May 19, 2019 11:00am by David Farrar

The delusion business case for Northland rail

The Ministry of Transport business case examined the cost of upgrading the rail line between Auckland and Whangārei, reopening the mothballed tracks north to Moerewa and west to Dargaville, and constructing a new spur east to Northport.
It estimates the total cost at $1.3b over 40 years. Including $730m in the first four years during the construction phase and $3m for improvements and maintenance in the years after.

That’s a huge amount of money. So what would the benefits be?

However, the economics tread a fine line. In the best-case scenario, the report gives the investment a benefit-cost-ratio (BCR) of 1.19, meaning for every $1 spent there would be a $1.19 return.

So what assumptions are based on that best-case?

This would require a major expansion of Northport which would see it handling 400,000 containers, 100,000 from within Northland and 300,000 from Auckland. In the year to June 2019 Northport expects to handle 12,500 containers, up from 8000 last year.

So Northport would have to increase its volume of freight by a factor of 50, yes by 5000%, in order for the investment in rail to be positive.

That is a delusional assumption, rather than an optimistic one.