Genter Julie Anne: Debate on Crown Entities Public Organisations and State Enterprises — In CommitteeText is incorporated into the Bound VolumeGenter Julie Anne: Debate on Crown Entities Public Organisations and State Enterprises — In Committee[Sitting date: 14 May 2013. Volume:690;Page:9903. Text is incorporated into the Bound Volume.]JULIE ANNE GENTER (Green):We heard from KiwiRail at the Transport and Industrial Relations Committee and looking at its financial report is very very interesting. What we can see is that KiwiRail’s business is actually very sound. Freight volumes moved by rail have been increasing rapidly even though overall freight has not increased over the past few years. So we have not had an increase in freight volumes moving around the country or into and out of the country as was anticipated but on the rail we have seen a massive increase. This is good for our exporters. Recently I actually visited the Fonterra dry-store and cool-store at Wiri. Forty percent of Fonterra’s exports move through this store and 95 percent of what moves through there comes in and leaves by rail. So rail is incredibly important for our exporters.What also became very clear during the financial review is that KiwiRail is simply not able to deliver the full transport benefits that it could deliver because the Government is not providing it with sufficient capital although it has through the turn-round plan agreed to $250 million a year for a couple of years. But let us look at the transport budget. We have over $1 billion a year each year going on new capital expenditure just on new State highways. The problem with these duplicating links in our State highways is that they have diminishing marginal returns. We already have a State highway network. It is working pretty well. We could have some cost-effective safety improvements that would result in great benefits but putting in a duplicate link is not going to have a very good benefit for the transport system.The problem for KiwiRail and the problem for New Zealand is that the National Government does not understand how a transport network works. If you invest in the rail network that directly affects how the road network is used. In fact our transport network is entirely full of cross-subsidies. So the line that we often hear from the Government that roads are user-pays and rail does not pay its way and is subsidised is completely erroneous and does not take into account the fact that we have massive cross-subsidies going on. This is clearest in the Government’s capital expenditure priorities. So the highways that it is prioritising like Transmission Gully could never be paid for by direct user charges. That is the reality. If you tried to fund them through direct user charges the tolls would never cover the cost. So it is road users all over New Zealand who will be paying for a road that is used by only about 10000 people in the case of Transmission Gully so that is a big cross-subsidy. But if we were going to take an economically rational approach to the transport network what we would do is put the money in the projects that have the greatest benefit and the next dollar that we spend on transport infrastructure would be on rail because it allows more efficient use of the entire transport network.So for example already rail freight is paying for itself despite the massive capital investment that is needed in New Zealand’s neglected railway system because of 10 years of privatisation. But the passenger service is making a very tiny loss of about $3 million a year. To put that into context $3 million is probably the cost of one intersection or one roundabout. It is a tiny amount of money that might be put into the State highway network to get some safety benefits—supposed safety benefits. But if we were comparing it on an equal footing and treating rail as part of the transport network we would take into account the safety benefits of moving more freight off the roads and on to the rail network. It has benefits for consumers it has benefits for exporters and it has safety benefits. It is an entirely economically rational approach that most countries around the world are taking.If you look around the world most countries are investing significantly in rail because it makes economic sense. It is highly energy-efficient and it would reduce the amount of money that the transport sector has to spend on oil to move things around. We are spending $8 billion a year on oil that we are importing which is bad for our current account deficit. So investing in the rail network is good for our current account deficit it reduces the dependency of our freight sector on oil and the vulnerability to high oil prices and it reduces the amount of money that we have to spend on maintaining and improving the safety on the road network. This is an economically rational approach to transport that we do not see coming from the National Party and it is really a lost opportunity. The Green Party would invest in rail.