5. JEANETTE FITZSIMONS (Co-Leader—Green) Link to this
to the Minister of Finance
Is he satisfied with the Auckland Regional Transport Authority’s business case for the electrification of the Auckland passenger rail system; if not, why not?
Hon Dr MICHAEL CULLEN (Minister of Finance) Link to this
A case has been put forward that sets out plans and justifications for electrification. There are still a significant number of issues surrounding that—in particular, the issue of funding.
Jeanette Fitzsimons Link to this
Why does Land Transport New Zealand require the use of the Treasury discount rate of 10 percent to evaluate major passenger transport investment, while countries like the UK, the USA, Canada, and Australia use 3 to 6 percent, thus valuing future benefits more highly; and does he agree that the 5 percent discount rate used in the New Zealand Energy Strategy draft for energy-efficiency investments is also appropriate for rail electrification, which both increases energy efficiency and uses renewable energy?
Hon Dr MICHAEL CULLEN Link to this
To some extent, discount rates are arbitrary, whichever ones are used. I would have thought a discount rate of 3 percent would be exceptionally low if it applied to almost any project, particularly given the structure of New Zealand’s interest rates, which have a bearing upon an appropriate discount rate. One could use a somewhat lower discount rate, but it would not make as big a difference to total cost-benefit ratios as the member might think.
Peter BrownAlthough it is a bit like the chicken and the egg, is there not a pressing need for more modern locomotives and carriages, the double tracking of the rail track, and the upgrading of many stations, just to keep up with increasing demand, and are not all of those required ahead of the electrification of the Auckland rail system?
Hon Dr MICHAEL CULLEN Link to this
At the end of 2005 we announced $600 million for the upgrading of Auckland’s rail network. The most recent announcement within that context was the reopening of the Onehunga line and the upgrading of the Newmarket Railway Station. Electrification actually has a cost of, at the moment—and these things always tend to increase once one gets closer to them—half a billion dollars, which is interesting, because in the Auckland plan of a year ago I think the cost was $170 million. It is not just a matter of stringing up electric wires; there is a great deal more to electrifying the railway than that. Of course, that would tend to lead on to an argument for a billion-dollar project, which is an extremely rubbery estimate around the building of the underground loop.
Gordon CopelandIs the Minister aware that the Auckland Regional Transport Authority is also interested in the possibility of diesel electric engines for new train services in the Auckland region, that that would be at a fraction of the cost of complete electrification, and that it would have a very positive effect on climate change policy, to the extent that it would take a lot of trucks and cars off the road?
Hon Dr MICHAEL CULLEN Link to this
It is obviously true that the extent to which we can increase the number of rail passengers—and the growth in rail usage in Auckland in the last 4 years has been very substantial indeed—will take some pressure off the roads. It will not remove the need for completion of Auckland’s road network, because the numbers involved in rail transport are still relatively small, and most of the traffic is not simply passenger traffic moving from one place to another; a great deal of it is goods and services traffic, for example. A decision around electrification will enable decisions around long-term rail purchases to be made, but, contrary to what is often stated, even if the decision were made now, there would still be a need to acquire some diesel engines in the interim, because the current timetable would have electrification completed in 2013.
Shane JonesHon Dr MICHAEL CULLEN Link to this
There has been a massive level of investment in public transport in Auckland. In terms of the current quinquennium—2006-10— spending on local roads has gone up threefold; on State highways in Auckland, nearly fourfold; and on public transport in Auckland, twelvefold. So it is quite clear where the major thrust of increased investment has gone.
Jeanette Fitzsimons Link to this
Does he agree that if we are attempting to move to a quality public transport system that is used by not just low-income people, it is appropriate to value the time saved by commuters who choose trains at the same rate as we value the time saved by car drivers commuting, in evaluating the benefits of public transport investments?
Hon Dr MICHAEL CULLEN Link to this
Again, one could argue a great deal around that. I notice that the valuation of both is at a very low level, given what wages are. But, of course, one of the essential differences is that if one is driving a car, one cannot be doing anything else; if one is in a train, one can. Therefore, the value of time lost when in a car is more than that lost when on a train.
Jeanette Fitzsimons Link to this
Does he agree that the economics of rail change if rail rolling stock is regarded as having a life of 40 years—which it does, in fact, have—rather than the 25 years that the Land Transport manual directs?
Hon Dr MICHAEL CULLEN Link to this
If rail rolling stock is to last 40 years, usually a great deal of work has to be done to it in the interim; often, there are two or three rebuilds during that period of time. The point I am trying to make is that one can fiddle the figures as much as one likes to produce the answer one wants, but I do not think that is the best way of making rational decisions around these sorts of issues.
Jeanette Fitzsimons Link to this
Why is he happy to fully fund State Highway 20 when the benefit-cost ratio is 1.2 and falling with the increase in construction costs, but not at this stage to even partially fund the Auckland rail electrification, with a benefit-cost ratio of between 1.5 and 2.34, if we use even a conservative discount rate of 7 percent, an assumed life of 40 years, and the same value for travel time saved; and when will he make a decision to electrify now?
Hon Dr MICHAEL CULLEN Link to this
Well, I am never going to make a decision to electrify now—I am quite sure of that. It would be a sheer physical impossibility to engage in that. I think the member needs to consider that we have to work through this process carefully, and one of the key issues in any such decision is who pays what. She might find that if her local motorists in the Coromandel are paying the full cost of Auckland’s electrification, it might not be wildly popular.
Keith Locke