KiwiRail battles defunding: ‘We need to continue momentum’

New proposals in this week’s draft policy statement on land transport could leave freight rail funded at a fraction of its current state.

Now out for public consultation, the policy from Minister of Transport Simeon Brown says though rail freight networks will remain in place, rail infrastructure should no longer be subsidised from revenue gathered on the roads.

“It is unfair to ask people using the roads to fund rail infrastructure,” he said in the statement.

What this represents is a desire to roll back the New Zealand Rail Plan – an initiative launched in 2021 by the Labour government to fund growth of the rail network through the National Land Transport Fund, which collects money from fuel excise, road user charges, vehicle registration fees and road tolls.

In the first three years of the plan, $1.27 billion was earmarked from the National Land Transport Fund for use in rail. That’s a sudden steep rise in total rail freight investment compared with the decade before.

However, the amount of freight being moved via rail has continued to decline.

That’s Brown’s rationale for removing the road-user paid chunk of funding, and putting the Government’s focus on the busiest and most productive parts of the rail network – the so-called Golden Triangle between Auckland, Hamilton and Tauranga.

Freight moved by rail

Roughly $100m a year will be removed from rail funding without road user revenue. Previously about $120m a year came from the National Land Transport Fund, although the $20m-odd a year from track user charges will survive.

“NLTF funding for this activity class will be capped at the level of revenue from track user charges and specific Crown funding for rail investments (if any),” Brown said.

At present the upper limit of funding for the rail network is $550m, with a lower limit of $360m. In 2026, the upper limit will remain the same, but the lower limit will plummet to $20m.

Somewhere within those limits is the real number that KiwiRail will need to work with.

If track user charges represent about $20m, that’s how much the rail network will have to work on unless specific Crown funding for rail investments are made – and the “if any” qualifier applied to these in Brown’s statement suggests that may well not be the case.

KiwiRail chief executive Peter Reidy said rail freight numbers reflected difficult market conditions, as well as a recent history of challenging circumstances.

“Rail volumes reflect current market conditions, similar to those experienced by trucking companies. New Zealand’s freight sector is being impacted by high stock levels during the Covid pandemic and the general economic slowdown,” he said.

“Volume reductions have also occurred in recent years as a result of major events and incidents including the Kaikōura earthquake, Interislander fleet outages, disruption to global supply chains and international shipping, and global economic conditions.”

And during all that, investment in new rolling stock and increasing the resilience of the network has been a long-term process that at times has had short-term negative impacts on users.

“Our major track upgrade projects can also cause a level of disruption and affect short-term reliability for customers,” he said. “These include extending Auckland’s electrified network from Papakura to Pukekohe, upgrading the aging networks in Wellington and Auckland, and repairing networks which were badly affected by Cyclone Gabrielle and other weather events.”

KiwiRail has new locomotives and wagons on the way, which are hoped to last 20 or 30 years.

“The benefits aren’t seen overnight as it takes time to construct and commission new assets,” Reidy said. 

He hoped those new assets would lift reliability and in turn attract more volume onto rail.

At the moment, rail carries 12 percent of freight – serving 25 percent of exporters and carrying about half of the freight for the country’s largest port in Tauranga.

“The investment in rail is making a real difference, but there is a long history of underinvestment to address and we need to continue the momentum,” Reidy said.

The exact measure of funding for rail is still up in the air, with Brown due to approve the next Rail Network Investment Programme later this year. 

For now, the transport statement will spend the next month in consultation, gathering public feedback.

KiwiRail put out a public statement saying it welcomed the chance for consultation and clarity on the Government’s draft investment priorities.

Reidy encouraged customers and communities who rely on New Zealand’s multi-modal transport network to submit their views as well.

“Rail plays a critical role in New Zealand’s multi-modal transport system contributing up to $2.1 billion in often unseen benefits annually – from emissions reduction to congestion relief and road maintenance cost savings,” he said.

“It isn’t road versus rail, but the two working together to deliver a resilient and efficient outcome for New Zealand.”

On road users funding rail, Reidy pointed out that the 70 percent emissions reduction per tonne by rail and congestion easing benefits are felt on the highway as well.

“Road users benefit from fewer trucks on the road, as heavy trucks make for heavy road maintenance costs,” he said. “Our freight customers want reliable performance so investing for resilience and reliability by replacing aging infrastructure is important.”

The new policy said Government expected its funded rail activities would be targeted to parts of the rail network where the most significant economic benefits and opportunities for boosting the productivity of freight movement existed – namely, the Golden Triangle.

Reidy said though investment in this crucial area was welcome, the high activity in this region couldn’t go on without the help of other parts of the country.

“We need to remember the importance of the provinces, as volumes are highest on the Golden Triangle in part because the rest of the network feeds freight from across the country.”