Questions Over Government Rail Freight Strategy [3]

As noted in our last post the government has effectively given over the incentivisation of mode shift to rail to regional / unitary councils to implement in concert with NZTA. This relies on the assumption that rail freight between industries and ports is a major traffic source and that therefore the regional councils as port owners are best placed to be incentivised to drive the acquisition of freight to rail. However this concept is fatally flawed in respect of a number of sections of rail corridor that are effectively part of a national network and these include the central North Island Main Trunk, Main North Line, Wairarapa Line, and the currently closed Stratford Okahukura Line. These lines are different in a number of ways by having some or all of the following characteristics:

  • They cross over a number of regional / unitary council boundaries
  • They service regional / unitary councils that do not own a port, or one that serves significant international shipping, and therefore do not need to move large volumes of freight in the course of their port business
  • They largely serve lightly populated areas that do not contain significant industries that can produce freight volume.

The Main North Line is the focus of this article in particular. Historically the line has served and still serves a very lightly populated corridor along most of its length except for its origin at Christchurch. It has also always competed with freight movements by sea between Wellington and Lyttelton, and because of this combination of factors, the line was not fully opened until 1945, and until 1962 it did not carry significant freight volumes at all. In that year the rail ferry service started between Wellington and Picton, and the combination of ferries and MNL eventually wiped out most of the coastal shipping competition through Lyttelton. However, coastal shipping is mostly domestic in nature, and this also characterises most of the MNL freight historically, as importers / exporters have ready access to the ports of Lyttelton, Dunedin and Timaru, which are close to and serve the majority of population and industry in the South Island.

In the case of the Main North Line the majority of the freight carried is domestic in nature, without an import/export component that is significant for most of the other traffic running around the country. To explain further, port companies which are owned by regional/unitary councils in most of the country, are involved in facilitating the transfer of freight by rail. Typically they achieve this by setting up an inland port at a particular site that is conveniently located to a traffic source, and use rail to move the freight to the actual port. The inland port works like a normal port except that it is not in the physical location of the actual port, and therefore customers have their goods delivered to/from the inland port instead of the physical one. It follows that as most physical ports are owned by regional/unitary councils, they have an incentive to subsidise the movement of freight in or out of their own port.

The situation in the South Island is quite different as Port of Lyttelton and Port of Timaru, which both handle international containers, are not owned by their regional council. The situation for the Main North Line is also quite different in that it does not serve any major sources of traffic other than the city of Christchurch. The nature of the operation of the Main North Line is that it is connected with the operation of Kiwirail’s ferry services between Wellington and Picton. These do not attract any significant level of international freight, maybe none. There is no need to handle international freight across Cook Strait because ample international ports exist in each island with competitive situations between them to negate any purported advantage of being able to transfer across Cook Strait with the extra costs of the ferry services. There is also the factor that Picton is not an international container port, meaning it is not in a position to compete with other South Island ports which are served by rail. Port of Timaru does act as an inland port for Port of Tauranga international container services. However, the containers are transported to/from Tauranga using coastal shipping services, rather than over land. Therefore there is no benefit to the rail network from Port of Timaru’s operation. The fact that Canterbury Regional Council, the largest in the South Island, does not own any port, unlike most regional councils, means they do not have any built in incentive to attract freight onto rail, unlike most other regional/territorial authorities.

To get freight onto some lines that are not advantageous to any regional council and that serve multiple regions, backbone corridors if you like, the central North Island NIMT being another key example, where freight is generally of a domestic nature. NZ has always had this kind of network because the majority of the rail network runs between different ports. There are only a few regions where the rail corridor is mostly serving domestic traffic. West Coast of the South Island and also the North Island are other regions which do not have international container ports and rail freight in those areas is nearly non existent because there is no focus on domestic traffic.

If the government had a clue (the present Labour administration has not got much of a clue about most things) it would realise a nationwide strategy for freight is needed for domestic volume that is not travelling directly to or from a port such as the Main North Line. Whilst there will be some interest in moving freight by Canterbury Regional Council in the North Canterbury and Christchurch regions, it does not have a port of its own that it has the interest in moving freight to and from, and the nature of the Main North Line is such that there are no significant sources of import/export traffic over the majority of its length.