COSTS OF THE RAILWAYS.

Star (Christchurch), Issue 16736, 18 May 1922, Page 5

COSTS OF THE RAILWAYS.

OPERATING EXPENSES. MR MASSEY EXPLAINS. (Per Press Association.) AUCKLAND, May 17. £ Hen dealing with railway matters in my speech at Feilding,” said Air Massey, ‘ I explained at some length that tha causes of the decline in business bemg done by th© New Zealand jaixwaya were entirely beyond the contioi of Government and Departi n }.\. In P° int of fact, the abnormal conditions under which the railways have been working since 1915, due directly to the economic effect of the war, have made such results inevitable un the other hand, costs of operating duo to the increased jirices of stores and materials and the advances in ■wages have increased operating expenses as compared with 1915 by 130 per cent, while on the other hand rates for carriage of passengers and goods were raised only 25 per cent and 40 per cent respectively during the same period. Up till 1920 trade in the country was abnormally stimulated by the high prices of its products, and this brought about such an expansion of the Department’s business as to make up for the disproportionate increase of rates in relation to the large increase in expenditure. Freight charges in themselves, moreover, were small compared w it,h the high prices ruling for commodities. The slump in trade last year, however, changed all this, and the reduction both in exports and imports reflected itself in railway business. The 25 per cent and 40 per cent additions in charges were no longer sufficient to maintain a proper balance in the De- i partment’s accounts. Furthermore the j fall in prices of the country’s products i made it impracticable to seek to adjust the balance by still further raising charges. “ I made special reference to the large increase in expenditure duo to the high oost of material and the advancement in wages and improved working conditions to the staff. In order to illustrate clearly the effect these increases had on the financial result of the working of the railways, it may be explained that stocks of coal which the Department had to obtain in order to maintain its obligations to the public, as was explained at Feilding, have been purchased at a high rate, actually 293 per cent above the price in 1915, and will continue to be charged at that rate to working expenditure until such time as tho stocks are exhausted. The same applies to stocks of other materials required for the carrying on of railway business. These are issued from the stock of stores at the rates at which they were purchased, and some time must elapse before the lower prices now ruling will be reflected in the expenditure. “ Some idea may be formed of the large increase in expenditure from the following table, which shows approximately the increased cost of some of the main items between 1915 and 1921: Axles (each) —1615, 30s to 83s; 1921. 163 s to 2695. Bolts and nuts (owt) —1915, 80s; 1921, 80s. Canvas (square yard)—l9ls, 2a; 1921, 5s 2d. Channels (each) —1915, llsj 1921, 48s. Channels (each)—l9ls, 87s to 114 s; 1921, 346 s 6d. Kails (ton) —?CJS, 181 s 9d } 1921. 3425. Sleepers (each) —1915, 8a 9d to 5s 3d; 1921, 5s to lls 3d. Springs (each) —1915, 36 to ss; 1921, 10s 3d to 13s. Steel (owt)—J9ls, lls to 25s 6d; 1921, ?9S to 68s. Tyres (each)—l9ls, 445; 1921, 160 s. Wire, fencing (cwt)—l9ls, 10s 6d; 1921, 59s 6d. Oil, lubricating (gallon)—l9ls, Is to 2s 10s; 1921, 2fl 6d to 7s. Iron (bar), N.Z. (cwt) —1915, 12s; 1921, 28s 6d. Iron (pig) (ton)—l9ls, 100 s 6d; 1921, 3985. Timber (kauri) (average)—l9ls, 10s 6d; 1921, 4&3. Timber (building) (average)—l9ls, 10s to 23s 6d; 1921, 24s to 425. Stationery—l9ls, £21,400; 1921, £45,000. “ With regard to wages an important factor in keeping down expendi- ! ture during the war years was due to the department’s policy in releasing ‘ men for active service. Efforts in this direction resulted in the staff of "* the department being reduced below ( normal and necessitated postponing re- , 1 pair* and renewals as far as could be 1 safely done until the conclusion of the i war. Arrears of this work aecumu- ] la ting over the whole war period must ‘ inevitably increase expenditure for this 1 year and for several years to come. 1 By the Public Expenditure Adjustment r Act of last session a reduction has been made in the bonuses which were being r puid on account of the high cost of 1 living, which is now very much lower f than a year ago, but this took effect 1 too late in the year in question to have any marked effect upon the total sum expended. As has been stated New Zealand is not the only country affected by the abnormal conditions which have existed during the last year or two, the

effects of which are prevailing. As a matter of fact railway systems in other parte of the world have made losses for several years, while last rear was the first year in which the percentage earned oil the Dominion railways did not come up to the rate expected in normal times. The reference that was made to the financial results of Australian railways was not for the purpose of comparison of the results -or working. Such comparison would obviously be useless without a close analysis of the conditions and policies governing each. The reference had as its object merely to indicate that the causes which have brought about the present financial condition of the Dominion railways have had precisely the gam© effect upon those in Australia, and indeed upon the railways throughout the world, whether State or company owned. “As I have pointed out railway fares and freights in New Zealand have been increased by 25 per cent and 40 per cent respectively and I am firmly of opinion that to go further with the idea of securing a larger excess of ; revenue over expenditure would create serious industrial depression, with consequent loss of business to the railways and the Dominion generally. “ That, the position of tho New Zealand railways is not nearly so serious as in other places may be gauged from the fact that although goods and passenger rates on English railways are 120 per cent and 75 per cent respectively higher than those ruling in 1914. compared with, the Dominion’s increases of 26 per cent and 40 per cent, English railways for some time past have failed to make an adequate return for the money invested. “So far as the present rates are concerned every effort is being made to remove anomalies, but the imperative necessity of conserving every penny of revenue prevents the Government from going as far as it would like in the way of reducing charges to the users of railways. The question of keeping expenditure down has not been lost sight of for a moment, but !» one that has received constant consideration, both by the Government and the Railway Department. The position has been, and is still being, ve.rv closely Matched, and ‘ cute ’ in ser-

| v ices throughout the Dominion were j decided upon only after the position had been thoroughly investigated. Al- . though some inconvenience to the pub- | lia was caused, the results achieved \ financially fully justified the action taken, and a large saving of expenditure was brought about. “ Taking also into consideration the whole of these circumstances it must be quite clear to all that the railways could not possibly pay anything like the rate of interest which has been laid down by the Government as the basis in the past. The rate of 3| per cent laid down as being the interest which the Railway Department should aim at earning Mas not arbitrarily fixed as suggested, but Mas arrived at after mature consideration. This rate represents approximately the average cost which the country paid for tho capital invested in M'orking railways. Even alloMing that the rate is low compared with the present cost of money it may be claimed that tho difference is fuJly represented by many of the services rendered by the department to the country without adequate return from a commercial point of view. It must not be forgotten that the railways act powerfully in promotion oi agricultural, industrial and commercial development, and it lias been the policy of the Government to utilise the railways of the Dominion to a very considerable extent in this direction, by rendering services in many cases at below oost.”