VICTORIAN RAILWAYS

New Zealand Herald, Volume LXX, Issue 21469, 18 April 1933, Page 8

VICTORIAN RAILWAYS

Two important recommendations will be made by an expert committee investigating the Victorian railway system—that the nominal capital should be written down by one third, and that a depreciation fund should be established. Both decisions reflect difficulties and problems of railway finance well enough known in New Zealand. Indeed, they seem inseparable from State-owned railways.- For the last railway year, 1931-32, the Victorian system produced a working revenue of £9,515,000, and expenditure amounting to £10,518,500, the result being a deficit of £993,500. The cost of interest and exchange on its remittance abroad was £4,100,325. If the capital of £75,000,000 is written down by one third, the apparent result should be a substantial easing of the position. The actual outcome will be modified, in the way an Australian economist remarked when discussing railway finance generally. On the question of writing down capital he said: "There is no known feat of legerdemain by which Treasuries can be relieved of the burden of the debt except by paying it back. The only financial advantage possible is greater efficiency and consequently less loss on the part of the railways, and this should be of sufficient importance to warrant the step being taken." If the whole advantage of capital reduction is psychological it is very different with the establishment of a depreciation fund. The lack of provision for this purpose has led in Australia, as it did in New Zealand until recently, to the interest liability being swelled by the renewal of equipment out of fresh loan money instead of out of revenue earmarked for the purpose. In Victoria accrued depreciation was estimated over three years ago to amount to £16,500,000, or 22 per cent of the whole capital. The proposed writing down by 33£ per cent will not do a great deal more than remove from the railway accounts — and to the State Treasury—liability for this dead-weight capital debt. The depreciation fund if properly founded and strictly maintained, will safeguard the future against the growth of a similar incubus on the railways, already sufficiently strained to meet the competition of rival transport systems.