Monday 6 August 2007

An $8 billion contract?

I saw in the paper recently some fluff about a RailCorp train contract being worth $8 billion, and it being the largest private-public partnership in Australia yada yada yada.

Journalists are such suckers for numbers that they never bother to question. "$8 billion" just sounds like such a marvelously huge number to throw around, so they use it without question.

I presume that the bulk of that $8 billion is not being spent up front, but rather over the 20 or 30 year life of the contract. It must be 30 years. Given the way NSW keeps trains running for longer than that in general, I am surprised they didn't go for 40 years. If we can keep B52s flying for that long or longer, we should be able to keep train carriages trundling around without falling to bits.

The up front cost of building the carriages isn't a lot - maybe a billion and a half, with the other six and a half being spread over the next 30 years. That's what - $200 million per year? That seems an awful lot to keep some nuts tightened on a bunch of carriages. But who am I to tell?

What annoys me is that the government tries to make that expenditure look like it is spending "new money" - that all this money is going to flow into the economy and create jobs and provide BMWs for all. Bollocks. The money was going to be spent one way or the other and you can't pretend that it is "new money". These new carriages are simply replacing old clapped out ones, and the taxpayer is already spending millions per year maintaining them. The maintenance work could be done in house or outsourced and it wouldn't matter - it's still the same old annual maintenance budget, just that it's being spent on different trains or being done by different people.

The only thing that really screws the government is that they can't fly the trains overseas for maintenance in China, like Qantas could do with its aircraft. I'd bet they'd love to do that.

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