Government invests in KiwiRail, sets up infrastructure unit

The Government has approved $115 million of spending on new carriages and locomotives for KiwiRail and the establishment of a small unit within Treasury to manage the next stages of its infrastructure programme.

The moves follow the announcement last month that almost $500 million of publicly-funded school, housing and roading projects would be fast-tracked – helping provide work for regional businesses.

“The Government was elected with a mandate to fix the infrastructure problems holding New Zealand back and to target projects that will help us build a higher performing economy,” Infrastructure Minister Bill English said today.

“Today’s announcements are the next steps toward achieving that. The KiwiRail investment will lift the productivity of freight services and the profitability of key tourist passenger routes.

“The National Infrastructure Unit within Treasury will ensure that the Government’s infrastructure programme is both strategically sound and helps build a more competitive, more productive economy.

“We will confirm more infrastructure projects over the coming months.”

Of the KiwiRail investments, $39.9 million will be spent building new carriages for the TranzScenic passenger routes. The work will be completed by KiwiRail’s Hillside Engineering workshop in Dunedin and will begin in January next year, maintaining workshop jobs and providing work for hundreds of other suppliers.

The remaining $75 million will buy 20 new locomotives from China, which will boost productivity on key freight routes and allow KiwiRail to free up locomotives for Auckland metro passenger routes. All 20 locomotives will arrive by August next year.

Meanwhile, the National Infrastructure Unit within Treasury will improve the way public sector agencies manage their existing infrastructure assets and lead to stronger forward planning of infrastructure needs.

The unit will be drawn largely from existing Treasury staff and resources and staff seconded from other departments.

A National Infrastructure Advisory Board, to include representatives from the private sector and local government, will also be set up to advise the infrastructure unit and the Infrastructure Minister.

The new arrangements will bring New Zealand into line with other countries, including Australia.

The infrastructure unit and the advisory board will develop a national infrastructure plan by the end of this year – fulfilling another commitment made by the National Party during the election campaign. The plan will be updated every three years.

“These 20-year plans will not be prescriptive roadmaps, but will present a high-level view of the state of New Zealand’s public infrastructure and anticipated future requirements,” Mr English said.

“I am confident that this will provide the private sector and all of New Zealand with far greater certainty and confidence about the nature and timing of future government infrastructure investment.”

Questions and answers on today’s rail announcement

What investment is being announced today?

The Government is announcing $39.9 million to upgrade 17 passenger carriages on its TranzScenic passenger routes – 12 new TranzAlpine carriages and five TranzCoastal ones.

In addition $75 million will be spent purchasing 20 new locomotives from China to be used on key freight routes.

Why is this investment needed?

The passenger carriages in question are over 70 years old and require upgrading to meet modern expectations. If they were not upgraded they would have to be progressively retired.

The need for new locomotives has been identified for some time. The 20 locomotives will provide greater efficiency and productivity.

Where will the 17 new carriages be built?

The work will be completed by KiwiRail’s Hillside Engineering workshop in Dunedin.

When will work on the carriages start and when will they be completed?

Work on the carriages is expected to start in January next year, once detailed design work is finished, and be completed by June 2011.

When will the locomotives start arriving?

The first 10 locomotives are expected to arrive in April 2010 with the remaining 10 coming in August 2010.

How is the investment being paid for?

The new carriages are being paid for out of an existing appropriation, while KiwiRail will borrow the $75 million for the new locomotives.

What other infrastructure spending has the Government recently announced?

Earlier this month the Government announced almost $500 million of fast-tracked school, housing and roading projects.

Questions and answers on the new infrastructure unit

What are the new entities announced today?

The National Infrastructure Unit will be a small dedicated unit within Treasury providing advice to the secretary and minister on the Government’s strategic infrastructure priorities.

The board will be a six to 10 person group of private sector and local government representatives who will also provide direct advice to the minister as well as provide a different perspective for the new unit to draw on.

What will the new entities do?

They will create a 20-year blueprint of New Zealand’s infrastructure priorities by the end of the year. They will then monitor its implementation and update it every three years.

Why have they been created?

To plan and rank New Zealand’s key infrastructure needs so that projects that provide the greatest economic benefit are prioritised. In doing so they will help identify investment gaps and emerging infrastructure bottlenecks.

When will the unit and board be up and running?

An “establishment unit” has already begun work, while the board is expected to be up and running in the next two to three months.

How much will the unit and board cost?

The net extra cost of the board and unit will be small, as costs will largely be met through the reallocation of existing resources and staff within Treasury.