Future of rail Te anamata o te ara tereina

In 2021, the Ministry of Transport engaged Deloitte to undertake an independent review of system issues impacting the Auckland metro rail network (AMRN). As part of this, Deloitte was to identify and articulate whether any system level issues may have contributed to the rolling contact fatigue (RCF) issues experienced on the AMRN and make recommendations on future changes to the system. This work was driven by the identification that severe RCF on the AMRN in 2019 and 2020 caused significant disruption.

This review comprised two phases. Phase 1 focused on identifying the system level issues that may have contributed to the RCF issues experienced on the AMRN. Phase 2 focused on recommendations to strengthen the AMRN System.

This proactive release contains official information relating to both Phase 1 and Phase 2 of the system review. These documents have been prepared by the Ministry of Transport for proactive release, in consultation with Deloitte, KiwiRail and Auckland Transport.

The documents covered by this release are below. 

Following agreement to a resilient and reliable rail system, Government approved the new long-term planning and funding framework for rail, and authorised the Minister of Transport to issue instructions to begin drafting the Land Transport (Rail) Legislation Bill.  

The Ministry is working alongside the Treasury, the Public Service Commission and KiwiRail to advise Ministers on the extent to which the current entity form of KiwiRail Holdings Limited (KiwiRail) and the New Zealand Railways Corporation (NZRC) as two State-Owned Enterprises (SOEs) support Government objectives. The review will also advise if any changes to the status quo would better enable KiwiRail and NZRC to achieve outcomes sought by Government, including making changes from the SOE form. The Terms of Reference for the review are published here, together with advice to Ministers about the Terms of Reference and the process for developing this advice.

In May 2019, based on the Future of Rail review, the Government agreed in principle to a resilient and reliable rail system that would deliver on the transport outcomes and wider benefits it sought.

Rail investments of NZD$1.215 billion through Budget 2020, and NZD$741 million through Budget 2019, are the first 2 funding instalments in a 10-year investment programme to achieve a resilient and reliable rail system.

These investments include:

• restoring the track network and other supporting infrastructure by addressing legacy maintenance issues across the rail network
• replacing and upgrading assets, including container wagons, locomotives and maintenance facilities that are at the end of their useable life, and
• helping to replace the current Interislander ferries and landside assets that are nearing the end of their useable life.

This investment programme allows KiwiRail to improve the resilience of the rail network and invest in much-needed assets so rail services can be more reliable. It also enables KiwiRail to maintain and grow its share of the freight market, which will help rail to deliver economic, social and environmental benefits.

The investment programme also includes funding from the:

• NLTF, to support metro and interregional rail services
• Provincial Growth Fund, to support rail projects that accelerate regional development and productivity, including an additional NZD$300 million for regional rail projects as part of Budget 2019, and
• NZ Upgrade Programme, which pledged more than NZD$1 billion for rail projects in early 2020.

The attached documents include KiwiRail’s cost and commercial estimates for the Wairoa to Gisborne rail line and advice from the Ministry of Transport to Regional Economic Development Ministers on the proposed Gisborne Rail Line Business Case.

We are leading this review to define and develop the Future of Rail in New Zealand, so that rail can be integrated into the transport system. This will mean rail can be planned, funded and looked after alongside other transport modes.

The review found that the benefits rail can deliver to New Zealand are hampered by:

• the current state of the rail network, which is facing a state of managed decline due to long-term underinvestment, and
• short-term funding arrangements for the rail network through the annual Budget process, which are inadequate for a long-term network asset.

Crown funding has been used to meet the shortfall between the minimum investment needed to support the rail network and the profits that KiwiRail can generate from its rail operations. However, the appropriate balance has not been found between:

• the revenue collected from rail customers, and
• investment provided by Crown funding.

In addition, there has been a lack of integration between road and rail network investments.

The review recommended a 10-year investment programme to rehabilitate the rail network. The programme would be delivered through the New Zealand Rail Plan.

On 2 June 2021, Cabinet agreed that a track user charge be implemented which applies to any rail freight operator undertaking freight business on the national rail network in New Zealand, and this charge be specified as land transport revenue and paid into the National Land Transport Fund (NLTF). The two attached documents (Cabinet Paper_The Future of Rail: Rail Track User Charges, and the Rail Track User Charge Phase 2 Cost Regulatory Impact Statement) provide context to the decision to implement the track user charge, how the charge will apply, and why the charge is required as part of the new planning and funding framework for the rail network.

A copy of the regulations giving effect to these policy decisions can also be found on the New Zealand Legislation website via the following link: Land Transport (Railway Track User Charges) Regulations 2021 (LI 2021/278) Contents – New Zealand Legislation(external link).

The Future of Rail was initially led by Treasury to review KiwiRail’s operations. The project was transferred to the Ministry of Transport in December and the scope changed to identify the purpose rail serves and how it can contribute to New Zealand’s transport system, and to provide the Government with certainty on what investment is needed for rail to play a successful role in the system.

We are leading the cross-agency project alongside KiwiRail, Waka Kotahi NZ Transport Agency, Treasury, Auckland Transport, Auckland Council and Greater Wellington Regional Council.

On 30 June 2021, KiwiRail signed a contract with the Korean shipyard Hyundai Mipo Dockyard (HMD) for the delivery of two new ferries to service Cook Strait. This is part of a wider project (Project iReX) to procure new ferries and develop the landside infrastructure in Picton and Wellington to accommodate the new ferries. Given the significance of Project iReX, KiwiRail’s status as a State-Owned Enterprise, and the fact that Crown funding has been allocated towards Project iReX, KiwiRail has engaged with Ministers and Government departments throughout this process.

This proactive release contains official information in relation to the development of Project iReX, and engagement with Ministers in advance of the contract with HMD being signed on 30 June 2021. The documents have been collectively prepared by the Treasury, the Ministry of Transport and KiwiRail for proactive release.

The Ministry of Transport commissioned Ernst and Young to deliver the Value of Rail Report 2021 to estimates the benefits that rail produces ever year.

Significant Government investment in rail in recent years is primarily aimed at addressing decades of underinvestment and restoring the rail network to a level where it can play its proper role in New Zealand’s transport system. The commitments the Government has made are multi year investments - in many cases this represents once in a generation investment in long life infrastructure assets.

The EY Report highlights, essentially, that without rail there would be an additional $1.7 - $2.1 billion cost each year to New Zealand, through increased congestion, transport emissions, and the like.

The Value of Rail Report [PDF, 4.5 MB]

We are working with Auckland Transport and Greater Wellington Regional Council to review the metropolitan rail operating model. This work is taking place alongside the Future of Rail.

Metro Rail 

The Land Transport (Rail) Legislation Act 2020 (the Rail Act) came into force on 1 July 2020.   The Rail Act amends the Land Transport Management Act 2003 (the LTMA) and the Land Transport Act 1998 (LTA) to implement a new long-term planning and funding system for the heavy rail track network owned by KiwiRail.

The new framework brings the planning and funding of the rail network under the land transport planning and funding regime set by the LTMA.

Funding for the rail network will now be channelled through the NLTF. KiwiRail will establish a rail network investment programme (RNIP) to take effect by 1 July 2021. The Minister of Transport is responsible for approving the RNIP, in consultation with KiwiRail’s Shareholding Ministers. This will allow the rail network to be funded from the NLTF.

The amendments to the LTA mean track user charges established through regulations can flow into the NLTF. This will ensure track users contribute to the network costs in a fair and transparent way.

Land Transport (Rail) Legislation Act 2020(external link)

We released a draft version of the first New Zealand Rail Plan for public feedback. The consultation process on the draft Rail Plan ran to May 2020.