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his contract. The completion of the line has since been let to Mr. Fallon, avlio is to finish, it in December next. On this line there is a deficiency in the present appropriation, mainly owing to the advance in the cost of iron ; and to enable the Government to complete the line with the necessary accommodation, the House will be asked to appropriate a further sum of £14,000. This line will, with the sum now asked for, only cost £4,437 per mile, but it must be remembered that the ballast is of the most inferior description; and if there is much traffic on the line a still further sum will have to be spent upon it; the cost of good ballast being dependent on whether the line is extended from Riverhead to Auckland, for which extension the whole of the necessary plans and specifications were prepared early in the year. The sixteenth clause of "The Railways Act, 1872," requires that, previously to commencing the construction of any railway, the Engineer-in-Chief shall report whether such railway is likely to pay its working expenses when completed, and on the nature of this report the authority to construct depends. In the case of the Riverhead to Auckland line, the Engineer-in-Chief's report was unfavourable, and it was my duty to decline to proceed with the construction. The report is attached. The Government are however of opinion that the Kaipara and Riverhead line will not pay until it is extended to Auckland, and that the extension ought to be made. They are convinced that the through line from Kaipara to Auckland will pay considerably more than its working expenses, although as individual lines neither of them probably would; and I shall therefore ask authority to construct the whole line at such early date as the position of the labour market may warrant its being put in hand. The Auckland to Mercer line is progressing satisfactorily. The railway has been opened for some months between Auckland and Onehunga, and with a view of expediting the completion to Mercer, the Government have offered Messrs. Brogden a bonus of £500 per month for each month it is completed previously to the contract date (Ist September, 1875). It is hoped that three or four months may thus be gained, and the colony obtain the use of the line proportionately early. Erom Mercer southwards to Newcastle the line is in hand, partly by contract and partly by the Volunteer Engineer-Militia. At one time the Government had good reason to suppose that it was necessary to increase the available defence force in the Waikato, and it was determined to effect the twofold object of having an additional armed force in the district, and at the same time pushing on the construction of the line. The force, numbering about 200, was rapidly organized by my honorable colleague Dr. Pollen, and commenced work in a very effective way during the month of December. The work done by it has been well done, and the progress made very satisfactory. The work is directed by the District Engineer, but the three companies have been kept under the control of their officers, Major Cooper being in charge. A sufficient amount of military drill and discipline has been exercised in order to assure their being available for defence in case of necessity. It is proposed to charge the difference in the cost of the work done in this way over that of ordinary contract work to the defence of the country. The Waikato Bridge, adapted both for road and railway traffic, is on its way from England, and tenders are now being called for its erection, to be completed in eighteen months from the date of the acceptance of the tender, or about March, 1876. Should the Engineer-Militia continue to improve in the results of their work, and the necessity for such organization still be found to exist, it is proposed to move them early in the ensuing summer across the Waikato, and to continue the formation of the line southward through the delta towards Alexandra. A very good line has been selected, and one which for nearly the whole length will be the best available line to Cambridge or Alexandra : that is to say, that the line as far as Ohaupo will in any case be part of the main trunk line southwards; and if the line should eventually go by Cambridge, it will only involve a short branch to reach Alexandra.