KEY POINTS:
Finance Minister Michael Cullen has now spent the thick end of a billion dollars of taxpayers' cash to renationalise a flagging railway system he could have picked up for a song much earlier if he had played a more aggressive hand.
The $665 million the Government forked out
yesterday to acquire the national rail and sea operations from Australian transport operator Toll Holdings is money well spent, according to Dr Cullen.
The Labour-led Government finally gets control of the nation's trainset and with it the ability to spend up large in modernising operations and buying new rolling stock to better equip New Zealand for a carbon-constrained future.
The acquisition also plays into the Government's declared strategy of centralising control over major infrastructure like broadband, where it has muscled Telecom into obedience, and the national flag carrier in which it acquired a 76 per stake after bailing out Air New Zealand to the tune of $885 million in 2001 to stave off bankruptcy.
Labour has also snookered National by exposing - again - the ideological rift between leader John Key and his deputy, Bill English, when it comes to Government ownership of key commercial assets
Earlier this year Mr English said that if Labour bought the railways, a National Government would sell them.
But Dr Cullen has cunningly declared that the assets will be tucked into a new state-owned enterprise which will constrain National from the privatisation option for at least a first term in Government.
Mr Key is not going to risk electoral wrath by promising to privatise an SOE when he made a commitment otherwise. Instead a National Government will have to try to make the railways profitable - a feat that has defied previous Governments - and get by with less cash to spray around on Mr Key's own pet infrastructure projects.
Dr Cullen is right to say the selling of the public rail system in the early 1990s and subsequent running down of the asset has proved a "painful lesson" for New Zealand. But that pain is larger due to the excessive amount that he has himself doled out from the taxpayers' purse to get the asset back in state ownership.
Consider this: In 2001, Dr Cullen spent $81 million buying the Auckland suburban rail network from the then Tranz Rail - a move which provided a huge cash windfall for the company enabling it to book a $58 million profit, underpin its financial position and hold off looming confrontations with its bankers.
When Tranz Rail finally ran out of steam the Government stepped in and bought the network for $1, agreeing to invest $200 million on renewals and upgrades while Toll bought Tranz Rail's main revenue-generating operations.
The Government considered the option of muscling full or partial control from Tranz Rail - but let it go by.
Toll Holdings didn't. Yesterday it posted a $235 million profit - the amount it received in excess of the estimated book value of $430 million - for the assets.
No wonder Toll's usually gruff chief executive, Paul Little, smiled as he presented Dr Cullen with a mock train at the announcement.
The Government will invest more cash - though it doesn't yet have a figure - modernising operations. But it will be able to offset some of that by selling excess land.
The big question is whether this is the end of Dr Cullen's buying spree.
I wouldn't bet on it.
Labour has its own broadband infrastructure projects in mind. There's also the potential to mop up Contact Energy again and have all major power generators in state ownership.
But taxpayers will hope yesterday's acquisition is the final move in the Labour Government's disastrous history of paying over the odds to acquire assets back from owners that can't make enough to expand the network themselves to optimal capacity.