Kiwirail – An Example Of What Governments Should Not Do

During the election campaign I was invited to be part of the audience for a debate on IT and telecommunications policy run by TVNZ and Internet New Zealand.  I was also asked if I would mind asking a question.  I agreed.

During the debate there were several comments made by Minister Cunliffe about the purchase of Kiwirail as an example of the government’s commitment to infrastructure investment.  So when it came to my question I introduced it by noting that we would rather have seen the money that had been invested in Kiwirail invested in fibre roll out as this would be more likely to have an immediate impact on productivity performance.  My comment was not appreciated by David (who I know quite well as we used to work together).  At the time my understanding was that we had probably paid too much for the railways and that we had been left as the taxpayer with an enormous liability in terms of essential investment in the upgrade of track, engines and rolling stock for the railways.

It seems that things may be even worse than i had realised a few weeks ago.  The very useful publication Transport and Logistics (from the same crowd that write Trans Tasman and the Main Report) carries this article today

Kiwirail value tumbles.The value of KiwiRail has slumped $242m just three months after it was bought. The Crown’s accounts for the three months to September reveal the value of KiwiRail has been slashed $242m, more than a third, since the Govt bought the business for $690m. The “fair value” of KiwiRail is now $448m. Expect the book value to continue sliding until the economic climate improves. National could use the value drop to reassess any further investment in the rail network and operations.

This is very annoying.  There were far higher priorities for Government investment in infrastructure than Kiwirail.  It is looking as though this investment is going to be a permanent drag on Government at a time when funds are becoming increasingly scarce.

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