Introduction

Good morning and thank you for the invitation to address you today.

As an organisation you have been around for a long time, since the1890s in fact, and your industry has seen plenty of change during that period.

Your longevity is a considerable achievement, especially considering the large and diverse industry you represent.

I commend you for maintaining this drive and enthusiasm.

I am delighted that this year the conference is being held in New Zealand and that as Transport Minister, I have the opportunity to outline the government's plans for the future of rail.

I understand that one of the major goals of the Australasian Rail Association is to ‘illustrate the positive impact that railways have on the economy, society and environment of Australia and New Zealand', and that you see your primary purpose is to ‘create an environment that will permit the Australasian rail industry to prosper'.

As you will be aware, the previous government bought the remainder of the New Zealand rail- related businesses of Toll Holdings in 2008. This followed the purchase of the rail network in 2003.

Collectively under government ownership, these components have been branded ‘KiwiRail'.

National was not in favour of that move, and certainly not at the price paid. However, now that these businesses are taxpayer owned, the government has a very strong interest in the ongoing viability of rail.

We also want to encourage an environment where rail can operate as efficiently as possible, with strong commercial imperatives to provide the greatest benefit to the New Zealand economy and rail passengers.

I will talk more about the government's plans for rail, but before I do I will outline New Zealand's wider transport picture.

 

Transport - the bigger picture

As well as being Minister of Transport I am also Minister for Communications and Information Technology, Associate Minister of Finance, and Associate Minister for Infrastructure - a range of portfolios with an important economic focus, therefore I have a strong interest in the way New Zealand's overall infrastructure is developed to assist growth.

Since coming into office the government has identified the need for economic stimulus and to invest in New Zealand's infrastructure, including transport, as despite some progress in recent times, we still have a major infrastructure deficit.

For this reason we have established a new National Infrastructure Unit within the Treasury to take a national overview of infrastructure so we can achieve higher levels of economic growth for the future.

The National Infrastructure Unit will provide cross-government coordination and planning, establishing frameworks for assessing and prioritising infrastructure investments and capital asset management. The unit will work closely with a hand-picked Advisory Board who will bring private sector and non-government experience and expertise to government infrastructure investment.

One of the key roles of the new unit will be to develop a 20-year National Infrastructure Plan that will present a high-level view of the state of New Zealand's public infrastructure and include a stock-take of existing infrastructure and anticipated future requirements.

The Plan will help Ministers, agencies, local government and the private sector better identify gaps and emerging bottlenecks and to outline and prioritise the best investments that New Zealand can make in order to lift the potential growth rate.

The National Infrastructure Plan will provide stakeholders with greater certainty and confidence about the nature and timing of future government investment, allowing them to better plan for the future of their own businesses.

It will also mean that stakeholders in the private sector will be better able to identify potential opportunities for their own future infrastructure investment decisions, alone or in partnership with the public sector.

Transport, including rail, forms an important part of the plan. There are a number of large projects of national significance that need to be undertaken.

The regional and national benefits of well-performing transport corridors has a flow on effect of making us a competitive country on the global stage, therefore we will be giving high priority to projects that reflect the country's transport realities while stimulating economic growth.

The government has already made a number of announcements to see this happen.

In February I announced that $142.5 million in additional funding will be going towards accelerating State highway projects and boosting road maintenance and renewal work around the country.

The government will also be channelling almost $1 billion dollars of additional investment in the state highway network over the next three years.  This will bring total state highway funding over the period to $3 billion and long term will provide $10.7 billion over 10 years for state highway investment.

This reprioritisation goes hand in hand with the government's initial list of seven Roads of National Significance. The list represents a statement of national road funding priorities. 

The roads are centred on New Zealand's five largest population centres that have large traffic volumes, and are of national strategic importance for the economy. 

All need work to reduce congestion, improve safety and support economic growth.

These are likely to feature within the government's National Infrastructure Plan, alongside other key transport links and wider infrastructure proposals.

  

The current rail picture

Considering where rail sits in this mix, the sector already plays a strong role in moving freight and people around the country.

Whether it's moving coal to ports, people between their homes and work places in Wellington and Auckland, or for tourism purposes - it is an important part of the wider transport chain that affects our day to day lives.

The make up of the KiwiRail Group reflects this diversity with a number of business units, including freight services, the Interislander ferry, the rail network, urban passenger and network services in Wellington and Auckland, long distance passenger services and the Hillside railway engineering workshop in Dunedin.

Looking first at freight - New Zealand's total estimated freight movement in 2006/07 was 230 million tonnes. Of that the overall rail market share, taking into account weight and distance, was 15 percent.

At present 900 freight trains run across the country each weekday, transporting goods such as dairy products, meat, cement, fertiliser, coal and steel to name a few. 

Rail plays an important role in facilitating the movement of goods to our export markets - carrying thousands of containers a week, particularly within the freight ‘Golden Triangle' areas of Auckland, Hamilton and the Bay of Plenty.

The 2008 National Freight Demand Study predicts overall freight volume across all transport modes to increase by 75 percent over the next 25 years.

While modal share is predicted to remain relatively constant, the sheer increase in freight volumes means rail's role in the transport mix will continue to be extremely important.

The government also recognises the ongoing role commuter rail plays in the transport network for meeting both present and future demand. In Wellington, where 2006 Census results show seven percent of people use this mode of transport to get to work, commuter services already provide more than 2,200 services each week. In terms of numbers through the door - this equates to 11.7 million passenger trips.

 

Project DART and electrification

In Auckland two major rail projects are underway to upgrade the region's suburban rail network.

These are ‘Project Dart' (Developing Auckland's Rail Transport) and the electrification of the rail network.

Project DART is a $600 million package of below rail projects that together will increase the capacity, reliability and reach of the network. Key projects within the DART project include double tracking of the western line, station and line improvements at New Lynn, a new passenger line to Manukau City, opening of the Onehunga line and improved signalling to allow for increased rail traffic.

This will enable an increase in service frequency at peak times on each of the suburban lines while still providing for freight movements.

After the DART project, electrification is the important next stage in the development of Auckland's rail network.

The government is totally committed to electrification in Auckland and has provided $500 million on top of the DART investment to carry out the network electrification work.

In addition the purchase of electric trains to run on the new network was to come from Auckland's regional fuel tax but will now be supported by the Crown through KiwiRail.

Just last week I attended the contract signing between ONTRACK and Westinghouse Rail Systems Australia for the signaling component of the Auckland electrification project.

This was significant as it is the first substantive contract to be funded for the Auckland electrification project.

The result of this work will be state of the art signaling technology that will improve the reliability of Auckland rail. I am confident that by providing a better service, more people will want to use Auckland's commuter train services.

Once the DART and electrification projects and other work are complete, the taxpayer will have supported well over $1 billion of improvements to Auckland's rail network.

 

Long distance

The role of long-distance passenger services is also evolving into a high quality tourism experience for both national and international tourists. This is hinged on the premise of creating a whole travel experience rather than simply getting people from point A to point B.

The Tranz Alpine service between Christchurch and Greymouth has been particularly successful in building a strong customer base, building a strong model on which other long distance services can replicate.

There has also been considerable investment committed over and above the purchase of the rail business. 

This includes $115 million on new carriages and locomotives for KiwiRail in order to lift the productivity of freight services and the profitability of our key tourist passenger routes.

Of this investment $75 million will be used to buy 20 new locomotives from China which will arrive by August next year.

They are lighter, more powerful and more fuel efficient than the models they replace and will enable a boost in productivity on key freight corridors and allow KiwiRail to free up locomotives for Auckland metro passenger routes.

The remaining $39.9 million will be spent refurbishing carriages for the Tranz Scenic passenger routes. The existing passenger carriages are more than 70 years old and require this upgrade to meet the expectations passengers, particularly overseas tourists, now expect.

These carriages will be refurbished at KiwiRail's Hillside engineering workshop in Dunedin. This work, beginning in January next year, will maintain workshop jobs and provide work for hundreds of other suppliers.

ONTRACK is continuing its programme of maintenance and renewals to enable trains across the network to be able to deliver on time. This includes track inspections, improving drainage, clearing culverts, de-stressing rail and replacing timber structures.

As well as this, projects such as ‘daylighting' and lowering tunnel floors has opened the way for larger freight containers to be carried on some lines and bridge work to lift speed restrictions, and increased passing loops will double capacity on the East Coast Main Trunk between Auckland - Tauranga, the busiest rail freight route in the country and right now

ONTRACK are also investigating what would be required to run hi-cube containers on the line between Gisborne and Napier.

 

Future direction

So that's the current picture. What it says to me is that we have a number of rail businesses with potential and that if we can get them all working as efficiently as possible more businesses, commuters and travellers will want to use it.

So how do we get things working more efficiently?

For the last six years the Treasury has managed most rail funding policy, while national transport strategy has been developed by the Ministry of Transport. This separation has seen rail policy developed in isolation from general transport policy.

The Ministry of Transport recently became the lead policy advisor on rail transport issues and funding - a role that will be formalised from 1 July. As the Ministry is already responsible for policy advice on transport as a whole and for leading the development of national transport strategies, adding rail is a logical step to see decisions made within the wider transport framework.

Another problem we want to solve is the present funding arrangements for rail.

Currently there are several agencies involved which pay out of different funding ‘pots'. These include the Treasury, the Ministry of Transport, the New Zealand Transport Agency and KiwiRail. This illustrates the need to rationalise the administration of all public funding to the New Zealand Railways Corporation and give a clear economic focus to save costs, increase transparency and improve efficiency.

The government has also agreed in principle that KiwiRail should be the owner of new crown-funded passenger rail stock in Auckland and Wellington. 

The current arrangements for funding rail infrastructure are complicated therefore I have decided to remove capital rail funding from the National Land Transport Programme and instead establish funding through transport appropriations.

Commuter rail subsidies however will still be administered by the New Zealand Transport Agency through the National Land Transport Programme.

The overriding reasons behind these proposed moves reflect the government's desire for the New Zealand Railways Corporation to manage the national rail network on a commercial basis.

As far as possible it should fund its operations from customer revenue and, where appropriate, commercial investment.

There will be an expectation that all investments in the national rail network provide a commercial rate of return.

Taxpayer subsidies should be provided only as a last resort and where there is clear evidence that it will improve service and provide a decent return on taxpayers' money.

The government will continue to review its interests to determine what investment is required to insure the ongoing viability and robustness of rail in the future.

 

Conclusion

In closing today, you can see there is certainly plenty happening in the rail sector that impacts upon the economy and the lives of New Zealanders.

The core role transport plays in the effective functioning of our economy in particular - whether it's getting our goods to market or moving people - means the stakes for getting this right will always be high.

As I have outlined though, the government is already well on the way to implementing a number of initiatives that will positively impact the way the transport sector operates in the future.

The rail industry will continue to play a very important role in this and I look forward to working with the rail industry to see our collective goals achieved.

Thank you.