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A railway line to nowhere


Friday 13th June 2003

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Free-market purists will be upset by the government's bailout plan for the embattled Tranz Rail but even businesspeople generally opposed to state intervention can see an upside.

Tranz Rail started life as a dog when New Zealand Rail was privatised. It was run down, inefficient and starved of capital. The new owners made some progress rationalising freight but failed to lift the company beyond also-ran status.

The challenge of the New Zealand market ­ a small critical mass and crippling maintenance costs over a far-flung country ­ proved too much for the American owners. Tranz Rail has been on borrowed time for the past two years.

The state bailout, when it came, was reluctantly accepted by users as, perhaps, the last chance for New Zealand to get an efficient, competitive rail network. It is not, as some on the political left claim, an opportunity for the government to get back into running business.

To his credit, Finance Minister Michael Cullen has been guarded about the contribution the state can make to the railway company. He termed the state investment "strategic" but there was no crowing about the failure of the private sector to make a go of Tranz Rail. The history of state-run rail in New Zealand is not especially glorious and Dr Cullen has been in politics long enough to avoid a Richard Prebble-like comment about "saving rail."

Parts of the ageing railway network might never be saved but the government at least has given Tranz Rail breathing space.

The smart thing now is for Dr Cullen to take on board the suggestions of the Rail Freight Action Group ­ some of the big users who want rail to be a partner in their business operations.

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