KiwiRail aware of need to improve

  • 10/07/2015
KiwiRail aware of need to improve

KiwiRail says it knows it has to raise its game.

The Government committed in the May budget to putting another $400 million into the struggling state-owned rail operator over the next two years but said at the time that level of support wouldn't be maintained.

And it's been revealed that before the budget Treasury suggested closing its entire freight network because it was costing too much.

"KiwiRail has heard the message and is committed to increasing its revenue and reducing its costs," spokeswoman Joanne Black said on Radio New Zealand today.

"The company really does have to make changes and the question is which changes it makes."

Ms Black says it's too soon to talk about job losses.

"But $200m a year from taxpayers is a lot of money and the Government says it can't go on, so things simply do have to change."

In a March 2015 cabinet paper, the Government said KiwiRail had presented it with two options: retain most of the freight network and rationalise unprofitable services, or close most or all of the freight network.

Treasury said it believed the net social cost of continuing to support KiwiRail was between $55m and $170m a year.

It recommended a one-year funding commitment for KiwiRail while a comprehensive public study was undertaken into the potential impact of closure.

However, Treasury said if closure or partial closure wasn't pursued then it supported a three-year funding commitment.

That would give KiwiRail certainty to manage its business accordingly, and sufficient time to focus on improving its productivity and efficiency to reduce the level of ongoing government funding.

Labour transport spokesperson Phil Twyford says the possibility of closing down KiwiRail is "nutty" and can't believe the option was even on the table.

"To be proposing the rail network should be shut down is nutty and I would hope that the minster didn't give it more than a second of consideration.

"It’s just crazy for Treasury to even consider shutting down the rail network… rail will continue to be the backbone of our transport system for decades to come.

Green Party co-leader Metiria Turei isn't happy with the track the Government appears to be going down with KiwiRail.

"National spends ten times more on a single road than they do on KiwiRail," she told TV3's Paul Henry programme this morning. "KiwiRail is improving… but it isn't required to make a profit."

The Government ultimately decided against the partial or full closure option, but it was initially only going to confirm funding for KiwiRail for this coming financial year.

KiwiRail raised concerns about the viability of making long term planning decisions and the government subsequently agreed to provide funding for two years, rather than one, a later cabinet paper explains.

NZN/3 News