At the moment various National Party supporters are claiming we should have an open access rail freight network, for example as described here. This is essentially a call for Kiwirail’s freight operations to be privatised and opened up to competition. At the moment, Kiwirail does not actually compete with private transport companies for freight. They operate as a train haulage service, or basically a rail freight wholesaler, with the retail side of rail freight handled by private transport operators such as Mainfreight, Owens, PBT, Toll and Daily Freight, and port companies. This is a fundamental issue that is overlooked by these campaigners. Kiwirail is not turning away low volume (low GTK) freight because they are not an agent for low GTK freight. These private companies are the appropriate agents and if the freight isn’t making its way onto rail, that is because there isn’t the market volume and profitability that would suit these operators. The only real argument that is possible is that KRL might not be interested in scheduling trains at the most useful times, the highest speeds or at the lowest possible costs.
I don’t have a lot of time to write about all of the misleading representations in that particular article, but the claim that Kiwirail is turning down freight volumes is one of the falsities that these campaigners have sidestepped. Small volumes of freight, or specialised loads needing customised wagon designs, are expensive and difficult to handle, and often can be carried by road without needing the special facilities required by rail, so that is one reason why road transport has an advantage in many cases.
Most of these campaigns are making a direct comparison between road and rail networks and claiming they are essentially equivalent, which could not be further from the truth. Roading inherently is better suited to small and specialised loads, short distances and fast deliveries, compared with rail which is inherently suited to large volumes and long distances, and characterised by slower delivery timetables. These differences mean rail is always going to be an industry that is more suited to those operators that move large volumes of freight, and not serve the smaller operators who are moving lower volumes. This is basically the same as the current situation, so it is not really going to change the operating environment in the slightest. This is one of the key reasons why railfreight is not carrying a large volume of freight, and other key reason is that New Zealand does not have large volumes of freight in general due to our low population density. Nearly all the other countries that are quoted for comparisons have much higher population density, so they have more freight volume density as well.
What we could expect to see in reality by opening up the rail freight business to competition through open access is a repeat of the race to the bottom that we already see in road transport. It is claimed that new freight is being moved in places such as Queensland where open access has been introduced, but this may not prove to be actually viable longer term. At the moment the operating model in NZ is low risk for the private freight operators who do not have to finance a fleet of rail wagons, locomotives and staff, and this eases the entry burden. As seen previously in NZ, private rail operators (Tranz Rail and its successor Toll) that have entered the freight market have built up a lot of traffic in the short term, which ended up being lost in the longer term as the inevitable issues of low profitability had to be addressed. So in any competitive market, the situation is that with existing road transport competition, rail freight haulage is not currently any kind of monopoly, even in NZ. And in rail freight, with competition, there will be the usual market pricing adjustments that become necessary over time, that result in freight being lost from rail. So it is difficult in reality to sustain claims that longer term, more freight will be hauled by rail under an open access system.
The real issues in NZ are that roads are much more subsidised than railway lines. Currently, road transport operators do not pay any RUCs on local authority controlled roads, and construction of new highways is often heavily subsidised by government. It is rare for KRL to get handouts for new railway routes or major realignments of existing ones, and often much higher BCRs are required to justify them.
Other claims made in the article that are mostly false or misleading are:
- That Kiwirail has lost interest in operating some lines and closed them down. Most recent closures occurred under the funding constraints on KRL network operations imposed by the National government, which was stacked in favour of privately owned road operators.
- That Kiwirail scrapped valuable wagons that were used for specific types of freight, the examples referred to being CF fertiliser hopper wagons and GT car carrier wagons. Both of these wagon types were specialised non intermodal vehicles that could not match the utilisation of newer intermodal designs. For example, cars can be carried in regular shipping containers and swapbodies that are standardised for exchange across a variety of different transport modes. Fertiliser is now commonly carried in special containers that can be readily transferred between trucks and rail wagons, which are a lot cheaper to load and unload. The wagons were in actuality disposed of because they had reached the end of their useful life.
Generally, campaigns like these are driven by the usual claims that competition and a market environment will solve everything. Historically, these are just variations of the pro-privatisation campaigns that have been produced in NZ in the past, and which had disastrous outcomes for the rail network of the country. The biggest likely impact is on smaller passenger operators such as the heritage steam train societies that operate at present on the KRL network in parts of NZ. Due to their small size it is likely the barriers to entry onto an open access network will be significantly increased for them, although several have claimed that self crewing will give them an advantage over current arrangements where there is a shortage of KRL-employed staff available.