a decent line to the world.)
    That’s where the gains will be made.
    Diary is already 25% of our income. How much more do we think they can contribute?
    Local manufacturers here that I know are world class but don’t have the needed grunt ot go out there. That’s where the money needs be spent. and remember many are happy to retain their business and their batch because they don’t want to give their comp[any to the wolves that exist in our business community.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  24. David Garrett (7,318 comments) says:

    I was very reluctantly convinced some years ago that rail is simply not economically viable in this country…for a number of reasons, beginning with our narrow gauge, and then for the reasons Griff points out (two extra “handlings”, one at each end) and others, which are beyond my limited economic understanding…

    However…each time I go on a trip and get passed by firkin great trucks, the slipstream of which even blows the old Jag around, I really wish that wasn’t so….And then there are those memories of debauched train trips in Europe 100 years ago…

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  25. Ed Snack (1,883 comments) says:

    Colville, that means at least 388 trains, even if the rail ran to each and every forest, which it doesn’t. So trucks plus double handling.

    RRM, the key to efficiency with rail is high usage and where possible point to point. Thus coal and mineral ore trains from mine to port or consumer is usually great. And NZ has very little of that. Although relatively fuel efficient, rail in NZ is rarely economically efficient. It is usually a kind of romanticism, harking back to a mythical past when rail was king, but it is rarely efficient these days.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  26. rouppe (971 comments) says:

    Getting back to surplus seems to be some end unto itself.

    It is only the beginning. After getting back to surplus (by a few tens of millions) we will then still have some 70 billion of debt to pay back. And at a few hundred million a year that will take forever. We need to be getting to multi-billion dollar surpluses before it makes a blind bit of difference.

    If history repeats, we will just get back to surplus, Labour will win an election and then it will all go to shit again

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  27. campit (467 comments) says:

    Are there write-downs pending for Solid Energy and other SOE’s as well?

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  28. campit (467 comments) says:

    Sure you have some freight also, but it is not enough to be viable.

    Um, freight contributes $400m annually to KiwiRail’s revenue. The InterIslander contributed $155m in 2011. David, you really need to do some research. Start here:

    http://www.kiwirail.co.nz/uploads/Publications/2010-2011%20Annual%20Report.pdf

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  29. KiwiGreg (3,255 comments) says:

    @ campit I don’t think you understand, try reading what you linked, revenue isn’t profit. Kiwirail gets $350m of government subsidy to stay viable, that’s more than half its revenue (and yeah I know the subsidy is dressed up as funding capex). So for every dollar they manage to drag in as revenue, we the taxpayer (on top of the other subsidies rail gets) chip in 50 cents. That’s not a viable business.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  30. campit (467 comments) says:

    Greg, the capital grant of 331 for 2011 will help sustain revenues for many years into the future – it isn’t an operating expense to deduct from 2011 revenue. (Providing Kiwirail don’t blow their money on cheap Chinese locomotives or rotten Peruvian sleepers)

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  31. emmess (1,428 comments) says:

    I’ve heard rail in NZ called ‘the world’s oldest start up’

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  32. Viking2 (11,488 comments) says:

    Perhaps we could argue quite rightly that Trucks are subsidized too much as well. Maybe is the real cost of trucking was added up then freight rates would be higher for many and trucks would be on a more even footing with rail.
    It would be easy to argue that trucking freight rates are overly competetive and are a race to the bottom which is why so many truckers go broke or sell out just before they do.

    Must truckers live off the depreciation.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote