Opinion: KiwiRail train wreck hurts Government books

Wed, 10 Oct 2012 11:45a.m.

Patrick says KiwiRail now has no social responsibility and must operate commercially

Opinion by Political Reporter Patrick Gower

The costs of KiwiRail have smashed head-on into the Government’s books, punching a $1.4 billion hole.

KiwiRail has now been valued on a commercial basis.

And the reality is that in commercial terms KiwiRail is what’s colloquially known as a 'dog'.

KiwiRail has undergone what’s technically known as a “write down”.

You see, KiwiRail was previously valued on grounds that included “social and community use”.

Now, KiwiRail is valued on its ability to bring a “commercial return”

And on that commercial basis, the long and the short of it is that KiwiRail is now worth $1.4 billion less.

This KiwiRail write down is what’s technically known as an “impairment expense”.

And it has severely impaired the Government’s books, for 2011/12 – released by Treasury today.

The Budget deficit in 2010/11 was $18.4 billion.

This year the deficit sliced to $9.2 billion.

But that’s actually worse than the $8.4 billon forecast at the May budget – the books are $800 million worse off.

That’s despite a better than expect tax take (income/incoming) and lower than expected Government spending (costs/outgoings).

So this $800 million would be more than covered if it hadn’t been for the KiwiRail hit – it’s put the Government’s books off the rails, temporarily.

The question is - what will happen to KiwiRail now?

Even the land KiwiRail owns is worth less.

The Treasury will continue to place its “social and community” value alongside KiwiRail’s new “commercial value”.

So you will be able to see what your local train line is worth commercially, compared to what it is worth taking into account the social value of getting you to work quicker.

This will provide an analysis to see what train lines are worth hanging onto or not – like Tranz Scenic.

It’s already been signalled for sale – another "partial asset sale” perhaps?

The books at least will say whether it's worth it or not.

Post a Comment

Before commenting, please take the time to read our moderation guide

Name

(Won't be published)

Your comment

Comments

29/12/2012 2:32:45 p.m.

Robert M wrote:

Prior to the global warning fad in 2008 and the need for a green coalition partner, Labour had no interest in rail and for the most part were hostile. Kirk and Rowling largely refused to make any investment in a modern rail system and the NZR management were even more hostile to any modern passenger services and just wanted a Stalinist protected 1930s rail system in which most goods were forced to move by freight. In the 1970s and 1980s track and the infrastructure were in good condition and modewrately fast and useful intercity and modern 120 seat railcars could easily have been introduced running at 115kmhr between, Auckland and Rotorua and Hamilton. Wellington and Napier by both routes, to New plymouth and separate frequent services between Invercargill and Dunedin and Dunedin and Christchurch, faster than people could drive.The cost would have been nothing compared with each years investment in Auckland services, The people who actually ridiculed these ideas were the likes of Rod Donald, Ann Hercus, Bob Tizard, Bill Rowling. It is mainly the middle class that patronise rail and Auckland patronage will inevitably be disappointing with the middle class having left the country. Fay Richwhite tried to run the railways profitably, while Toll were just rent seekers. Tolls locomotives running thru NZ with their Australian National war bonnet hoods was a colonialist outrage

5/12/2012 1:34:55 a.m.

cyril wrote:

@matt j. the benefit to the community you talk of is lost when the work is done in china.
Thanks for the train set Helen and Michael you stuck it to us again for being so arrogant as to vote you out.

28/10/2012 2:44:33 p.m.

Guzza wrote:

sell it to the chinese,might as well govt giving the country away

28/10/2012 12:09:11 p.m.

Tony wrote:

The Green Party has the answer to all of the rather inconvenient costs of running passenger trains to travel thousands of kilometres a year with next to no passengers. Just print more money!

24/10/2012 2:18:16 p.m.

simon wrote:

quit simply you want to pretend the nine years under clerk did not happen , its simply false when they brought kiwi rail back the private company from australia had run it into the ground and did not want to put money back into it so the government had to . its simply not true at all pat im sorry to mention your name a guess you wont post this now , but im not john key mate my memory of the events is fine . your miss leading the public on behalf of the government .

24/10/2012 10:46:17 a.m.

grhys wrote:

strange no mention of Fay Richwhite stripping all the high speed rail lines and flogging them off to france then complaining of a lack of investment by the crown so the tax payer purchased it back and improved things once again. I think we do need to hold onto our rail service and invest in it instead of letting corporate's raid it for its value and then maon of its inability to generate revenue

23/10/2012 11:03:06 p.m.

Braam wrote:

KiwiRail, a perfect example of how long down the track Labour's skid marks lie.

21/10/2012 4:52:57 p.m.

simon wrote:

how embarrassing a developed country with no rail system what a bunch of idiots .

15/10/2012 1:42:37 p.m.

Crystal Ballgazer wrote:

National are a nightmare, but what do we expect leaving the country to be run by a money trader who got lucky!

11/10/2012 10:29:22 a.m.

Sven wrote:

Surely the best solution is to create a separate track company and then charge access fees for operators. If Mainfreight for example had to pay for the whole of the roading network rather than part then it would not be viable either! The road user lobby group has a lot of influence - hence the roads of national significance!