Monday, May 05, 2008

More Thoughts on the Government's Railway "Investment"

Today's investment by the Government buying out Toll's rail business is $1Billion - not $665Million.

I should have added to my earlier post the analysis of the Government investment of $665Million should include the loss of direct cash contribution by Toll of access charges of $48Million per annum. So rather than spending $665Million to avoid providing Toll and its customers a subsidy of $10Million the actual question for analysis is spending $665Million in June 2008 and ALSO losing a net contribution of $48Million per annum to rail operations. The present value of that annual loss of income for 10 years is -$337Million!!! (at a discount rate of 7% - a reasonable sense of what the Government could borrow at).

That makes the Government's direct investment in buying the Rail Operations off Toll as $1,000 Million - $1Billion! ($665M + $337M).

That number is not getting a hearing on the MSM tonight.

Over at Liberty Scott they have a good summary of Railway investment since the 1980's.

I would disagree with some of it - but overall a good summary and think piece. Their thoughts on subsidy are very good.

Historically rail uses a third of the fuel a truck does per tonne kilometre so it is very fuel efficient. I am not sure road user charges recover (on trucks) their full direct costs on the road network including depreciation or new investment.

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