Rail

As a state-owned enterprise, KiwiRail is expected to pay for the maintenance, renewal and upgrade of rail infrastructure through the revenue generated from its freight and other businesses. The board of KiwiRail prioritises and approves projects based on the expected contribution that each project will make to KiwiRail's commercial performance. However, KiwiRail is not generating enough commercial revenue to cover its full costs and currently relies on government capital grants and operating subsidies.

The Government wants to set KiwiRail on a path towards commercial independence and long-term viability. For that reason, any financial support for it will focus on helping it catch up on deferred capital expenditure in those parts of the rail network where rail offers the greatest comparative advantage to other transport modes, based on undistorted price signals. This is likely to be in the transport of bulk goods, and imports and exports to and from major ports, where rail offers a vitally important alternative to road transport. This will relieve congestion and provide a greener and more cost-effective transport solution for some users.

In the urban areas of Auckland and Wellington, metro rail services remain the responsibility of the regional councils. They specify the desired level of service and undertake required infrastructure projects in conjunction with NZTA and KiwiRail. The scale of recent metro rail infrastructure projects in both cities (including the replacement of ageing rolling stock) has required significant investment from central government. The Government is committed to finishing these projects, which will enable patronage levels on metro services to continue growing.

Significant committed investment is outlined below, categorised into: Freight and National Network; Tourism and Long-Distance Passenger; and Auckland and Wellington Passenger. Many of these projects are under way or nearing completion.

Source: The Treasury, Ministry of Transport, KiwiRail

Future capital requirements

Subject to policy decisions about the size of the rail network and level of service the Government wishes to support, it is possible that KiwiRail will undertake further capital expenditure. For example, the current locomotive and wagon fleet is old (average age is 30 years for locomotives and 25 years for wagons) and prone to structural failure, and thus allows little or no room for revenue growth. In addition, a new interisland rail ferry is likely to be needed by 2016 to replace the ageing vessel Arahura. This may cost up to $250 million to purchase, or long-term leasing arrangements will need to be put in place.

Demand for further investment in the Wellington and Auckland metro rail systems will also continue, although this is driven by passenger demand and the investment plans of local government, rather than KiwiRail as the national rail operator. Beyond the projects already approved and under way, regions have significant aspirations for the ongoing development of their metro passenger rail systems, which would require expenditure of billions of dollars over the next 20 years:

• Auckland is planning for an inner-city underground passenger rail loop connecting the Britomart Transport centre and the North Auckland Line near Mt Eden station, a rail link to the airport, a rail line connecting Avondale and Southdown, and a rail tunnel under the Waitemata Harbour to the North Shore.[14]
• Wellington is planning for the purchase of further electric trains, and ongoing improvements to rail corridors, stations and park and ride facilities, including the provision of ‘feeder’ shuttle services.[15]
• Christchurch is investigating the possibility of introducing commuter rail, and a commuter service between Hamilton and Auckland is also being investigated.