expenses and interest on capital, while, with the exception of the last year, there has been a considerable reduction in the percentage of average loss during the ten years. Owing to the adverse season, the year 1903 has been financially the worst in the history of the railways of the state.

In the foregoing table will be found ample evidence of the economical working of the state railways under their present management, for, despite the exceedingly unfavourable conditions, the net earnings for the financial year ended 30th June, 1903, were 31.63 per cent. of the total earnings, as against 33-31 per cent. when the Commissioners took office. The financial depression of 1893, which brought about a great change in the character of the coaching traffic, and the continued unfavourable character of the seasons, adversely affected the earnings of several years; the fall in earnings, however, was met by a reduction in working expenses, so that the satisfactory results of the railway management were not greatly affected. The year 1900 compares somewhat unfavourably with the three years immediately preceding. This is due to the fact that, notwithstanding a much larger tonnage carried, the merchandise and live stock traffic showed a decrease in freight earned, clearly indicating that the traffic from these sources had been carried at less profitable rates than hitherto. The traffic in wool and hay also showed a large falling off, but there was no further diminution in the net earnings for the year 1901, the total, £1,530,578, being the largest for the period shown in the table. The revenue exceeded that of the previous year by £410,207, towards which all classes of traffic contributed. The increased traffic, the greater cost of coal and materials, and the more liberal advances granted to the wages staff, were responsible for the rise of £273,681 in the working expenses. For the year ended 30th June, 1902, however, a considerable falling off in the net earnings occurred. The rise from 57.17 to 61.80

in the percentage of working expenses to gross earnings was due to the increased volume of traffic carried at exceptionally low rates, largely contributed to by the concessions made in the carriage of starving stock and fodder. The increased cost of fuel, the additional repairs to the

rolling stock and permanent way, the necessity for hauling water for locomotive and other purposes, and the increments granted to the staff, also contributed to the reduction in net earnings. As previously pointed out, the year ended June, 1903, was the most disastrous in the history of the railways of New South Wales. Owing to the long-continued dry weather, water had to be despatched by train to several remote parts of the state, and large quantities for locomotive uses had also to be transported for long distances. The latter, of course, was carried free, while merely a nominal rate was charged for the former, the working expenses being thereby heavily burdened, with practically no corresponding gain to revenue. During the year live stock was carried at greatly reduced rates from the drought-stricken areas to places where feed was obtainable, while fodder for starving animals was carried at an extremely low charge. Exclusive of terminal charges, the average rate on all fodder carried fell to 0.04d., and on all live stock to 1·23d. per ton per mile, without taking into consideration the amount of empty, and consequently unprofitable, running involved.

The cost of working has steadily increased over the last three years of the decade, and this has in great measure been brought about by the increased cost of fuel, the heavier expenditure on stores, and the large outlay on wages. Much of the additional charge under the lastmentioned heading has been necessitated by the adoption of eight hours instead of nine hours per day for the running staff. Renewals and replacement of old stock also added a heavy burden to the total expenditure. For the last quinquennial period the average charge for maintenance amounted to £421,758, as against £313,806 for the preceding five years, the capital account having been debited only with expenditure on new lines and the outlay necessary to meet the heavy growth of passenger and goods traffic.

For 1903-4 the prospect is very encouraging. The copious rainfall over the whole of New South Wales has resulted in a prolific growth of herbage for stock, while from present appearances the wheat harvest will be the best experienced in the history of the state.

The proportion of working expenses to earnings is less in New South Wales than in any other part of Australia, as the following figures, which are the average of the five years 1899-1903, will show :

An analysis is given hereunder of the working expenses of the New South Wales railways for the ten years, 1894-1903; in this statement the total expenses as well as the expenses per train mile and per mile of line in operation, are given. It will be seen that there has been a

general reduction in the expenditure per train mile, and this reduction is visible in all the details included in the total, with the exception of the expenditure upon locomotive power, which has slightly increased during the ten years. In regard to the working expenses generally, it may be said that the condition of affairs revealed by the table is satisfactory. When the Commissioners took over the management of the railways in 1888, large renewals of rolling stock were needed, while additional expenditure had to be incurred on permanent way and buildings. The result of this will be seen in the high outlay per train mile and per mile open in the earlier years of the decade. By the year 1896, the lines were in thorough working order, and have been so maintained since that date. The rolling stock has been very greatly improved; the tractive power of the engines has been increased, and types of locomotives adapted to the special and general needs of the traffic introduced.

Interest returned on Capital.

In establishing the financial results of the working of the lines it is the practice of railway authorities to compare the net returns with the nominal rate of interest payable on the railway loans or on the public debt of the state. As previously pointed out, an accurate comparison can only be made by taking the average rate of interest payable on the actual sum obtained by the state for its outstanding loans. On this basis, the lines of the state have met the interest on construction and equipment during five years only, viz., 1881, 1882, 1883, 1899, and 1901. In 1901 the lines yielded a net sum of £74,000 after paying working expenses, interest, and all charges, but the year 1902 showed a loss of £91,000, while during the year ended 30th June, 1903, the loss was £480,000. The following table shows the average loss for each year during the period 1894-1903 :

The fluctuation of the profits is partly owing to the extension of the lines in sparsely-populated districts; but as a result of more economical working the returns show an improvement during the period, with the exception of 1903, the position of that year being due to the special circumstances dealt with in preceding pages. Regard must be paid to the fact, moreover, that there are twenty-four branch lines on which over thirteen millions sterling have been expended which do not pay their way, the loss on these lines being about £280,000 per annum.

Earnings and Expenses per Mile.

Two important facts which demonstrate the financial position of the railways and the character of the management are the earnings per train mile and per average mile open. Although the returns now being realised cannot be compared with those of 1875, when the net earnings per train mile fell little short of 52d., and per mile open of £775, the earnings, with the exception of those for the years 1902 and 1903, are in every way encouraging. The falling off in 1902 was largely due to the

increased volume of traffic carried at exceptionally low rates, the average revenue derived from all descriptions of merchandise and live stock traffic, exclusive of terminal charges, having decreased from 1·13d. to 1.07d. per ton per mile. Under the control of the Commissioners the net return per train mile during that year was increased from 27.4d. to 28.9d., or 5.5 per cent.; while per mile of line open for traffic the advance has been from £374 to £481, or 28.6 per cent. During the year ended 30th June, 1903, the adverse circumstances already alluded to brought about a considerable reduction, and the net earnings per train mile fell to 21.79d., and per mile open for traffic to £346. The gross earnings, expenditure, and net earnings per train mile for the past ten years are shown in the following table:

The gross earnings, expenditure, and net earnings per average mile open for the past ten years, were as follow:

In many cases the railways of the state pass through heavy and mountainous country, involving steep gradients. For the more expeditious and economical working of the traffic, important deviations have